Prof G Markets - Prediction Markets vs. Gambling: Where’s the Line? — ft. Tarek Mansour

Episode Date: February 27, 2026

Scott Galloway and Ed Elson are joined by Tarek Mansour to break down why prediction markets are surging in popularity, and whether they’re really any different from gambling. They also explore how the company polices insider trading, the real-world use cases for these markets, and how Kalshi is navigating regulation. Tarek Mansour is the co-founder and chief executive officer of Kalshi. Tarek began his career as a quantitative trader at Goldman Sachs and as a global macro trader at Citadel. He went on to co-found Kalshi in 2018. Resist and Unsubscribe Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [e-mail] Learn more about your ad choices. Visit podcastchoices.com/adchoices

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carefully consider the investment materials before investing, including objectives, risk, charges, and expenses. This and other information can be found in the funds perspective at getvcx.com. This is a paid sponsorship. Today is number 30. That's how many additional minutes Americans spend sleeping per day compared to two decades ago. True story. I find that when I have a bad sunburn, it helps me sleep to take Viagra.

It does nothing for the pain, but the sheets no longer touch my legs. Listen to me. Markets are bigger than I. What you have here is a structural change in the world distribution. Cash is trash. Stocks look pretty attractive. Something's going to break. Forget about it.

How are you? How are you? I'm doing very well. I'm here in London and I had drinks with you last night, which was awesome. You know me. I like to get to know my staff. I like to spend quality time with them. We did spend some quality time.

We got kicked out after about an hour. The other thing is we went to a bar that we were very excited about. and I show up, because Scott showed up a little late, and I show up, but it turns out that it's comedy night. Comedy night. And there's some Scotsman on stage speaking a dead language and only twins speak to each other. And they close the bar down, so I'm like, oh, this fucking sucks.

So we had to spend the first 20 minutes listening to this guy. I got to tell you, he was absolutely bombing as well. It was not comfortable to sit through. But then we had a lovely drink. I got to know your girlfriend. I just sat there and thought, what is she seeing him? I don't get it. I don't get it.

I don't get it. Ed, I don't think young people should get married, but my advice to you is three things. First, lock, second, it, third down. Lock it down. It is, I think the world of you, you are so out of your way class, my brother. You are so out of your way class. Anyways, it's good to see you. That's very good to see you.

She had a great time. I had a great time. It's good to be in London. Nice, right? Yeah, it is very nice. It's too dark, and it's a little late, but it's nice. Well, we have a big, important interview here with the CEO of Kalshi. Shall we start to move on to that? Let's do it.

Okay. Actually, before we do that, apologies. Let's not. I forgot to also say that ProfituMarkers is returning to the Vox Media podcast stage at South by Southwest. We will be there on Saturday, March 14th. So if you want to see that, come join Scott and me at 10 a.m. on the 14th of March at the Hilton Austin for a live taping of profiting of profiting markets. Live show, it's going to be epic. Scott and I very excited, or at least I am. I think Scott's excited.

You had me until you said Hilton Austin. I don't, that's not what I aspire to, but you know what's going to happen here. It's the same thing. We come in, we skirt the line, and a few people take a picture with me, and they're like, oh, and by the way, I have a daughter. She's at UT. Is Ed single? Is Ed single? Everyone is asking about your romantic status when we go to these things. That's not what happened last night where we're standing together and then someone comes up and goes, oh my gosh, Scott Galloway. And he looks at me, he's like, I know you too. But Scott Galloway, it's great to see you. It's all handsome guy? That's right. He is a tall drink of lemonade, like a nice, young, handsome man.

Yeah, yes, I enjoyed that. I enjoyed meeting him. Yeah, it was good. It was very good. Yeah, but South by Southwest, and you can learn more and get a special discount. I love how they're already discounting us. That makes me feel good. On your Southby Innovation badge at Voxmedia.com slash SXSW.

That's Voxmedia.com slash SXSW. We'll see you there. I'm actually really excited. How many people from Prov Gio, we bring into Austin, We've got a huge crew. I think it's like 12 people, maybe. I heard 16. I don't know how much money that's going to cost me. Oh, my gosh. I'm excited. Anyways, everybody, Ed and Scott are going to be at South by Southwest.

Please say hi. We really do enjoy meeting our fans. And Ed, not so much. Ed's sort of standoffish and a little bit arrogant, thinks he's better than everybody else. But not me. Not me. Not me. Say hi. Ola. Ola. El Perto and absorbodo self-young person, young man. See it South by Southwest. No comment. Here's our conversation with Tarek Mansour, co-founder and CEO of Kalshut.

Tarek, good to see you. Welcome back to the show. Thanks for having me, Scott. Annette. I'm excited. So it's been a little over a year since I first interviewed you on first-time founders. A lot has happened since then. Just looking at Kalshi as a company, your revenue has grown by about 1,000 percent. Your volume on this platform has gone from $280 million to $2.3 billion. You also recently raised a billion dollars at an $11 billion valuation. Basically, we knew Kalshi was going to explode, but it's exploded in a billion. a way that is kind of larger than life and getting a lot of attention. I'll just start with this.

Why is Kalshi so popular right now and why are prediction markets so popular? You know, one, it's just the exponential. You know, when, you know, the numbers are small, the exponential, you don't really feel it quite as much. And then as you compound and compound, all of a sudden, you know, everything basically happens all at once. And you tend to see that with sort of with a lot of consumer businesses that really hit

the mainstream and they're growing at a, I mean, at an exponential or exponential looking pace. And I think

that's definitely happening in prediction markets or at least in the case of Calshi. The second thing where I think

we're benefiting quite, you know, I think the prediction markets are benefiting from an overall societal wave, which is sort of

this general distrust in traditional news sources or information sources. And I think people are

looking for an alternative. And, you know, I think they found it a lot, you know, a lot of people have found in podcasts. I don't think a lot of people have found in social media. I think people have, I mean, social media had this kind of, kind of idea of, you know, crowdsourced wisdom or crowdsourced truth, but social media incentivized clickbaits in a way that, you know, people over time are not feeling like, you know, news feeds are basically like split into two. The word is basically completely dispersed.

Everything is polarized. And prediction markets are, in some ways, some sort of antidote where you get the crowd wisdom. you have a lot of people participating in prediction markets, but you have skin in the game. You know, people are putting money where their mouth is, and that leads to some of the answers that get out of prediction markets to be more accurate.

And that's been definitely a big catalyst of the growth. There are two things I'd want to kind of separate in this conversation. One is prediction markets as a content platform, which I totally agree with you on. It's been massively helpful for us. I think a lot of people find it interesting because it just tells you a little bit more about the future. If you're trying to understand an issue, you will go to the prediction markets and you'll find the question, and then you'll get to see, like, this is what the consensus view is.

This is a probability of this event occurring or not occurring. That's content. It's also a trading platform, some would say a gambling platform, which is a different kind of thing. And it brings with it a lot of different issues. and I think as this platform has gotten so popular over the past year, it has also drawn a lot of criticism. And I think a lot of that criticism is reasonable, valid, worth talking about. So I guess I'd love for us to dive into those criticisms.

As the founder of this company, as the CEO, what would you say is the overall, let's say the three or four biggest criticisms of the company right now. Based on what you're seeing, based on how things are being reported, what would you say are the issues that people are worried about when it comes to prediction markets in Kalshi? Any consumer company, and this is one of the things that we've learned, and I'm learning in real time right now,

most consumer companies that hit the mainstream, they go from really exciting new technology, and when they hit the mainstream, there's a sort of flip. where all of a sudden, you know, there's this sort of like, let's just kind of air out all the risks, the dangers, all the ways that this could go wrong. You know, I think we see it play out with Uber, Airbnb had its fair share of it.

We're seeing it play out with AI on many dimensions and many levels. And we're seeing it play out in prediction markets. And to some extent, I think that's a healthy thing. Like I think society having a debate about new technologies and how to kind of deal with them is a good thing, right? If we all agreed on everything, you know, we probably are headed in the wrong direction. Look, my understanding is like there's one, you know, this question of like, you know,

is this gambling, is this different, you know, are there kind of concerns about addiction and socialist isolation to young men? I know you guys, Scott, you talk about this a lot. I think number two is there's the concerns of insider trading. Like are, and to me I bucket into kind of is the market fair? How do we police it? What is being done about that? But to me, I don't think it's totally, totally abnormal.

given the rate of growth and how fast this basically has gone mainstream. Well, just to double click on that. So there's a real fear that a lot of big tech or a lot of technology companies as they scale tap into a less mature prefrontal cortex of men looking for dopa hits. And that essentially prediction markets are sort of the high IQ or graduate education version of gaming apps. and that it preys on a dopa hungry male and that there's enormous incentive for... Well, first, let me start there.

Who is your typical... What's the demographic profile of your average customer? And what is different from speculation or prediction markets from just flat-out gambling sites? You know, the vast majority of volume is really in the bucket of 25 to 45 years old, and then we have a bucket and, you know, 60 plus.

So retired has sort of disposable income time on their hand. And I think that like, you know, when I think about the typical customer, there's been recent reporting, which I think was pretty interesting about this. You might have, I don't know if you've seen the New York Times article about the rise of the prediction market trader. And they kind of gone through a number of, you know, and the most active traders, the people that basically, you know, drive a lot of the activity on the platform, you know, people that would kind of consider it like a super user, a power user.

Those are the people that, like, are spending quite a bit of time modeling. Like, you know, I'm passionate about the economy. I read the news a lot. And, like, you know, I'm going to basically be forecasting inflation on daily basis. Or I, like, mentioned markets. You know, Joel, there was a whole profile on him on this New York Times piece. And the guy, like, has built, like, you know, pretty sophisticated models, like, you know, what words are going to be said and what appearance is.

and those are people that like, you know, have had an interest in something and then they figure out an outlet to basically like, you know, make money off of it or engage with a committee that has kind of that shared similar interest. Like these are the most engaged in our Discord or we have this Calci Idea platform, which is basically Twitter, but you can only speak if you have a position. So it's kind of a Twitter that is filtered for people that are position takers. But to me it's like, you know, I think the concern that you sort of outlined is a real concern, right?

Like, I think, in my view, any financial markets, and I think this concern applies, like, this concern applies to any financial market. I think it applies to, you know, day trading of options or these kind of idea of zero DT options that settle on any given day, retail trading.

I think it applies to crypto, also the meme coins. And obviously, it applies to traditional gambling and sports betting. And that risk exists in prediction markets. And I think the way that I think of it, and as I build a company and as this company scales, there are certain things that are intrinsic to the model, and then there's guardrails, like things that you add to the model

around your business model to basically protect consumers from this sort of thing. So let's talk about the intrinsic piece. So I think prediction markets is a much healthier mechanism to engage with something than a lot of these other mechanisms. Like I think a lot of the problems that we've seen with dopamine hits and addiction and a lot of the issues that we, you know, people generally pertain to as gambling have come from the gambling industry. And I think, and you ask why, well, you got to look at the incentives in that industry. Like when you go to a casino or you go to, you know, traditional sports book, the revenue of that company is equal to the customer's losses.

The way that that whole system, the business model is like, well, if ad comes to me, the business model is figuring out how much money can I take from ad. That's how it works. So if that's your business model, what are you going to do? Well, what are you going to figure out is like, okay. Okay, I have Addon Scott as customers. If Scott is a winner, I'm going to block Scott from participating because anything that Scott wins, it's going to take from me as a business.

And if Ad is a loser, I'm going to figure out how to create a habit, how to get Ed hooked in the platform and get them to come back pretty consistently. And that to me is a lot of where, like kind of a lot of where, it's a perverse incentive. And, you know, show me the incentive. I can show you the outcome. Well, what the outcome is going to be is basically going to get people hooked and dopamine hits are going to basically be, you know, increasingly bigger part of the platform and so on and so forth.

Prediction markets just don't have the inherent incentives. You know, I take a small fee and ad is not trading against me. Ad is trading against Scott. It's inherently just more social. It's inherently more, like I think the model doesn't have

this sort of embedded perverse incentive. And that enables me as a business model to just have much more versatility around solving that problem, around creating really good guardrails around that problem. Like, you know, when Ed comes, he's not basically facing an algorithm

that's just sort of optimized to get Ed hooked. Ed is facing Scott. It's facing you and is figuring out whether ad could be smarter than you, whether he could do research, how can he beat you? Intrinsically more social, intrinsically more competitive,

intrinsically more interesting. In terms of the guardrail, we focused on this a lot. And I think that, like, a lot of the guardrails are really what you want to prevent is excessive behaviors. I think anything taken to the extreme is bad. And, you know,

I talked about some of the trading, like retail trading, some of these examples, but, you know, you see it in other places. You see it with drinking. You see it with online shopping. Like, you probably have a, I mean, I'm the person like,

I have a bunch of shit in my house, like, because I have these Instagram ads that keep feeding me all these, like, random trinkets that I keep sort of, like, clicking on and buying. And I, that's a form of excess. Like, I somehow, like, find my, you know, I, I do the thing, and then five minutes later, I'm like, why did I just buy that? Like, I, why, you know, and I do this on Amazon, I do this on Instagram a lot. And all of these things take into the excess tend to be bad. And so how do you, you know, you have to create measures on like, okay, how do you prevent excessive behaviors? You have to do a lot of customer education. we have tools around self-exclusions, limits, pauses.

And then we also have surveillance where, like, when we do find someone, especially on the younger side, you know, we do have age-gating. So you cannot participate as a minor, obviously. But someone on the younger side, you know, repeatedly losing, repeatedly kind of taking aggressive actions, doing too much of their portfolio, we start showing warning signs. Like, hey, you should not put more than X percent of our portfolio in one thing. Because, you know, again, like long-term, if want to build a healthy ecosystem,

you don't want these sort of behaviors to go off the rails. but then also our incentive is not misaligned with those guardrails. In some ways, it is aligned. We want people to be long-term participants in this model. We want them to be engaged socially. We don't win a lot if they come and lose a lot of their money very fast. That's actually a bad outcome for us. The pushback to that point, though,

you make the point, which I agree with, show me the incentive, I'll show you the outcome. The pushback for a lot of people to that would be, actually the incentive might not be that consumers need to lose it, that traders need to lose money, but they need to trade. And if you can get them addicted, if you can get them to keep trading and get hooked, ultimately that actually is a boon for your business. So the guardrails you're describing, they are inherently counter to the incentives that are built into your business, which is we need people to trade as much as possible,

because that is our business model. We're taking a transaction fee on all the trades that happen. we don't want you to lose money, but we want you to put some money up. What would you say to that? I think there's a presumption in your question that's just assuming that all the trading is basically, you know, dopamine, you know, type behavior, right? Which is not the case, right?

Actually, like, again, a majority of power users, the people that are really controlling the most volume are the people that are making these, are actually necessary. Their trading is necessary to this, because they're making the forecast more accurate, right? The stock market doesn't get efficient if nobody trades.

You need the trade. and you need the informed trading, you need the well-researched trading. And actually the trading that grows the most over time is the winners, is the people that are essentially very well-researched. They predict the weather because they're scraping satellite data. These are people that are building models. They're in the spreadsheets.

They're doing math. They're building systems. These are people that are actually rejected from traditional, for example, like sports betting because they're making too much money. They get blocked and limited there. But they can come to prediction markets. It's a good home for that. So, like, yes, you want the trading,

but the dopamine level training is not necessarily the thing that makes the forecast the most accurate, right? Like, it's not, you know, it's part. You need that vibrant ecosystem. You need speculators. You need, you know, forecasters. You need hedgers, which we can talk about. But you don't necessarily need the excessive behaviors. And the excessive behaviors are the things that you can cap over time to build the well-balanced ecosystem.

We'll be right back after the break. And if you're enjoying the show so far, send it to a friend. and please follow us if you haven't already. Hey, Kara Swisher here. I want to let you know that Vox Media is returning to South by Southwest in Austin for live tapings of your favorite podcasts. Join us from March 13th through the 15th for live tapings of Today Explained, Tephy Talks, Prof G Markets, and, of course, your two favorite podcasts, pivot and on with Caras Swisher.

The stage will also feature sessions from Renee Brown and Adam Grant, Marquez Brownlee, Keith Lee, Vivian 2, and Robin Arzon. It's all part of the Vox Media podcast stage at South by Southwest, presented by Odu. Visit Voxmedia.com slash SXSW to pre-register and get your special discount on your innovation badge. That's Voxmedia.com slash SXSW to register. Really, you should register. We sell out, and we hope to see you there. We're back with property markets. I just want to go back. to some of the criticisms. And by the way, the reason I'm interested in this is because this is what everyone is interested in

when it comes to prediction markets right now. I was just on a PBS panel where, you know, this was the entire conversation. There was a focus on young men and young men's issues, this prevalence of addiction and this trend towards gambling, and this question of do prediction markets sort of fit that description. And so what are we supposed to do about it? How are we supposed to feel about them? So one thing that I found interesting, I want to get your reaction to, I read somewhere

that almost 90% of the volume that is happening on these prediction markets, and I think on Kalshi, is related to sports. So it's prediction markets trading, but if it's trading based on like what color is the gatorade going to be at the Super Bowl halftime show, that to me fits the bill of gambling. It's to me as a kind of a different thing from the looking at satellite data and figuring out how will this affect weather patterns. So I guess my question is, one, is that right? Are you seeing that amount of sports prediction markets trading? And two, does that not fit your definition of gambling? So we're seeing a lot of sports. Sports has grown astronomically last year.

We don't have the Gatorade market. Again, there's unregulated, regulated. But we don't have the war, terrorism, assassination markets either. You know, the insider trading is also not, you know, the Maduro trade and, you know, the capture, this is not regulated prediction markets or Kalshi. But, look, I think there is sort of definitional, like, okay, maybe like, let me just kind of, let's just align on some definitions so we can have, like, a precise conversation. right? When someone is buying an option that expires end of day, retail participants, buying it against Citadel and the open market on traditional, you know, the most boring names like NASDAQ or Chicago border, whatever, do you consider that to be gambling or a form of gambling?

I think it's something different from investing. And so I would consider it, I would call it gambling, yes. And that is why I'm very interested in the regulatory rules around options trading, which are stricter than buying a stock, for example. So long answer, short answer, yes. So let's just establish a definition, and then we can like basically, you know, have a principal conversation here. So there's a few definitions we can basically take on, right? It's like, one definition could be there's a threshold of research or understanding in a certain market that needs to happen for this to be a trade or not gambling. And obviously, you'd see kind of the problems with that definition from a, from a, you know, delineation perspective, because how do you know

who does research and you get into nanny state questions? And like, now you have access, you know, open access problems, et cetera. One other one that I believe to be too broad is, is one that a lot of states and their state rules rule books hold, which is like, you're staking some money in the hope of making more money on something you don't control. That's one, you know, now you could see where that lands, right? You know, if you and I just leave this call and open Schwab and buy stock, even if we're investing in that stock, that's gambling, right? Like, we just gambled.

So what is the line? Like, I mean, how do you define that line? And, you know, I'll tell you how we do it, but I, but it's actually kind of grounded with how historically the lanes and the regulations have basically landed on this piece, which is one, is there a natural underlying instrument that, you know, where it's helpful to price or forecast the thing because some people in society care about it, whether socially or economically or other.

And, you know, number two is the mechanics. And I think that's the most important thing. When we talk about addiction, all the issues, the mechanics, is this, you know, to me gambling is the negative incentives, right? It's the incentive where I'm walking into a casino and that business is essentially, like, structured against me. Like, it's rigged against me. It's basically going to incentivize all bad behaviors that we're talking about because that's how they make money. Whereas an open and open marketplace, like a marketplace where I'm a marketplace, I'm a neutral fair exchange where I provide the rules, I provide the guardrails, I provide the technology, I provide the structure.

but then people are engaging with each other and they're figuring out the pricing, you could be a price taker ad or you could be a price maker and then you're figuring out how to beat others. That has historically fell under definition of an exchange, a marketplace, whether a stock market, commodity market, et cetera.

And that same principle was drawn in 1905 at the Supreme Court for grain futures. And then they delineated like there's the bucket shop so if you go and trade directly or bet directly against like a company on grain futures, That's like bucket shop laws. It's going to go state by state.

And if you do it in an open fair marketplace in the Chicago Board of Trade and now CME, that's considered like a federally regulated financial market. And then the same thing happened with the election market for Calci and then, you know, what we're seeing kind of play out in sports. Also exists, by the way, insurance. You know, you have state regulated insurance, which is like one insurance company

is the one that gives you the price and you just take it how it is, versus hedging, which is on CME, if you go and want to offload some risk in an open fair marketplace where anyone can compete on the price. that's also like open and fair game. So that's kind of like where, you know, we, I think, draw the line.

And to me, all prediction markets very squarely fit under kind of number one and number two. I mentioned the Gatorade at the halftime show. What color is the Gatorade going to be? Which is something that you can bet on on gambling apps. You say that's not something that we provide on Kalshi, which I didn't know that. I assumed that that was kind of fair game. That raises an interesting question. question of where does that fall on the line? Why does betting on the color of the Gatorade not

work for you guys? Well, I think it's kind of the pillar number one is like, is this like a natural like thing, a risk or an occurrence that, like, okay, trading on Brexit. Like if you're have a market on whether Brexit is going to happen or not, that has extrinsic consequences to a lot of people, government, businesses, people. pricing that thing is relevant. People care, right? Like pricing whether this is a 20% chance or a 60% chance, that's a very important thing. That can go, that can be basically traced back to asset prices. That can be traced back to how we price the SNP to how we price the Futsi. That's a very important thing to have. That has intrinsic consequences outside of the speculative

activity that is going to happen on people trading on whether Brexit is going to happen or not, right? the gatorade is a harder kind of argument because the odds are, I think it's, I would assume, it's 50-50, right? Or coin tosses as a similar sort of setup. So this is where like when you go back and if you all take a step back, you know, on kind of like this sort of what is the purpose? And maybe we didn't talk enough about this so far, like about prediction markets. Like why is it so important?

Well, I, you know, I'll say like what they do is they apply a market-based mechanism to questions to these key to a lot of questions about the future, some of which may be existential to humanity, some of which less existential, and you have to build a marketplace of diverse range of participants and diverse range of sort of opinions and all of that. But I think to me it's like what this does, and I don't know if you have seen there's a Fed paper last week that has kind of in some ways confirmed a lot of stuff that we've been saying over last few years. And the Fed paper was saying basically, Calci fills a lot of holes.

One, it's more accurate than Fed funds for forecasting Fed decisions. It's more accurate than any other like survey, like the Bloomberg Economist survey for forecasting CPI or inflation prints. But it also gives us a full distribution of outcomes and it does it in real time. It gives us like a much better understanding of basically the economy or a better understanding of the economy. And what excites me about what we're building is like over time is if you get a very liquid marketplace about all these kind of different questions, you will basically just have

a better light about our future, which enables better decisions, better resource allocation and then better also like better asset pricing for all the kind of. of assets that we're currently pricing. So there's a paper from Kevin Hassett about this idea of as society gets increasingly more complex and you used to be an agriculture-based economy so as long as you understand the agriculture,

you understand where we're heading. Then we added, you know, industrials, then we got into a service-based economy and now information economy, all these different, now AI is happening. As you add more and more complexity to society, it argues that we need infinite number of markets. You in some ways need prediction markets

to price all these different aspects and facets of society so that you can actually price like the core asset prices, like homes and S&P and the rates and the big sort of ticket items that we currently price. And maybe to make that example very concrete, like, you know, did you read the AI paper, some people are kind of a Dumerism AI paper

from what was it called? Satrini. Satrini, yes. And what we're doing is we're launching a market this afternoon on like whether the Citrini outcome is going to happen. Because in the Citrini paper, like someone put out in an opinion and it actually thanked a bunch of stocks. The market actually reacted to this. And, you know, I want to release that market to price that specific outcome. Like price these, like the outcomes that people are talking about when it comes to AI and get a better understanding of AI.

Because if you have these markets getting us better prices about these things, those will end up basically helping us price the bigger things, like the S&P and the stocks. And those are things that basically excite me about what we're building. When I think about potential for insider trading, which has gotten a lot of reporting, I think eventually that'll be starched out when people realize that you never want to bet against someone who has more information. So I see that probably going away organically. Why would you say that? This already happens. I mean, insider trading is rampant across many markets, including the stock market.

The way we prevent it is through regulating it and making it stop. It isn't organically stop itself. If I'm betting on the speed of a baseball pitch, and I realize I don't know, but someone in the audience may be giving hand signals to somebody, or it comes out that this is highly susceptible to insider trading, I think fewer and fewer people are going to bet on those things that aren't, that don't have access. My friend Todd Benson once said to one of my classes at Stern, never bet on anything where there's, if you can, where you believe there's people who may have much greater information than you. I think a lot of the most ripe for insider

trading markets are just going to, quite frankly, die a slow death because people are going to realize they're maybe betting against people who, I don't understand why anyone would buy, would anyone would bet on a, I figure what you call them, markets where on someone saying something on a TV show that's already been pre-recorded unless you are engaging in insider trading. Because it's fun. Well, then it's consumption. It's not gambling. It's, and you better make sure you're having a lot of fun because it means someone with a lot more information is betting against you.

You're on the wrong side of that trade. Anyways, Terrick, what would you say? I mean, look, there's a lot of consumption, and I like that frame, too. It's like the consumption bucket to think about a lot of these different things. And I think there's consumption on prediction markets and a lot of traditional, like, financial markets,

and that's not necessarily a bad thing. But so I agree with Scott. And I think the way I always think about this is, let's think about why is inside trading ban in the first place. You know, some would argue, well, if you let insider trading happen in stock market, shouldn't that make it even more accurate?

But the reason it's banned, and actually in some ways we've tried this, is that what happens is exactly what Scott mentioned, is that like, if you let insider trading kind of go loose, people stop trusting the market. And if people stop trusting the market, they stop trading. Like no one wants to participate,

or very few people wanna participate in a game, or a structure or a mechanism that is rigged. Like that is, there's just like, you know, unfair. So, but, and so, but that's why we actually, you know, for, we are regulated, there are rules against that are trading. So, so, you know, and these rules are very similar to stock market rules. And the mechanism of how we police it are very similar. And, you know, this has been a big topic of discussion

and it goes back a little bit to the regulated versus unregulated situation. There are unregulated players, you know, and they are, you know, offshore. And there is, or at least allegedly, allegedly there is a lot of insider trading going on, like the Maduro trade that a lot of people have talked about. And, you know, that has brought kind of these decisions into light. But at least on the cautious side, like we have a very strong position which we ban insider trading. Inside a trade is not a good thing. It makes the marketplace unhealthy long term and it creates an unfair field. Can I ask how you do that?

Because I think in the stock market, inside a trade, I mean, inside of trading laws are very, very strict. and I mean, anyone who's worked on Wall Street will know and will tell you just how intense everyone is about making sure. I mean... The problem is the executive who told the cousin, who told the cousin, right? And that stuff does happen in the stock market. But we have such airtight definitions in the stock market and such airtight regulations, or you're shaking your head as much as airtight as we could make them. Yes, sure. But the definitions are airtight here, too.

and the regulations are attired here too. So please explain that. And I think it's an education thing. So it's a thing that over time we need to get better as an industry. And look, are they perfect? I don't think they're perfect. And I think there's work to do

with regulators and policymakers and that's something we're very committed to. But so how is it defined in the stock market, right? And let's sort of attack that problem first. I think at a high level it's defined as like you cannot trade on material non-public information, which is basically, let's make that even simpler.

It's like, Ed, if you have a least, obligation not to disclose information that you have, that you have received, you cannot trade it because trading is a form of disclosure, right? Disclosing information, you can, you know, one way to disclose information is you can call Scott and tell him. One way is go on CNBC and tell them, or you can trade it. And that's one way of disclosing it, right? That same standard applies to prediction markets. And our rules ban it the same way, right? So if you have information that received that you legally cannot disclose, you're not supposed to tell anyone, like you work at the BLS and the Fed, you're not allowed to release the report beforehand, you cannot go into

the marketplace and trade it. And this applies to any of the other markets that we have. Isn't the reason that there is a legal requirement not to disclose it because of the insider trading laws in the first place, which says you can't disclose this? And just to explain this for people, this came up in your interview with CNBC where Andrew Ross Sorkin was providing to you the hypothetical like what if there's a dancer at the halftime show who knows what's going to happen in the halftime show and there's I mean there's no law requiring her to not him or her

to not tell someone about it but then he or she does and that seems to me to be inside a trading the stock market is not the only market that exists out there right We have markets on commodities, you have market on rates, we have markets on, I mean, we have all sorts of markets. It's not like we add the stock market and then all sudden prediction markets happen. But those markets also have rules around market manipulation, insider trading, and so on and so forth. Right. So yes, there's some reflexivity.

I agree with you. Like, maybe the companies in some ways, the underlying got more strict about some of these things because of the existence of the market. And this could have happened in our market too. It's possible, right? But like the way I'll describe it is like, and by the way, I do also want to address how we actually police it. Like how do we actually find, so let's just finish the definition. And let's move on to that.

But on the definition piece, like, if there isn't a problem with disclosing the information to people, then there isn't a problem with disclosing the information to people. You can trade it. Like, you know, and, you know, you could tell a friend who could tell a cousin, and then that's completely fair game. that is not concerned inside of trading. There's no issue with that. And if people feel like, hey, maybe too many people may be around the stadium and can look at it,

and that's like an unfair market, they would stop trade. Like, they would just like, you know, if you over time feel like the subset of information is too important or too prevalent, like too deterministic for the marketplace, and they would start trading like Scott basically was saying. But I think that the line, like, you know, you don't want to be in a position where you like block information because it is actually totally fair game to go and sit around next. to a stadium and figure out what the next song is going to be and listen to rehearsal. That's like doing research outside of Walmart.

It seems to me my mind starts spinning around the different types of synthetic applications of this or different things you could use prediction markets for, whether it's hedging, existing positions. Can you give us some examples of different applications of prediction markets that people have not hit the mainstream yet? One example, you know, and every time we're, around hurricane season, we get a lot of calls from people that live in the Keys. And they want to basically buy our hurricane contract.

They're buying a hedge against hurricanes hitting their city. And it's super interesting because historically what they do this is they go to state regular insurance, right? They go to an insurance company and the insurance company insures their home against a hurricane. There's sort of like two issues with that. One, it's an inefficient marketplace. And it's a little bit goes back to how when I, I started the company when we were like structuring these trades around Trump or Brexit,

like there's one priser, which is the insurance company, and you usually don't get a very good price, and oftentimes they don't pay out the policy, whereas having it in an open marketplace enables competitive bidding, right? So if Ed wants to buy this hedge, you know, Scott or other people can basically be, you know, competing for that market so he can get price improvement. The number two issues for this specific, like use cases, like insurance companies have pulled out of the keys because they've had a lot of trouble and a lot of difficulty pricing hurricane risk.

It's been like a very difficult thing for them to put in in their balance sheet. Usually they reinsured with reinsurers, but reinsurers have pulled out of the market. And so this is a very good alternative that people basically go to. And we see this in a bunch of other places, like, you know, the Fed interest rates,

inflation, geopolitical events, bills passing, where kind of regulation could negatively impact an industry or other. And we even see it a lot in sports. I mean, sports, the reinsurance or insurance industry for sports is around $10 billion today, $9 to $10 billion today. And same sort of thing applies. So, for example, there's a lot of teams that have big bonuses that are due at the end of the season if they achieve certain milestones. And a lot of teams like to insured against those performance bonuses. And they do it oftentimes with reinsurers. The prices are really bad. And so now that they can basically

all Florida on an exchange, they get better pricing and they get more effective. efficient pricing. They actually know what the fair price should be for this thing. And that's generally a good thing because it increases liquidity in the ecosystem for all these types of use cases. We'll be right back. And for even more markets content, sign up for our newsletter at profiteemarkets.com slash subscribe. We're back with Profitie Markets. My understanding is that your revenue 10xed in 25 relative to 24, are you assuming that same level or ballpark of growth in 206? X. 24 to 25, just to kind of talk about the number,

I think we grew, it was closer to like 35, 40X, 24 to 25. And this is like on an FY basis, on an annualized basis much more. It was maybe like 60. I think we could do, I don't know if 10X, but maybe half of that is,

I think, within the realm of possibility for this year. It is pretty mainstream now, right? Like, it is very, very mainstream. I think, like, the, so obviously, as you get more in the stream, the growth, you know, at some point, I mean, you know, 45% of people up to the age of 45 of men up to the age of 45 are like basically active users of prediction markets now. Like, like, some part of them are trading pretty actively and the other part is like consuming, consuming it as an

information feed, as a news feed that they use next to X and other places. Like, that's a pretty large number, right? You're starting to kind of like flirt with, I wouldn't say you're flirting with the boundaries, but you're starting, you know, you start decelerating as you kind of get closer to the boundaries of the TAM. But yeah, I think it's possible. I mean, I think, you know, we're growing, the institutional business is starting to pick up traction. I think going international is exciting.

Diversifying it to more marketplace, markets, types of markets, and there's a lot of categories that are growing. So, you know, I think, I think there's a lot to be excited about for 2026. Tarrague, I've grilled you a good amount in this episode. I think, as we just close here, I would separate two things, as I said at the beginning. On the content, Calshan prediction markets as a content machine, as an information machine,

I don't think it can be disputed. Everyone is looking at this stuff. Everyone is interested in this stuff. This is, by the way, one of the great things about markets in general. This is kind of why I love markets. It has this really awesome thing, which is that it tells you a lot about the world. You can look at a chart and you can understand things. It tells you about the the future, this is the great thing. It's even a great thing about options trading as well. Options trading also is an interesting and helpful information machine, content machine. At the same time, I am personally someone who thinks that the act of trading options is not a good or wise investment decision most of the time. I would grant you that there are a lot of people

who make a lot of money who ultimately are doing well. But ultimately, something I wouldn't recommend. I don't think it's great. Now, the law generally agrees, for the most part, which I think is why we have these stringent laws on things like gambling, on things like options trading, where we say, you're only allowed to do it if you prove this, this, and this. You're only allowed to do it if there's sufficient education. That's not true for gambling. Or for gambling, it would be, we need to, expressed to you and, I mean, if you're advertising as a gambler, you need to say, you need to gamble responsibly. We kind of recognize that that is built and you need regulation. Which brings me to, I view Kalshi as kind of the only platform in prediction markets that actually is embracing

regulation. I think prediction markets are here to stay. I think the genies out of the bottle, this is happening. So the thing that I think is really important for you, and I guess I'd want to hear more about is how will you embrace the regulation that so many tech companies throughout history have tried to shirk off because it eats into margins, it eats into your bottom line, it can be an annoying problem. How do you deal with that? I don't think of it that way. Look, I think let me just address it in twofold. First, the model. You may or may not, you know, people may or may not agree whether trading an option is a good or bad thing. I strongly believe that trading on prediction markets is a good thing. I strongly believe that trading on prediction markets is a good

And we've seen the results. People are being more engaged in the political process. They research different things. And if you talk to our traders, you see, like, it brings them community. Like, you know, I, you know, going back to the Joel example, like, I think one of his best man is someone who he's met in a prediction market in Calsh in our Discord. And I think there's a lot of, like, beauty that's coming out of these markets where, like, you're seeing this sort of, like, subjective debate that usually happens.

people insulting each other on Twitter and, you know, this polarize on Instagram happening more quantitatively, more objectively, more objectively, more in a more engaged way, more intellectually, on prediction markets. And I think that's a good thing. I think we're not talking about like, when you have a position on something,

you get more self-calibrated. Like, you know, when social media is incentivizing clickbait, prediction markets are incentivizing truth, calibration, objectivity, the pursuit of truth. All of these things are good things. And I think over time, you know, when I think about people like, even, you know, when we think about like,

You know, our generation, like we want people to value things like being accurate, being precise, thinking critically about the world. And I think prediction markets brings a lot of that. Our regulatory position. So we spent four years getting regulated before we launch a single product. So the reason why you heard about polymarking a lot of other, you know, probably market really primarily in other places, they just launched without our license or anything else. We were committed to like, we will get the license up front no matter what. And let me tell you, like when I was 22, the idea of spending my 22 to 26 year olds just doing regulation and law. and legal stuff without a product.

I mean, it was horrendous. It was really difficult. But I'm very proud of that decision because, you know, it led to the outcomes that we're seeing now, we're leading in the market. But I want to build an enduring company. And I just don't see a way to build a financial services company. I can't talk about social media and other places.

But a financial services company without proper regulation. I think that's, you know, I think it's not right. Like, I think you need a regulator overseeing every step, where the money is going, reporting on transactions, everything needs to be public. But then, you know, I also think that like there are questions like the ones that we're discussing that, you know, over time we need to get better at solving. And that's something as a company I can do alone. We need the regulars and we need the regulars to work with us.

Tarik Mansoor is the co-founder, Chief Executive Officer of Kalshi. Tarak began his career as a quantitative trader at Goldman Sachs. And as a global macro trader at Citadel, he went on to co-found Kalshi in 2018. Tariq, thank you very much. Appreciate your time. Thanks, sir. Thanks for having me. What did you think?

What did you think? Can I throw it back to you? Well, you know, me, I'm pretty quiet. I don't like to share my viewpoint. It's just sort of reserved. I think they're trying to be the clean, well-lit corner of this environment. I mean, I struggle with the concept as a whole and the tension between you can't infantilize young people. people, Paul Tudor Jones, one of the great investors, will say that 80% of the stock market is speculation.

That if you look at there's $3 trillion in transactions, it's like $300 billion of secondaries and equity offerings, true financing. So technically 90% of it is not investing. It's me betting against you that the stock's going to go up or down and you're taking the other side of that trade. So this isn't much different. But at the same time, it does feel like it has more of a gambling fee. feel to it. So I don't have moral clarity around that. What I am absolutely fascinated by is the opportunity for, so I am a resident of Florida. Basically, Floridians are struggling with they can't get insurance. And it's not only you have to go naked in terms of risk,

if you have a mortgage, a lot of, because the mortgage industry is in bed with the insurance industry, in order to get a mortgage, you have to show proof of insurance. And now homeowners in Florida can't get insurance. So is there some sort of synthetic where they basically, every time, you know, Hurricane Claudia pops up, they basically agree to buy or bet for you that this will hit. And if it hits, you get a bunch of money to cover your, you know, damage. I just think there's so many opportunities here. As you know, we are constantly using this information because as it ends up, the wisdom of crowds really is why. that this might put pollsters and investment banking analysts out of business because the guy covering Apple for J.P. Morgan,

J.P. Morgan wants Apple's next debt offering and is always going to exaggerate the upside or have a bias towards the upside. There's nothing to get to get to how you really feel about something when you ask people to put their money behind it. I hope that he does appear to be sincere about not embracing regulation, but at least being Relative to his peers, he gets credit for embracing regulation as opposed to trying to skirt around it. So I think he gets some credit there. You know, it would be interesting to see if he, I thought it was 10x. He said 40 to 60x. Obviously, 26 is going to be a pivotal year for him. Anyways, my thoughts. What are your thoughts?

I think you have to give him credit for wanting to comply with regulation. I think there are so many of these companies that the idea is that's just like skirt around as many rules as possible to make as much. money as we can. That's not the route that he is taking. I do think he needs to get more clear on what are the lines that you're drawing here. What are the lines between speculation versus investing? What are the lines between speculation and gambling? These are hard lines to draw. It's not very clear. As you say, you know, options trading, you can make the argument that the entire stock market, or at least 90 percent of the stock market, if you're not directly, particularly, in the fundraising and investing of an actual company, if you're just trading the stocks around,

maybe that's speculation, maybe that's gambling. I think it's a harder argument to make. But the point being, there needs to be a lot of clarity on what are the definitions between these different things. Because what I can tell you is that betting on, say, the color of the Gatorade is flat out gambling and there is no real benefit to society other than it's fun and it's a form of consumption. And if that is the case, and if that is happening on the platform, he says they didn't do that, do the gaiterate on the platform, but maybe there are some others. If that is the case, you've got to regulate it like it's gambling.

You've got to have disclosures. If you're going to advertise, you need to say gamble responsibly, trade responsibly. The same way that we have real robust regulations around any other addictive product, around cigarettes around drinking. I mean, the rules are there in place because bad things can happen. And so what I would love for Tarek, and I think he's doing this better than anyone else in this industry, which is happening. Sorry, it's happening, whether you like it or not. He is embracing that more than the others are, and I think that is going to be crucial to minimizing the very real potential for downside risk here when it comes to

speculation, addiction, and gambling. Because unfortunately, that is happening on these platforms. So now it's on regulators to figure out how to make sure this works for everyone. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carty. Our research team is Dan Shalan, Isabella Kinsel, Chris Snowdonahue, and Mia Silverio. Jake McPherson is our social producer, Drew Burroughs, is our technical director and Catherine Dillon is our executive producer.

Thank you for listening to Profugee Markets from Profugee Media. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.