Hello odd lots viewers.

You are about to watch a conversation with Tarek Mansour, CEO of Kelce.

This was recorded live onstage at Chicago's Untitled Supper Club.

We had a blast and we hope you enjoy the show.

Tarek, thank you so much.

Really excited to chat about the.

You're definitely having a moment.

The South Park episode, I think last night was all about prediction markets.

Did you watch it live?

I try to avoid watching or reading anything about us.

Yeah, without kind of getting the the third party reaction before.

Oh, so we didn't know because we, we, we saw the thing like the announcement a few days ago there. Yeah, episode prediction wise.

And we started kind of imagining all the types of things that they're going to do.

It's crazy.

I mean, the highlight, I think is like, they copied the app, like.

Yeah, exactly.

That was I mean, they even had the refillable and they even had some of the bugs. We haven't. They have.

It's like, oh, amazing.

It was unbelievable.

So, but you know, it was it was pretty cool.

I mean, there's a few parts I disagree with, but the other for the rest, I mean, it really enjoyed it.

Yeah, I watched it this morning.

Why do you think prediction markets are having this moment now after they've been around for decades?

Literally. Why now?

Yeah, I mean, I think there's like path dependance on these things. Right.

Like it's not sort of like, I, I'm a strong believer that sort of like, you know, in history, you have to have a few agents that sort of like push and, you know, push the boundary of certain things and, and, and so somebody's got to do it type of thing.

But, my, my view on this and that's why we started the company is the fundamentals are there.

Like, this should be a very large market.

And we can talk a little bit about the history, but when we first started the company, this idea of sort of like a financial market that prices questions about the future, what sort of we were very drawn to it.

Because, you know, one, if you could build such a financial market, it could be the largest of them all because the largest number of people care and the number two is could be the most important because, you know, yes.

I at least from my perspective, when I looked at the history and you were chatting a little about the history, like the Elephant Room was regulatory, it was, I mean, there's a very simple kind of like first order factor here.

Well, well, it was illegal like.

Yeah. That, that that's pretty good. That's tough.

Yeah.

And it's a pretty good reason for something not to, you know, generally kind of go mainstream and exist.

And, and the legality has been sort of the thing that has weighed on all prior prediction markets.

I don't know if you ever encountered Intrade.

Yeah. Yeah.

I mean I traded on there.

Well, you know, so here you go. Right.

I mean, Intrade was you know, how that story kind of it ended. How familiar are. You?

I don't I don't know how it ended.

So so John Delaney was this was a sort of founder of Intrade and is kind of a visionary.

I mean, like in many ways, I mean, he really believed that, you know, he was on CNBC back in 2000, sort of like talking about the forecasts for the election.

And so, but he sort of ran offshore from Dublin and it was kind of a like a VPN type setup.

And two weeks later, John Delaney died, and he died, climbed Mount Everest.

And there was a kind of whole controversy of like, what happened.

I mean, was there some sort of causation there?

But for us, when we we got really obsessed by doing this and realized, like, actually, that the only way for this to go big is you got to legalize it.

Like, there was no other way.

And no matter how big the company would get it, no matter how kind of how much culture there was going to be around the company, it didn't really matter, because the government could shut it down.

And they will, after a certain level of scale.

And so this was sort of like we spent, you know, three years and a half when we started after starting Koski, like all we did was basically regulatory work.

It was like, how do we do fight exactly?

The fight was actually like more like five years and a half, like three years and have to get to legalize prediction markets.

And that was sort of the whole thing with the prior administration around, the election market, which we, we, we were completely uncompromising on, we had to do that.

And that was kind of a whole two year long process that ended with our suing the government, our own regulator.

And, and then I think that lawsuit, I view it as sort of the, the probably what the turning point, is for these markets like this is when we want that institution.

Like this is when everything changed. I think. Yeah.

Would you have died if Trump hadn't won in November?

No, it would have just been slower and harder. But no, not died.

I mean, we didn't die under the harshest environment of all. I think, like like, you know.

Well, the first. Right, the first three years and a half was like, well, this was just not allowed. Right.

And we didn't, you know, we kept sort of making progress on all the way up until legalizing and launching.

But then, yeah, the reality is like the prior government I think was as hostile as it gets, that it was just not I mean, they just didn't want it to exist, so.

Well, you say that like, it's really important to have a change in the regulatory landscape, that there is no way this could have taken off had this changed, had this not changed, however, there is a competitor that you can access via VPN fund with stablecoins.

In theory, there doesn't even need to be a company that had been operating for several years.

Like what? Like couldn't have happened?

And could it still happen that the future of prediction markets is on chain and essentially outside of the regulatory landscape?

I don't necessarily think that on chain, off chain is sort of necessarily kind of an unregulated regulated like like on chain doesn't mean a legal right.

Like, sure.

So but I think that.

Like but there is a lot of volume on this entity that had all kinds of things while, you know.

I'm sorry. I'm talking about Poly Market. So,

It's not like we couldn't go on chain. Right?

It's like, this is not a very hard thing to build, right?

Like in terms of, like the, the, and actually like, it's funny, like the first two weeks, of course, you tried to do something on chain and realized like, well, again, it was a good way to sort of be maybe like somewhat smart about regulated regulation, but not really because augur was on chain also. And like that was also sort of shut down and there was a bunch of issues,

for us, we stood very firmly that like for this to go mainstream, like you should avoid a VPN, you know, and, and, and, but but also like kind of how do you, how do you, how do you have this be legitimized?

Financial markets attract the type of institutions that would trade, you know, a bunch of institutional partners and now the brokers and actually truly take this ministry.

It was just no, no way to do it outside of like that's the universe of financial markets.

You cannot do it outside.

You have to expand it.

And if you expand it, then I think we have a real winner.

And I think the results show like, you know, yes, poly has a lot of volume, but like, there's not real revenue yet.

There's a lot of wash like it's it's kind of how do you account for all this stuff?

And even if you account for all of that today, where like something like three x bigger within a year.

So definitely want to talk about the brokers and the market makers.

But before we do a very basic question, but often the basic questions are the most interesting.

Can you walk us through the life cycle of, you know, a binary event contract that gets created on your platform?

It's a great question.

Because that's a hard problem, right?

Like because in traditional markets, right, the life cycle is like, you know, we we have an idea like, a grain futures or onion futures or GPU, not.

A you don't do on your futures.

Onion futures is a bad idea.

But you can set up a prediction.

You know, what do I do? Things.

Actually, I do think it's a little, lame that poorly market like it hasn't done onion futures.

Because if you're going to like, what's the point of on chain if you're not sticking it to the man anyway?

If like, the onion. Farmers are like finally have like instrument to hedge and yeah. What's the point of crypto if you're not using it to fight against these absurd rules?

I mean, like, well, the onion futures role is truly absurd.

Yeah, yeah.

I mean, it's like that's one of those, but I guess now it's maybe kind of funny.

Maybe we should just keep it.

But, like, but but you know, or like, I mean, or like GPU if you mean, like the point here is, like,

you have something where the lifetime is kind of like infinite, you list the future and the derivative and it's sort of there forever.

And then you build the liquidity over time.

You can take your time.

It takes like usually that these things take time.

They take years to kind of build up to market them and build liquidity.

This is different, right?

Like this is much more dynamic.

It comes and goes like oftentime the trend could be sort of like there for 2 to 3 weeks, sometimes a week, sometimes it's a day.

And you have to be much more, much faster.

And kind of my mental model for what this looks like, it's sort of like there's an idea that can be from a user, from a, from the news, from a trend, from some tweet.

Then there's a listing of the market, and then there's kind of like from a listing to kind of making it reasonably liquid and active.

It's interesting because, you know, the first time.

So we've, we've gone through like a, all kind of types of regulatory winters.

But the first time we listed a market, it took us 18 months.

That was just for listing.

And because there's a lot like operations attack.

These are tickers, right?

Like you list them like a stock or like a, like WTI crude oil.

Yeah. Now we do it within 30 minutes.

And so we've expanded the territory quite a bit.

And, and most.

And when you list it, does it go to the CFTC or what.

Basic. Removal process. Yeah.

Yeah.

Because there's like a self-certification which is basically fight with the CFTC.

And they kind of like generally they historically is basically like if you file it and you haven't engaged with them beforehand, they usually will basically block it.

They'll call you and say, stop until we talk, and then you do it.

But now we've covered so much territory and we've built so much technology and like the operations and the regulator in the loop that, like most new things that we do, actually fit into a bucket that we've already done.

And sometimes they're arguably new things.

Like right now, the frontier is actually some of the SEC like company related markets, I think is this sort of next frontier.

But we've covered so much ground now that, like, most things are like of a similar flavor.

We've been going this whole time, you know, you talk about company related stuff, talk about hedging onion futures maybe hedge or sorry hedging onion prices.

Maybe you want to strip out something related to Tesla car sales.

But let's talk about the business.

How much of this is sports right now?

How big is the gap between volume on a Sunday versus volume on a Wednesday?

Volume on a Sunday is very, very big.

But like, it's it's interesting.

I mean, like the, I'll say a few things, like, I loved, the sports side has gone like, it's. I mean, I'm shocked. I'm still shocked.

Yeah.

Like, every week we do a forecast and we beat it and like, I mean, America likes NFL.

I mean, I don't I mean, they like football, but I don't know more than I expected, I guess.

But, the it's a little bit more than that.

Like, you know, the thing about sports is, but, see, there's two things going on.

One, there's just a lot of scheduled events, okay?

There's just a lot in the week.

But if you compare, like a 1 to 1, like a game to, like basically anything that Trump does, Trump will win.

Like, you know, like the there was a volume 1 to 1. Like these markets do really, really well.

And it could be literally unlike any I mean, anything he does.

The problem there is like there's not enough scheduled like that.

Aren't that many of them.

I think they may be over.

But just like.

What percentage is on Sunday?

Like it's not I mean, probably 90% of sports on like a regular weekday is like much lower.

And what's the gap in volume between Sunday and maybe.

Okay, okay.

So like yeah I mean NFL Sunday is like massive.

But it's a little bit like it's it's a little bit like asking the question like okay well on Election Day what was the volume.

Right. Yeah.

It's like 99.9% elections. Right.

So so sports is very large.

But like we have other categories now like like culture for example I think is like growing at a similar rate.

It's just starting from a much lower baseline.

And our market diversity, our liquidity is just not there yet.

Whereas sports is much more kind of like, I would say like much more diverse and much more liquid.

Yeah.

Okay.

So I'm going to ask the obvious question, I guess, but why is it not sports betting?

You know, I don't I don't get like as much wrong with the word betting.

I think gambling is sort of where it where I have a problem.

I mean, you know, when like, CME launched water futures, like 3 or 4 years ago, I, you know, I remember like the headline about that was like, oh, you can now bet on water.

It's like, all right.

I mean, I guess the word betting is used very sort of loosely, but like, look, I got two things.

I sort of the legal question and there's sort of the, the, at the whole is this good for society question.

And those are my.

Yeah for sure that matter. We'll do both of them don't worry. Yeah.

I mean I guess so.

So the legal question I mean like our approach has always been sort of legal and regulated first, like always do it within the bounds and expand the bounds.

So we did this prediction market and elections. You know, I mean a year ago right. Yeah.

Well a year ago even like I mean people were saying this is going to destroy democracy, right.

Like it it was it was the end of the world. If we ever got legalized and like, you know,

and like it was and then we got legalized and it was like super biased.

And, you know, I was being accused of being Mossad agent.

I, I don't even remember that period. But like, it was like.

I missed that one.

I was like, it was like a whole thing about, you know, I worked at Palantir and that's I'm obviously kind of rigging the election, but like,

and obviously the vibe has shifted pretty dramatically with the election.

And because, you know, there is some kind of biases market.

So when it comes to sports like on the legal piece, like it is legal, like the CFTC could stop it if they wanted to, but the states can't.

That's called preemption and that's how it works.

And where an extremely strong legal footing.

I mean, Dan was mentioning sort of this year, I don't think city is asleep at the wheel.

Like, you know, they have less staff, they have staff.

And the staff is a way of sports.

We talked about it.

It's not like we showed up one day like, hey, surprise, it's worse. Markets are here.

Isn't Trump's nominee also on your board?

The nominee for CFTC?

Well, he was ex nominee now.

I mean, we'll see.

But I mean, I don't know, but I don't know if it's nominee.

But like they're just going to have questions.

But I, I he was not there when this happened.

And like he was you know so he's still not there actually.

So I don't think it's very relevant to the question.

I think the change of the administration is relevant to the question.

Like, yes.

I mean, I think it would have been much more challenging in the prior administration.

Like, there's no question about that.

But the law is pretty clear.

I mean, if you read the Commodities Exchange Act, there's like a two pronged test,

and it is an event kind of related to war, tourism, assassination, violence or gaming.

And then there's some sort of illegal stuff that's illegal under state or federal law.

And so you can fall under that category, we could debate whether this falls under gaming or not.

And there's actually quite a bit of debate there.

And then the second test, which is like if it does fall into this category, the CFC can make an explicit determination that it's contrary to public interest.

Right.

So there is that sort of second standard.

Yeah. Which raises the second question, which is like, I'm just I'm a believer in markets.

Like I think a market based model for this market is better than the over the counter sportsbook model, because the odds are better.

Anyone could be a price better.

They don't have to be a price taker.

And the results show like less people. I like the percentage of people that basically lose on couches closer to 5050.

That's just not the case in like a traditional sports.

And I think that's the sort of argument that wins it long term, which is like this is just better.

Like you get better prices, more transparency and the ability to, you know, influence, like basically participate in a way represent an additional model.

You already said, that you don't think that the distinction is not between trading and betting.

The distinction is between betting and gambling.

So you sort of preempted a question.

But there is this Facebook ad that I saw and it says breaking news.

Sports betting in California is now legal.

And I saw a screenshot of I couldn't find it.

I found it on a blog.

But is that like an actual Kelce ad that ran?

Well, we have a very large marketing team and this is the ad is not there anymore.

But like regardless, I mean,

So that was doing it.

Well, you got. To imagine a company has like rule 100 like.

Again.

But like so like like nothing. You know, you're seeing like, breaking news. It like, I guess what I'm saying is, like, we all know what's going on.

There is just breaking.

I mean, it is legal to trade on. Yeah.

I mean, that's big news, you know. Yeah.

And we are

I mean, you know, and so but like I do actually think like I'm not as worried about this like like, you know,

the word gambling is the one that really irks me.

Like, you know, because.

Like, okay, zero zero DT options like, yeah.

Like what retail is doing what, like $1 trillion of volume?

I mean, you probably know the numbers.

What is it, Tracy? Cronos I can't remember, but it's a lot.

Yeah.

So what is retail doing there like hedging

I mean, right now, what exactly are they doing?

They're gambling.

I don't know about that.

No, I think I mean, I think it's fun,

like I, I agree with like this premise that the idea of.

Like dry line, it's basically like like it's it's the sort of thing where like, I mean, in 1905, I think we talked a little bit about this, like the Supreme Court.

There was this whole question of grain futures and like, should it be gambling or should it be a financial instrument?

And if it was gambling was going to go under the bucket shop laws.

And, and and it was this Supreme Court case, Chicago Board of Trade versus Christi,

where the Supreme Court basically like ruled in favor of the Chicago Board of Trade, which is like, yes, a lot of people are speculating, but there's value to these markets beyond the actual speculative, you know, activity is taking place.

And then you get into the question of like, what is the standard the commodities exchange act like,

should all the activity be hedging?

Well, if that's the case then you let's just cancel the whole act.

Let's just stop trading altogether.

Because in most markets, including grain features like 95% plus is not hedging. It's speculative.

And I think that's true in the stock market.

And so you know and then like okay, well how do you distinguish and you know, should we take out the spec and even just keep the hedging.

Well if you do that then there's no liquidity.

And so it doesn't work.

And then how do you even know who's hedging and speculating.

Do you go and check.

Sure.

Yeah.

So so you go into all these different questions.

But like to me gambling is sort of like you create an artificial risk and then you, you roll a dice and then you gamble on it, you know.

But trading on whether Brexit happened or not, that's just like a natural risk. That's sort of there.

And then the second question is that.

And to me, the even more important one is like the the market based mechanism versus sort of like you walk into a casino, the odds are like structurally stacked against you.

And actually if you start making money like in the best case scenario, they basically, you know, stop you from participating.

And that happens in sports. Also in other the worst case scenario they like kneecap you right.

Like that. And so that to me is gambling.

Like it's like the the revenue of the company is equal to the losses of its customer and vice versa.

And I, I just don't think this is the same year.

Like, that's not how the New York Stock Unit makes its money.

It makes its money based on fees.

Same with Robinhood, same with, you know, and, you know, same with Casey.

And so I think there's a there's a big structural difference.

Well, this was going to be my next question, actually.

So setting aside the gambling terminology, part of your argument here is that even if it is betting, it is somehow qualitatively different than traditional betting, where, you know, you have a sportsbook maker who's setting all the prices.

And you said earlier that there is more transparency and fairer pricing and all of that.

But then again, if you look at some of the words that your own company has used to describe this, you've put up job advertisements saying that you need experts in something similar to sportsbook pricing.

No, this that's not quite right.

Now that the job advisor sports operations listing the markets, how to settle down all these different things.

What's that dynamic is very I mean similar right.

Like you have to know which markets to list how to list them.

What are their price feeds to kind of like pull up to, to bowl to basically settle whether it's sort of like this team one versus the other.

That's very different from like, you know, we need, I don't know, like someone who is like an expert in, like, you know, like, programed to, like, you know, bring in traders and figure out how to optimize, like, you know, how to, like, optimize, like, losses and things like that.

Like, this is very, very different.

Well, talk to us how the prices are actually set.

And why does, you know, a platform that ostensibly is a peer to peer trading platform need market makers at all?

Well, if you listen to market right now, like on let's let's give an example on, on, like even fed rates, you got to kickstart somehow, right.

Like the financial markets aren't market makers, right.

And they appear like financial markets are the ultimate version of peer to peer.

That's what they are.

But it's basically a way to kickstart and which I think actually are most liquid markets.

The more successful a market becomes, the more profitable market becomes, the lower the percentage of market makers like, whether it's like partners like Susquehanna and institutional market makers and others.

And the higher it is, it's it's basically organic liquidity.

So actually, the more successful it is and the more profitable for us.

And like, you know, anybody, it's the lower the participation of these market makers.

So the use is actually like, you got to have somebody that starts to bid ask like you, otherwise you what am I kidding?

There's nothing.

It's just that. And so you have to kind of break the chicken and the egg.

In some ways you start with the chicken and you incentivize that chicken so that the egg comes, and then you basically get the flywheel rolling.

So I think it's kind of exactly the same as financial markets.

And like a lot of our liquidity is in the non liquid market smart and market driven.

And the liquid markets non-market market maker driven.

Basically let's talk about some non-sports stuff and the future.

Like any anything you could sort of future tries anything right.

When you envision it.

Could you have could we one day have a future for every single stock on the exchange?

A perpetual future, a perpetual Tesla future, a perpetual apple future, a perpetual like?

Could it be a world that we live in one day and a perpetual ten year Treasury future?

I mean, cash is everything in Arabic, right?

So. So you know, the long term vision is like, yes, I mean, the the I just think like we should have a market for.

Perpetual, or a future for private companies.

Space future. Yeah.

And you know, like the idea is so kind of get like one, I guess, general and then specific. Answer to that specifically.

So the general sort of principles, like, I think anything that has a difference of opinion, difference of opinion, of qualitative opinion should basically have a mechanism to resolve that quantitatively.

And so and then there's some limits like I, I think there are markets that do create bad incentives.

And I think, actually CIA does handle them.

And like we, we really haven't done these markets.

But to your question, like, yes, I think that's, that's probably what the next frontier looks like.

And I and I think that the concept of security futures has been like a very kind of like would say it's been a very exciting concept for that.

I mean, even Pre-calc it's not sure where, but I think the CFTC SEC relationship historically has been a big part of the bottleneck,

because if you're on the SEC side, you can't be do you don't really do futures.

And if you're an CFTC like you've you don't need securities.

And you had this question like should I get right. By both I mean yeah you already have one.

That's sort of I mean you're like daily in your operations already.

Very tough.

Now you're adding a second one and it doesn't scale linearly at scale. It scales sort of quadratically.

And so it's been really tough historically.

But maybe now in this environment I think it might be possible.

And maybe, maybe we'll figure it out on Monday.

So we'll see.

Yeah.

On Monday.

Okay.

Can I go back to the market makers for a second?

Because this is an area where I think people have a lot of questions, but that

what are the actual obligations of market makers on your platform?

And you talked about how in the beginning, you know, maybe you have this really esoteric contract about throwing rubber objects on to basketball courts or whatever it is.

We don't. Have that.

But, you know.

But that's.

The other.

Guys.

Theoretically.

Yeah.

The other player.

That won the CFC would like to go.

How do you market makers decide what contracts to actually support initially, and

are they obligated to come in and provide like for everything?

No, because well, not everything. No.

Because like well though if well you have fair access sort of requirements and and a CFC regulations, do you have to have rules that like basically I generally like, accessible by anybody, in a certain sort of like tranche or two or whatever.

But like if I'm like make a wants to come and trade on Cassie, they could do that and they have no obligation.

They can make, they could take, they could do whatever they want.

Generally what happens is like, you know, if a market maker wants like, okay, but then how do you kind of incentivize liquidity?

Then you could sort of say like, okay, maybe you rebate you some fees if you basically commit to obligations.

And the obligations, the way they look like is like if you make on the fed market.

So that's an actual specific example like you put like 75,000 contracts up on each side within like for 3 to $0.04 spread.

And you have like 98% availability or so you're pretty much there every time we we kind of probe, you could, for example, get your fees that you pay rebated so you don't have to pay.

So that's kind of like actually our most common type of I mean, this is pretty much like the market program.

A lot of them are public.

And people can sign up to which markets they want to participate in.

So some people sign up to economics, some people do politics, some people do sports.

Some people do a combo of what a lot of people do. Financials.

And the reason you want that actually is because without any sort of structure, then no one's going to commit to anything, right?

Like then people will only do it when it's like advantageous for them, and they won't do it when it's, maybe like a novel market where we need to kind of bootstrap liquidity and so on.

So you have to figure out the sort of set of incentives, especially in the beginning.

And those over time go down as the market goes more and more liquid, as you need less and less of them.

And are the rebates and incentives and I guess the information is that equal for all the market makers on the platform because you also happens.

In the obligations.

Okay.

So like it's not like a you don't do something for like you don't do well.

So well finish the sentence.

Well I was going to ask about Katie.

Yeah. Yeah.

So people ask a lot about category so fully it's fully information like we've operated for five years.

It's fully siloed. Informationally.

It's like run independently and so on and so forth.

What I can say, like emphatically, Katie has absolutely no advantages, like in any way, shape or form of other market makers or market participants.

And we've always said that, you know, we're we don't think of this as a flank because it's true.

And, the CFTC audits us and they see the numbers and the numbers, you know, are factual.

They're not the best performing, trader, let alone market maker on call sheet, by orders of magnitude, like, you know, I'll leave it at.

They're successful because they're not that successful.

They're doing okay. I would say like and it's it's fine.

It they, they, you know, try to kind of like push optically and some markets are harder and so on and so forth.

And that's a good thing.

Like otherwise these markets would sort of not be there.

But I'll say for sure is they don't have any privileges or, you know, benefits aside from anybody else.

Aside from saying aside from we have some small teams, 2 or 3 people that sign up to market maker programs.

Some of these teams are actually beating all the other market, the institutional at including ours, institutional usually better than ours.

But like, what we do is like there's like tiers.

So if you kind of like abide by certain conditions, you can get more rebates, than if you do lower conditions and less rebates.

And those is accessible to anybody that basically would do the conditions uniformly.

One because regulatory wise, we have two and then two because otherwise, like, we wouldn't trust the sort of marketplace.

So yeah, there's no, no, no.

Like, we got accused a lot of a lot of different things, you know, but like, that's normal.

I mean, there's like a lot of incentives and interest there on the other side of this equation for, for specificity.

Okay.

Now sports at the time, it was elections.

But I think that kind of like we let the truth mean revert over time.

So obviously you have these sort of legacy market makers who are now participating on your platform.

You mentioned Susquehanna, etc..

Have you seen like, I'm very curious about whether we'll see legacy institutions and use become actual sort of like use your market for actual hedging purposes.

Now, I'm sure there's some around the election, but some of these other things like I'm curious, for example, do you know other hedge funds that might have a particular trade on and they want to, hedge against the possibility of a negative NFP print because they think that a bad jobs report is going to bust some trade like that is the risk or maybe a sort of hot CPI trade, etc..

Do you see institutions using these markets yet to actually take hedging or positional trades yet?

So I think that, so yes, but it's a kind of a size thing, right.

Like the main bottleneck is basically liquidity.

And it goes back to same question.

It's like you have to incentivize more and more liquidity over time so that like, you get the larger size,

it's like a typical I mean, the way I think about it is like there's a small prop shops and the smaller shops like those are doing some and like because you can take millions of liquidity on cash, it's not that difficult now.

Depends on the markets and so on.

But then if you get to sort of the buy side firms like the larger.

Yeah, you know, like you know, where it's going to top 1015 on the street. 1015 hedge funds on the street.

And then after that, corporations like, then you're talking like the minimum minimum size, like for even to care is eight figures, but probably 50 to 100 million.

And so I don't think the equity is there quite yet.

Like elections start flirting with that sort of level and we start we've seen some but like the we don't see that like it's just a matter of time for liquidity to build up.

Okay.

For the kind of like deep institutional use case to basically start kicking in.

And I think I see this over the next two, three years.

Like, I think that's going to be a very big part of

it's always been part of the vision because you you create a marketplace where you can price anything.

You know, what you're doing at that point is you're pricing risk, sure pricing. Anyways. It's sort of happening in the world.

And then when you price the risk, it's much easier to to create the liquidity the same way. It's easy to create liquidity for the option market today.

That's much higher for some esoteric event, as there's more and more price benchmarks, then you can provide more liquidity.

And then after that, we can basically really cater to the sort of institutional risk transfer, use case, which I think is kind of where the time really expands.

Launcher.

I mean, I assume in addition to talking to regulators, a big chunk of your time is spent going out and talking to institutional players, either on the market making side or maybe by side who might one day potentially be interested in actually using this as a hedge.

What are those conversations actually like?

You know, you you have this partnership with Susquehanna now.

What are the concerns that they lay out when it comes to this new business?

And what are the sort of I don't, I guess, enticements that you offer?

So, I would say, like right now it's a lot more just like learning.

It's not to say like, hey, our approach is much more like, let's we learn, we learn, and then we figure out how to build the right product.

And then people come.

It usually works that way.

Not sort of like, oh, like sort of come.

Did Susquehanna did they approach you that?

We have it.

It took a while.

I mean, like we had a relationship, like we kind of when we started like thinking about the company.

And this is where an issue with like a lot of the sort of institutional players and like the market makers and I mean, I like to say that before and, but like, I don't know if like we have, but I mean, we just had a relationship when we started talking and, you know, they see division like so Susquehanna really believes I mean, Jeff, yes.

Really believes in the vision of sort of like this idea of like have some skin in the game to forecast any, any question about the future instead of debating about it.

And he's always like prediction market.

So there's a little bit of a natural fit there.

But but like going back to the kind of institutional like what we learned is like it's there, right? A lot of them, whether they price these specific events like NFP specifically, or like a CEO or leaving a company specifically or they're worried about it, like even if they don't price it specifically, but they're sort of like, this is something that I'm worried about on my thesis.

Like, I have a thesis, but these are some of the external factors that could, like, screw it up.

That's a real thing.

And like they would use it for hedging.

And I think the requirements of it's like, okay, some of them that are like sort of like compliance, regulatory like, you know what, you have a clearinghouse regulated, all that kind of usual stuff.

But then there's liquidity.

Like how much size can I take for it to be worth it for me to kind of allocate a desk and, you know, put resources into it.

And then the second one is like margins, which like, you know, today it's fully cash collateralized on couches.

So if you want to trade $100, you have to put it up.

That's very difficult for like you say, Citadel.

Well.

Yeah.

I was going to ask actually, do you anticipate on the roadmap sort of beside traders when there is perhaps if it happens, sufficient liquidity, will they be trading on Kelce or will it be something they trade through their prime broker or their futures broker.

Whose would you like.

Are you in talks with the brokers.

Yeah same exact sort of like I mean said like what do you need basically like and how does it work.

But yes, I mean the prime brokerages are, are very important, because like, you get, you basically get like they have the full portfolio so you can get a bunch of margin benefits if you kind of do it all with one prime broker.

And that's why usually prime brokers are the gateway into financial markets.

Yeah.

And the same way as our broker strategy for retail, right.

Like what the Robinhood and people on some of the other brokers. Right.

It's very similar actually, because you have your portfolio with the prime broker.

And then like as you're thinking about a portfolio is like, hey, I could add on a hedge and it's much easier for me to do it through my prime broker than do it on a separate platform.

But by the way, it's pretty crazy.

If you go to the App Store and you just like, look at Robinhood, it's the first thing is like the foot, but the image of the football, right?

Yeah.

Because they're trading through you anyway.

Just an interesting cultural on that point.

I mean, there is a social utility question here, right?

Like if I download Robinhood okay.

Yes, I could get into 0 or 1 day options and we can talk about the social utility there.

But maybe I'm going to invest in an actual stock that generates some income.

But now I'm seeing ads for football and sports betting.

And I don't know, I'm sure there are some old fashioned people out there potentially like me, who would say, who would say like, what does this do?

What's the value.

Thing that, do you think that sports like, let's even forget about like.

I mean, first of all, I don't like sports. But.

Well, I mean, but, like, you know, I mean, a lot of people love sports, right?

I mean, like, you know, I don't know, I think that, like, my general view with these things, I mean, I'm a free market person, like.

Sure.

Building a company where the name is, you know, we want to have markets for everything.

So, so, I'm much more in the camp of, like, you know, you figure out what people want to do and figure out how to do it in a safe, equitable and fair manner.

Like, you know, make sure that like it's it's done with fair rules of the road for everybody to participate.

And they want to get smart and do their own research.

And if they don't, that's on them.

And they figure it out and, and add some sort of checks and balances, around it to make sure it's safe and there's customer protection and,

but it's you that like I'm a strong believer that, you know, sort of the job of regulators should not be, dictating what people should do with their money, or their lives.

Like, I'm, I'm a very, very strong, like, staunch opponent of that sort of view of what a regulator should do.

And I think that's fits there.

I mean, in some ways maybe that's like, like if you look at Robinhood, like there's all these choices now and like it's a bit weird to me that like the decision here is, is sort of like, don't let them make the choice.

Like if they want to invest in gray, then if they want to do football, then also great.

I mean and decisions.

That feels weird to me, which is like hide that option because the 50 year old or 30 year old man that's on Robinhood needs me to figure out what, what to do with their money.

Right.

Like and so that to me, that was always felt weird to me.

And the I don't even call it regulation.

I'm, I'm very pro regulation.

And we chose to be regulated upfront.

Right, right, right.

So but it's sort of like I would say like I would say, I mean, people are like, what, law fair.

But whatever.

Like the financial regulators, I think I've taken it too far and that in that dimension.

So, as we've mentioned, a couple of times, there's this big, meeting in DC next week.

There's going to be a roundtable, incidentally.

So Tracy mentioned it, earlier in the day, we, interviewed Terry Duffy for an episode, and that'll be out in a couple of weeks.

And I guess you haven't met.

He said you've never met, but I guess you're going to meet on, Monday.

But what, like what should we ask?

Tarik and he said, I think if I'm getting this right, he said that Robin or that Kelsey characterized itself as CFTC approved.

And he says it's not that.

It's instead not CFTC ban that actually, because it's the self listing.

Yeah.

Are you CFTC approved and or is it just that the CFTC has not said no.

Let's

factually incorrect I mean I don't know.

You know, it's like I mean, which I am based out of meaning tag.

I mean, there is legend, but like,

Well, we got a license and then a second one.

Okay, exchange and then the clearinghouse.

I mean.

And then the and then the broker license.

So the exchange was like in 2020 and the and the clearing house 2024.

And then the broker one was in, 2025.

There's all approvals.

I mean, it's not like, you know.

But for instance, the individual contracts that go up to the CFTC are those each getting approved?

Well, they just are. Not actually disapproved.

Right.

Like and we had to sue over it.

And it was a and we were clearly right on the law given that we won the district and then the and and the appeals court.

So, maybe there's like a separate dimension here, which is also the regulation, not always rights, but, you know, sure, there's a whole other thing there.

But but self-certification is, is, is a regime which, by the way, CME is also operated within.

And they, you know, so from a from that specific perspective for each market.

Yes.

It's not that every market goes through as a prospectus like in the SEC and then gets approved.

It's actually like a disapproval regime.

Yeah.

But the CFTC has authority to say things and it's a very broad authority.

Right.

So, maybe it's a good question on the CFTC because, you know, I can't speak on their behalf.

But.

Oh, you can ask them on Monday.

Yeah.

We got to be on that table, but, you know.

Oh, what is the,

What are we talking safety all the time?

But yeah.

So, you know, obviously, Poly Market is a major competitor to

what do you see as, like, what's your vision for what is traded on chain

and what are like, could you imagine?

You know, we just talked to Don.

He said he could see in five years almost everything being on chain.

Like, do you see that.

Yeah, maybe.

I mean well it's interesting because poly now is

so there's kind of the on chain strategy and then the kind of what we did, the regulated, you know.

Yeah.

Normal clearinghouse like private clearinghouse strategy.

And like, now what they're doing is sort of they're pivoting to ours, basically.

That's, that's

And so our view jelly is like, well, it's a pretty positive sign for our strategy.

Probably.

Right.

Because, you know,

But but even setting aside. Companies like for you, to me, it's a regulated like front.

It's more.

Sure.

So so okay, there are a lot of benefits.

I really believe that.

And I think the. The

to being to understand.

Okay.

Yeah. Because like, one of the ones that I'm less interesting is sort of like skirting regulation like that.

But, but but I think that like there's a number of things which is like my mental model for it is, is a bit like, you know, the banking rails are set up in the kind of early 20th century.

It's like JP Morgan, a bunch of his friends are like, hey, how do we dominate this whole thing?

And you know, they set up a bunch of regs and then they close the door behind them.

And that was sort of that.

And there's a bunch more complexity to that.

But to me it this sort of whole on chain thing is a is imagine a bit like having given that problem to a bunch of smart like, like hard working, developers without any limits and let them build.

Right.

And obviously that's going to be there's a lot of good that's going to come out of that, and then there's going to be some bad that comes out, comes out of that, obviously.

But like to me is like, well, there's a lot of liquidity on on chain today.

So that's that's something that we should access.

And some point to I think the clearing side, there's a lot of benefits, for, you know, how like you have to do innovation and you have to do, immutable immutability and you that right now we do it from a like operational legal perspective.

And obviously there's some tech, but, you know,

launching really helps with that.

That's like basically what it's designed to do.

And so over time, like, I think, I hope as sort of regulators get more permissive, like I see some parts of clearing going on chain where, you know, it enables some of these use cases and also more transparency, like the, the trades and the transactions are all transparent for everybody to see.

And then people can build interesting like UI and interesting projects on top without us having to sort of this whole permission list sort of concept.

And so I'm very bullish on it.

I do agree with Don, actually, that like over the next 4 or 5 years in economies like Robinhood, like companies like a lot of companies are leaning in, I think, while cash is also leaning in.

So pretty excited about it.

So obviously the trajectory of your business has changed enormously just over the past year, less than a year, really.

If you were thinking about it now, today, as we sit here, what's the biggest, I guess, blockage to further growth for calculating.

You know, right now.

So the question I haven't been really thinking about is when it's growing so much right now, it's like all about like how do we like, not break basically because like,

I mean, honestly, like we grew way more than we could have possibly imagine even in the most bullish scenarios.

Even post winning the election lawsuit, like even like December 2024.

What, like a forecast for 2025?

Like it was, it was nowhere near what it what it is today.

So and it's interesting because we're not

it feels like we're sort of like halfway through, like there's still just the current structure.

I think we're not even halfway through.

Like we have more brokers.

So like we have a very deep pipeline of brokers.

So that's great.

And more sports, I think it's the frontier is the SEC thing.

So I think it's like more markets like

And I think we have a lot of what we want.

I think over time is like how do we start doing company related, prediction markets?

And we're very excited about that.

I just have one last question, and it's kind of a softball.

But like after years of fighting all these different battles, regulatory battles, issues with states, etc., like how good does it feel?

It must feel really good to actually kind of know that the business is real and have these battles.

Yeah.

I mean, like just like describe that feeling.

It's weird because I don't know if I feel that would try to this year than last year.

I mean, Logan, I only saw the company we really build a company around.

I love this book.

So have you ever read the book like discord takes care of itself?

I don't think.

It's a great book, but like, like everything, honestly, like, I really it's just all right now, you know, like,

So John Warren was sort of basketball coach, like most legendary it I mean, the whole thing was always about, like, never mentioned winning about chain.

The team is like, focus on the process and like day in, day out, like just fall in love with trading and like,

if you do, you just start winning.

And like I would say a few things.

I see these things.

I sort of there's good times and bad times for all companies.

And so yes, right now we're having a pretty great time.

Like as good as it gets for, for a company.

But I don't feel that different.

I think it's just like solutions bring new problems and like you, then you focus on the new problems.

It must be so much, you know, go to work on building rather than.

Pretty good at winning the election lawsuit like that one, because we were so there was some pretty big time vindication there.

Like, I think we were, you know, because imagine like in 2020, like three going up to our board, you know, like Sequoia and a bunch of others.

It's like, hey, like, yeah, we're not really figuring this out.

It's been two years of like, you know, pouring money into this and like, you know, and nothing is working.

We lost half our team over it.

And like, company might die.

And actually what we're going to do is to a triple down and sue a regulator now.

So it's you know that was a they looked at us.

They're like well that that that doesn't feel right.

You know like and we still went through with it and like it ended up being absolutely the right decision.

So that I think maybe like October 7th, the day we won the election loss, it was probably the day I felt happiest.

What did you do when the CFTC dropped the lawsuit?

That was not that important.

It was the one where we the appeals were.

You actually got.

This? Yeah.

Yeah, that was important because,

Well, I first screamed a lot and like, we just, like, all the face in the office and, like, you know, you know, it was amazing.

But then, you know, then we got back to work because you got to see me anxious about, like, you know, launching the thing.

Yeah.

That was a brutal three weeks because we had to ramp up really aggressively, and and,

I mean, we really went from, like, we really grew 100 eggs overnight.

Like, it was. It was crazy.

And so that was three weeks that I wrote the hardest in my entire life.

It was it was I was sleeping in the office, like, I, you know, I was like, I was given this chance.

Like, we have to basically like, you know, utilize it to the fullest.

And it was. And we didn't charge fees on the election market.

I don't know if you knew that it was intentional decision because like the most, the KPI here is we got to show the world that these markets work.

Yeah.

And it's done safely and nothing bad is going to happen and democracy is going to be totally fine.

And actually and you'll see we're announcing a few things with some some big news organizations pretty soon what you'll see the shift that's happened in culture where like the level of embracing that's happening with predation, like it's now, it's that's that's pretty nice to see this guy.

Plus South. Park.

And South. Park.

Yeah.

Turkmen. Sure.

Thank you so much for, coming to all of us.

Like, this is a lot of fun.

Thank you so much, guys.

But that's fine.

Thank you.

That's, that was our conversation with Tarek Mansour, recorded live on stage in Chicago.

Thanks for watching.

Shall we leave it there?

Let's leave it there.

All right.

This has been another episode of the All Thoughts podcast.

I'm Tracy Alloway.

You can follow me at Tracy. Alloway and I'm Joe Weisenthal.

You can follow me at the stalwart.

And if you enjoyed this conversation then please like and subscribe or leave a comment down below.

Thanks for watching.

To be.