Animal Spirits Podcast - Talk Your Book: Real World Betting Markets

Episode Date: November 1, 2021

We spoke with Kalshi founder Tarek Mansour about betting on the outcomes of real-world events. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Book is brought to you by Kalshi, the real-life betting market where you can put your money where your mouth is. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holtz Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for

informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. So when Michael and I get into our argument from time to time, it's possible we could put our argument if it's a yes and no binary outcome. Is housing unaffordable? I thought about that. We're trying to figure out ways to do this. Here's one for you. Will GDP increase by more than 6% in Q3? This thing is awesome. So go to calci.com slash join slash spirits to check out their markets. Check this one out, Ben.

There's one. Will pre-K be made universal before November 8th, 2021? Unfortunately, that's enough. There's not enough time. But there's another one. Will the salt deduction cap be raised? So the reason why I'm so bullish on this platform in a real way is because financial institutions, if they wanted to bet on binary events, what would they do? They would buy or sell

derivatives based on what they think might happen. But the problem, as we've seen, as we experience over and over and over again with the markets, is that you can be right on the news or the outcome, but you can completely bungle the trade. You can get the market reaction precisely wrong. So instead of having to go to the second level of, okay, I think this event will happen. And then here's what I think will happen in the markets. This is a way for people to just, bet on the outcome. That's it. If you're a fund manager, Brexit would have had big implications for your portfolio. And instead of figuring out what those levers are, you could, with a site like Calcia, you could just bet directly on will Brexit, what is it happen? Is that the right?

Will Brexit proceed? I don't know. But anyway, you get the point. I think this is awesome. The thing about this is it's not exactly sports gambling because that's totally different. but I look at sports gambling as there are people who do it in a serious fashion and have all sorts of ways that they do it and they try to figure out what's underpriced and overpriced. And then there's people who do it for entertainment. I kind of view this as the same way. There's some stuff on here where if you're smart enough, you could make some serious money, I think betting against people who have preconceived notions about the way things will work.

So, Kelsey, if you go to their website, they have these different markets, they have transportation and COVID and economics and politics and climate and weather and world entertainment, science and technology, no sports because that has to be legal. But I'm surprised, and I know it sounds like from our talk here that it was hard for them to get it through regulation-wise, but I'm surprised that they were able to get as many markets as they did. And by the talking of regulation, they are regulated by the CFTC. This is very legit. This is legit. So I clicked on the economics one. And the one that stuck out to me right away, will a recession start this year? Now, it's the last week of October right now. And,

And the way that this works is that there's a yes and no, and it kind of gives you the odds of the way people are betting. No is 79 cents right now. Yes is 21 cents, basically meaning close to 80% of people think there's not going to be a recession this year. 20% of the people do. I'm absolutely betting on this. I put money on this platform right away, and I'm going to bet $1,000 that we will not have a recession this year. It'll pay out $200 almost. I think that's almost free money. There's no way we're going to have a recession this year, correct? Of course. I mean, listen, I think that's free money. I don't want to tempt the market gods. The reason that this is so fun is that, like, you never know what could happen because

you could have said the same thing in 2019 and a pandemic hit in 2020. And you would have had egg on your face because you thought, well, everything was fine back then. And then we had a pandemic. Well, if heaven forbid there is a recession in the next, however many days we have until the end of the year, I'm just going to blame you. I think that's fair. Okay.

That's reasonable. So there's all sorts of things. Like, will the 30-year fixed rate mortgage be above? 3.09% by next week. And it's funny, this one is 50-50. Yes or no? Going through some of these, it's interesting to see how the market prices these things. And I think this is a market that's going to become more efficient over time, but there are certain areas where people have a bias. I'd happily bet against the zero hedge crowd who says there's going to be a recession every year. They say yes and I say no. Like, I feel like there's people who have these inherent biases that

will make poor bets just because. Or they'll make a flyer. Will volume on Kalshi be over half a billion dollars in the first half of 2022? So we discussed one of them that we wanted to do was will movie theaters slowly go away in the next five to ten years? No, no, no. Will movie theaters do over, I don't know what the box office number is that they did in 2019, but let's just say, will they do 50% of that in 2022? What's your guess? Only if there's hyperinflation. What's your guess?

What's your guess? 50% of 2019 by... Yeah, so use 2019 as a baseline. Okay, by what year? In 2022, will we be above or below 50% of 2019 numbers? Oh. You understand? Yeah.

I'd probably take the under. You bastard. Don't you think? That's actually a pretty good one. Anyway, this whole idea just fascinates me. So we talked to the founder of the firm, Terik Mansour, and I think his story, like the way that he went through this and created all. these markets is just fascinated. This is one of those ones that you and I immediately are like,

we are so bullish on this company and this idea. Credit to us, I think in February, when we saw them in the Wall Street Journal, we flagged it as a cool idea. Yes. And this seems like the thing that it's only going to grow and the amount of things you're going to be able to bet on and literally put your money where your mouth is that you can never do before. So here's our interview with Tarek. Tarek, we first discovered your company when you were in the Wall Street Journal back in February. And my first reaction was, ah, this makes so much sense. Of course, of course this idea is here. So I was about to explain what Kashi is, but I let you do that. Yeah, absolutely. So what we're building is a financial exchange, think like the New York Stock Exchange or

CME, but for events. So a place where you can trade directly on the outcome of events from things like will Brexit happen by the end of the year to will a new COVID vaccine be discovered to will it rain tomorrow. So in some ways, we're creating this new asset class called event contracts that you can trade like any of the others, like equities, commodities, rates, crypto, but one that is allowing to buy yes and no shares and whether events are going to happen or not. So binary outcomes? Sure, yes.

I mean, the way we interpret events actually is it can be broader than just binary outcomes, like yes, no. There are things like COVID over time that we're going to start listing that are a little bit more linear where you can just like buy into a COVID index if you think COVID is going to go upward down and other things. What if there's an idea like, for example, there's something on your platform that I don't see that I want to bet on? So, for example, will there be hyperinflation?

I think no. But if I go on calshu.com, I can't see that. Like, will the dollar be worthless? Can users bring you ideas? Absolutely. Actually, so there is actually an inflation contract right now. Okay. And it's pretty popular because a lot of people are either expecting on inflation or

trying to hedge themselves against inflation. People are worried about like the month to month inflation. So there is up there. But to answer your question, absolutely. We have a suggest the market functionality, a fraction of the markets that we list are suggested by traders. And you list them, they go through our compliance pipeline. And then just to make it very specific, we create a market out of them. So every single one of these markets become a listed derivative, a listed commodity. It has a ticker, a symbol. Like Apple has APPL. This thing gets

Brexit gets BXT. I don't know what we're picking for gold. Gold is going out today. And then people can start trading on it. Was there a specific event that really springboarded this whole idea for you? Or a event that you first put on the platform? Is this just an idea that you always wanted to bet on the outcomes of certain events. Yeah, I mean, if it's helpful, I can go back to sort of the history of the company and talk a bit about how we really come up with this. But for a while, when I was at school at MIT, I worked quite a bit in finance, a similar kind of background for my co-founder and Juana. But what we observe is people like to speculate on events. You're sitting with a friend and you're like two to one odds. I think Trump and Kim are going to get out of North Korea to deal

or the weather is going to be this or that. And then the other striking thing is when we were working at Goldman in 2016, we had this massive inflow of funds that, we're coming to us and say we want to bet on whether Brexit is going to happen or not or hedge ourselves against exit. And then we come up with these very fancy, esoteric bundles. Think of them a bunch of options, a bunch of swaps, a bunch of complexity. They cost a lot of money and they're not direct. And then the question of like, why is there no exchange that you can just trade directly

on events? I mean, it makes so much sense. It's very tangible. People debate events at the dinner table. Like you probably debate COVID hyperinflation, the weather, you're less likely to debate, I don't know, Cisco financials on a dinner table. And so we went for it. There was a clear answer to this.

there was regulation two years and a half ago, but we were the ones that, you know, decided to go on this crusade to get it regulated. Two years and a half ago later, we managed to get it regulated and finally launched. How hard was that process getting it through? And you basically created your own exchange here. Yes, yes, extremely, extremely, extremely hard. It was really difficult. I mean, years and a half ago when we started, talked to every single lawyer in the

US, no one wanted to touch it. They're like, this is clear cut. It's never going to happen. The regulator was saying the same thing. And actually, people have been trying since the 80s, doing something similar. The way I discovered is like we spent two years and a half in a death. in hell, slowly pushing it to go from a hard note to finally getting regulated at the end of 2020.

Who regulates you? The commodity futures trading commission, the CFTC. So the SEC, more people are familiar with the SEC, regulate equities, securities, like stocks and stuff. The CFC regulates everything else, commodities, derivatives, futures, these other things. And we fall under the definition of a commodity. So how do you set the odds? Like let's say that I want to bet on, there's an event, right?

There's an outcome, whatever. Is it going to rain tomorrow? Where do the odds come from? The market gets listed and now people can buy yes and no shares. And the way it works, actually it works the same exact way as the New York Stock Exchange. So Michael wants to buy yes. Ben wants to buy no. What you say is I want to buy 100 shares of yes at a specific price, let's say at 40.

And then Ben would want to buy 100 shares of no at another price. And if the prices match, we basically match you. And that's the first trade. So the prices are set by supplying demand by the marketplace, the same way that the price of Apple stock is set on the New York Stock Exchange. I see one right now. I'm on your website and you can click on the markets and you have different categories. Transportation and COVID and economics is when I clicked on. So one of them says, will a recession start this year? So it says yes, 21 cents, no 79 cents. So right now the market is betting it's basically 80, 20, no yes for a recession. Correct. That's absolutely right. Okay. This is very interesting. So who determines that there's recession because the way that the National Bureau of Economic Research works is that they're going to tell us. so that a recession happened or it started, probably by the time it's already over. So if there was a recession today, we're not going to find out about it until eight months

from now. So how does this process work? It's a great, great question. So the reason why commodities are car commodities is that they're commoditized or standardized. We call these things event contracts because they're a legal contract where everything is defined up front. We define the settlement source. We define what is a yes, what is a no?

And everything is very, very strictly defined. And so this specific market, if you scroll down to the bottom and you look at the rules, you see the source agency is the Bureau of Economic Analysis and then you say yes and what is it no for each one of these markets and that's very, very important because the reason why people trade

on, let's say, grain futures is that CMEA did a very good job at making them very specific about how the future settles and we do the same thing here and that's a process that took up sometimes. TARC, I see at the bottom you see like the rule summary,

the open date, the close date, the expiration date, the terms, I see all the way at the bottom there's a little warning. It says trading is prohibited if you have access to material non-public information or have the ability to influence the market's outcome.

So I would assume that Jerome Powell can't buy one of these contracts. I don't know if you've seen the news, but he's been trading stocks. He probably can't trade this. He cannot trade this. It's very similar. The way I always say, we are an exchange. And as an exchange, like the New York Stock Exchange, we call self-regulated entities. We have our own set of rules and we have to enforce them.

One of those is not allowing people that can manipulate an outcome to trade on that outcome. We have systems that check for these things and all sorts of things. And so absolutely, people that work at the Bureau of Economic Analysis, People work at the feds, they cannot be trading on whether there's going to be more inflation or there's going to be a recession. Sorry, Ben. That means you too. All right.

I don't have the ability to stop a recession. But are there certain minimums or maximums in terms of the amount you can bid or need to to get on the platform? Yes. So no minimums. You can trade as little as like a few cents if you want and deposit as little as few cents. But in terms of maximum, so we are starting with $25,000 maximum loss. That doesn't necessarily mean that's the maximum you can trade, but we protect.

from more than a $25,000 loss. And then over time, we're increasing those. So those are soon going to go to 100,000. And then over time, we're just going to basically get them bigger and bigger. Is the money sitting in some sort of escrow until it, like, where does the money go until you get paid out? Let me piggyback that, Tarek. Is this blockchain based?

And I'm not kidding. Yes. So it is not blockchain pace. And it's a very, very fair question. It is a normal database for time. We're going to accept crypto and other types of sort of payments and such, as well as like list crypto markets. But we use and we have a partner that is a CFC regulated clearinghouse.

What the clearinghouse they do is they take care of the custody of the money. And essentially, so what you do is you come to Kalshi, you deposit money with us, so into your Kalshia account. That money goes to what we call a segregated account that is held by the clearinghouse. That is the highest level of security and sort of integrity, very heavily regulated. It's a little bit like other exchanges. When hedge funds and people trade on the New York Stock Exchange, the money is held in their clearinghouse. And then they take care of the custody and sort of money movements. And no one can touch this money.

It's your money. For all intents and purposes, basically a money that you have in another bank account, essentially. All right. So it's just like a planned connection, something simple like that? Correct. Super simple. ACH, very fast. You don't have to worry about it. So on election night where you see like the market's moving in real time, is that predicted? What is that thing that people look at? Is that what that is? So yeah, predicted is one of the platforms. They're not regulated. So predicted is the nonprofit research. They have very low limits. And so we see it as a proof of concept for what we can do at proper like New York Stock Exchange scale.

That's a good example of how it's great at aggregating people's belief and what's going to happen with the elections. Is it the goal for CalShoot to be like the real-time exchange, the real-time market for information? Yes. I mean, really, the way I always describe is the New York Stock Exchange for events because we see people, hedge funds, institutions, really anyone participating in this asset class over time. And then, you know, I really like what you're talking about where the price is in time, the odds are giving you a probability of whether the event is going to happen or not. And it's significantly more accurate than if you were to survey or poll people,

because here people are putting their money where their mouth is. People don't like money at stake. How efficient do you think this marketplace is? And I'm sure that is an evolving concept and maybe depends. But I look at this whole, so we have a couple months left in the year. And there's this recession question where 20% of the people are saying yes, and 80% are saying no. That 20% seems high to me. So how efficient do you think this stuff is? And how often do people let their biases take over versus calculating actual probabilities and what they think is going to happen versus what they want to happen? Great, great question. I mean, the way I see it, there is a certain wisdom of Christ. crowds, especially when money is involved. And people tend to be relatively good when you get like a mass of people at predicting these events. Because if the price is a bit too high, you're going to have these very smart traders, the arbitrageurs, people that spot the price difference, they're going to bring it back down. They're going to basically trade on it and bring it back down. It's a 20, but if you think right now it's pretty high and you think

the actual probability is 10 or lower, then you should be buying no on this. And you're probably going to push the price back down. We've had markets that were pretty efficient. Things are on COVID and how it's going to track, we tend to consistently hit it. We had a market around indoor dining this fall, whether it's going to be implemented again, like shutting down, closing down indoor dining. There was a lot of news. The news like to over-dramatize things where they were like, oh, yeah, it's happening. The Delta Varian just hit and everyone was freaking out, but our markets were consistently pricing it pretty low. And so I would look at the markets and be like, okay, we're good. So it's becoming sort of my forecast mechanism as well.

So I'm looking at will new U.S. home sales be above $710,000 in September? Where does that particular number come from? Is that just like Wall Street estimates? Yes, we put a lot of time picking what we call the targets. Generally speaking, we try to pick a natural target, which is the number where the estimates are around it, where like the general expectation is what Wall Street is estimating. And then we see if our traders are going to beat that estimate or not. And so far they do. So once you have the line, I'm guessing the line is set, unlike in sports where the line can move. So the line is probably set, but the odds will change? Correct. The line is set. going to be 710, and maybe we list another market for 750 or other, and then the odds change.

People are basically, they're going to be trading, and then the price is going to move over time. How much do you think you are like Wall Street financial market versus how much do you think you are more like Vegas setting sports betting lines? Because to me, this almost feels more like vague, because I've been betting on sports for the last six months or so. We got online gambling in Michigan now. Sorry to New Yorkers. You can't do it yet. It feels a little bit like that to me, which I think is fascinating and very entertaining for me. So how much do you think you strata the line between Vegas and Wall Street. Historically, the line between financial markets and betting slash gambling has been drawn

where the line is about whether your markets have economic purpose. When you're trading on a roulette spin, it's hard to argue for a social utility for that market. Whereas here, I mean, sure, a lot of people might be speculating on Brexit, the same way they speculate on price of Apple stock or Tesla, but there's a subset of people that are hedging their economic risk with Brexit, the same way that grain farmers are hedging grain price risk. before Michael, you jump into the question, the way I always like to describe this, back in the 1900s, people used to call Green Futures gambling. I mean, nobody calls Green Future's gambling

today. It's the most boring financial asset class. And there was a 1905 Supreme Court decision where Justice Wendell ended up going out and saying exactly what I just said. Sure, people are speculating, but these are very important because they allow people, consumer, to buy bread for cheap at breakfast. And this is the same concept. Can people hedge their risk respect to COVID, economics, all of that, absolutely. people speculate on this also absolutely. And that's a very important part of building volume and equity. So the reason why this was so appealing to me is because everyone knows that even if you could predict the outcome of an event, let's say that you're a big market player and you

want to hedge the outcome of an event, even if you knew what the outcome was, you don't know what the markets are going to do. Let's say that breaks at what happens. So what do you do? Do you short the euro? Maybe you buy it. Who the hell knows what's priced in? So with something like this, I love the fact that you don't have to bet on the derivatives. You can literally bet on yes or no. So is your idea that you're going to have big institutional traders using your platform to gain exposure to these sort of binary events? Over time, yes. We're starting with retail people. And then over time, we're going to go into institutional. Absolutely echo the feeling here. There's a certain purity to event

contracts. Exactly what you said, because now you're thinking, okay, COVID is going to get better. And what am I going to do? Maybe buying Marriott stock. But then the CEO, I don't know, gets fired, then that stock plummets. You have no control over that. Whereas here, just buy yes on will COVID get back? You know, it's interesting, like, let's say you nail the event, you could still be 100% wrong on the outcome of the market. Exactly. That's where cashie comes in.

Okay, so let's talk about liquidity. So I'm looking at this new U.S. home sales. I see 1,637 of liquidity. The spread is one cent. What does that mean? That is basically the current right at this second amount of liquidity that you can match with. And usually when you match, it gets replenished and other people put order books. But this is basically the outstanding orders on yes or no that other people have put on the order

book and that you can basically match with. So does liquidity, is that like your maximum trade that you could make? Or is it? At this very instant. So oftentimes you make the trade and then oftentimes other traders, you know, maybe the price moved a bit, they come and put more liquidity and more orders and then you can trade more essentially. How are you going to bring more people into this market?

Like, in other words, you have big ambitions and you want to have a lot of money on this platform. How do you match like institutional investors? I know it's down the road. So maybe you didn't want to go there. No, I mean, I think the way we think about is building incremental blocks. So right now we have people trading. And some of these people, providing liquidity, some of people are just trading like yes and no.

And then over time, we get more and more people. We build more and more volume and more and more liquidity. And then you start getting bigger and bigger, let's call them entities, prosumers, small hedge funds. You have a few hedge funds, people that set up small hedge funds to start trading on cash exclusively. And then over time, we're getting the bigger and bigger, hedge funds, bigger sort of institutions. And really, it's a spectrum, going from the small all the way to the big as you build more and more liquidity and volume over time. Do you have an idea about how you want to manage between some shorter-term, bets like what's going to happen next week, next month this year versus what's going to happen

in the longer term? Do you have a specific time horizon that you won't go past on some of these because it just is too long? The answer is no. Last week we launched our longest contract, which is the moon landing by 2024. Ah, nice. We'll see. I mean, people are trading on it already, but there's things that settle today. There's things that settle, again, like the moon landing in four years. It all depends on where the event and where its natural kind of inflection point is. There's events that the natural thing is next week. Others are in a year or so. But we tend to be a bit more towards a short term.

Tarek, when do you start selling your data to Citadel? We're not doing that. Our business model is a lot simpler. We don't have PFOP. We don't have any kind of exotic stuff. We take a trading fee. How does that work? Let's say you're coming in, you want to trade a bunch of shares.

You're putting in $100 to enter your position or enter a trade. We take another dollar or two on top. Simple. Because you have the COVID section, that where the most of the money has been going? What do most people care most about in terms of trying to prove if they're going to be right or wrong? Whatever is viral and trending today. That is really what is about. People always say, what are the top categories? What we see is there's no top category. It's what is on top of people's minds today this week. This is where the volume is going

to be at. You can start by highest volume. Yes. Yes. So right now on the platform, it's COVID. It's, will 2021 be the hot as you on record or the corporate tax rate be? Or will the corporate tax would be specifically above 21%. So it's all things like this. Will Jerome Powell be replaced? Let's click on this. This is interesting. 20 cents saying yes. How do I see like the deadline?

Okay, there it is. December 2nd. By December 2nd, hmm, Ben, you like those odds? I don't like those odds. Yeah, then you should place a trade. I mean... The man has done nothing wrong.

Sure, he traded stocks, but who hasn't? All right? Put your money where your mouth is. That's the whole point here, right? It's the whole point. I mean, makes sense. I personally think that 20% is a bit overpriced. I think 20% chance of him getting taken out is a bit high. And that's the whole point.

You'd be basically shorting this mic at them. You know what? I think I'm to go short. I'll keep the audience up today. I think I will go short on that. I want to put one on here for I'm betting that movie theaters are going to be dead within five years. We've got to figure out a way to quantify this. But that's so arbitrary. What's dead?

Actually, we could do total gross box office volume. Ah, there you go. All right. So for 2020. What's the number? I don't know. What's history say? That's an interesting one that you're trying to quantify this.

So if people come to you, I guess your research staff, wherever, if they're going to add something new, they have to figure out what's the best benchmark for this. What's a fair one? Is that what you have behind you is basically a research staff that is thinking through these things? We have a markets team that's consistently thinking about what we call source agency. What is the source of truth that we're going to be used to determine what is a yes, what is a no? Shadow stats. Yeah, well, it takes quite the effort.

But that's a very important, like I think step to make these like a standardized set of things that people will trust to trade on. And the point is, like Michael said, it's spelled out on the website. So you know exactly what your hurdle rate is, whether you see. say yes or no to something. Oh, this is interesting. Will NFL viewership be greater this week than last week? So, for example, like one thing that's conspicuously absent, and I'm sure there's a good reason, are sports.

You can't bet on sports. Is that a regulatory thing? I mean, that tends to fall a bit more under sort of the realm of betting and gambling rather than kind of financial markets. And so we don't do sports right now, but we do sports. I think a lot of things that are very interesting for a sports. We don't do sports contests. Like, will the Red Sox win the next game?

We don't do that. But we do things that are tend to like NFL viewerships and we have a series of markets going. So you could do, like, will Tom Brady play until he's 47? Potentially. That'd be an interesting market. The one thing that we'd have to look into is Tom Brady's ability to manipulate this market. That's a very serious part of it. Would you want to put in $25,000 on the market where, you know, Tom Brady can just, on a whim,

and decide how it's going to go? And those are some of the considerations that we think about to build sort of a legitimate market place. Because what if Tom Brady buys a derivative of that bet on FTX and you guys don't even know about it? He's a whale. He's moving the market. I mean, he could. I mean, potentially. FTAX doesn't do events.

They don't do this now. They don't have a regulatory setup. He could ask a cousin or a friend to buy it on Cali. So, Tark, what's been your biggest challenge, besides some regulatory, which obviously was a bear, what is the biggest challenge for CalShuette today? I think right now, I mean, we're really focusing on building the best product. In these markets, the interesting thing with the product is that it's for a variety of people.

There's people that are casual, just have an opinion about things, buy yes and no and capitalize on that opinion. The people are a bit more sophisticated. Some people are doing this like as a full-time job. They're day traders. and they trade pretty hardcore. They really try to forecast and estimate, and they tend to be two-sided.

They're not just buying yes or no. They're trying to buy in low-selling high. They put things on yes. They put bids on no. They try to make money via spread, really. And we're trying to build a product for all that spectrum. And that's sort of a lot of the kind of product complexities. What is some areas where you think you want to go with this

that would make a lot of sense for the platform that you're not really using now in terms of events or stuff that people can bet on? Is there anything else in the future that you guys are looking at? I mean, I think more and more geopolitical. related things because that tends to be very tight to the economy and has a lot of impact. These days, like economy and politics, it's just very hard to kind of draw the line between the two. So that's a big one. I think over time, we want to also do what we call

scalar markets, which are essentially things that are sometimes maybe not naturally binary, but home sales where you're like, instead of having a new home sales like threshold and you buy yes or no on whether it's going to be above or below that threshold, you have a derivative that just pays out based on where the home sales land. So it's a little bit like a great in future, but a future on home sales. You buy in and then if it hits a lot higher, you know, a few months down the line, you make money. What is liquidity like between expiration dates? Between expiration dates. So you mean like between same market, two different? I guess what I'm saying is like, let's say that I put on a trade and whatever, the market moves and I'm up 30%.

Can I take my money out or no? You can. Let's say this Jerome Powell being the move market, you bought a bunch of 20 cents, then it moves to 50 cents. You can basically exit at 50 cents and then take your 30 cents per share of profit, which would be, like, in this case, 250% profit here. Which is crazy, 2.5x of your money. That's already crazy. You don't even have to wait to settle them. And that's what's so great about the markets.

Do you have any examples of markets where something out of left field came in at the last minute and changed? So you might have had 90% of the money on a yes or no, and it turned out to be the opposite for some unforeseen event or just something to change. Like, what are some events that would do that where the market got it wrong or just people had bad luck? Infrastructure bill was the recent one. I think two weeks ago, and we had a lot of people who was to buy it on Twitter.

I mean, it was trading at $0.9.9 at some point because the administration said we're passing it. But then Biden just didn't push it in time. He didn't pass it that long. Oh, wow. So all the money was on one side. It was trading at $0.9.9. And then there's a bunch of people that kind of were like, look, a lot of people like to buy the one cent where they're like, more of the time I'm going to lose it. But it's so cheap.

It's so painless that we're not to take the opportunity to get the 100x. And those people got the 100x return, like 100x of what they're invested money. is, which is amazing. I see right now, will average gas prices be higher this week than last week? 99 cents is on yes. I don't know. Thought a flyer, Ben? I mean, there's people that body.

You're looking for the low probability bets here. What if we find the oil on Mars? I'm definitely going to be placing a bet on the no for a recession. I feel like those odds are way stacked in my favor, the 80, 20 there. So, talk, can you do the math for us? So you bet a dollar, how does that work? Is it, you bet a dollar you win 20 cents? The amazing thing is that you can see directly on the platform, you don't have to do the math.

So if you go, let's say the recession market, we can do it in real time right now. So let's say you want to buy, it seems like you want to buy a no at 80 or let's say you want to buy a yes. Let's say you want to buy a yes at 21 cents. No, no, no, we want to buy the no. Listen, we're patriots. We want to buy the no. You pick the price. Let's say you want to do, I don't know, like you want to buy that 75 cents, a thousand shares.

You can see exactly how much profit you can make. And which is right now here, you're looking at 33% profits. if you end up being right, which is pretty solid. If you really think it's unlikely, it's going to get removed, you're getting a 33% profit in the spend of a week or so. I don't know. I just feel like that's free money. Like, have you seen the consumer?

The thing is, this is the point. The beauty of event contracts is you can get very high returns. Well, and the funny thing is is that you would have bet on this in early 2020, and then the pandemic hits and shuts the economy down and there's a recession. That's the risk for something like this. Exactly. I mean, the other thing I say is a lot of people in early 2020, they're like, we think it's going to be a recession.

What they did is they shorted the SS. And you can guess how that trade run. Instead of betting on. Yeah. How long have your markets been up and running? We launched in July, finally. We started with four markets and I've already, I think, have around 70. It's been a very, very exciting ride.

Well, Tarek, I'm super bullish on this. I think this is very cool. And the fact that you got regulatory approval is impressive because I know how difficult it is. Well, not firsthand, but I just see on the outside, like they're not in a rush to approve stuff like this. Oh, actually, why we have you? 24-7 trading. Is it coming? It's coming.

The SEC will approve? The CFTC. So, yes, they don't have a major issue with it. I think we're just basically slowly, incrementally increasing the hours, and I think we're going to get there very soon. Well, how do I bet on it? How do I bet on that? There you go.

That's a bet. It'll be 24-7 trading. All right, Tarek, thank you so much for taking the time. We really appreciate it. Awesome. Bye and Michael. Thanks a lot. This was awesome.

All right. Thanks to Tarek. Thanks to Kalshi. Again, check out Kalshi.com slash join slash spirits to learn more.