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Transcript

Taking Bets on the Future · What's Your Problem?

0:15
Speaker 1: Pushkin. I could turn on the news right now and
0:22
Speaker 1: find someone making a prediction about the future. They might
0:26
Speaker 1: be saying there's no way Congress is going to pass
0:28
Speaker 1: some particular bill by the end of the year, or
0:31
Speaker 1: maybe they'd be dead certain that the US economy is
0:34
Speaker 1: about to start shrinking, And you know, I could try
0:37
Speaker 1: to parse the logic and assess the evidence behind the arguments.
0:41
Speaker 1: I could try to figure out whether these forecasters have
0:44
Speaker 1: some ulterior motive. But I mean, come on, I don't
0:47
Speaker 1: have time to do a research project on every claim
0:50
Speaker 1: some pseudo expert makes in the news. What I want
0:53
Speaker 1: is some source that will aggregate all these different predictions
0:57
Speaker 1: about the future. I'd like it if this source could
1:00
Speaker 1: give more weight to people who have higher conviction about
1:03
Speaker 1: their views. And ideally this source would force the people
1:08
Speaker 1: making prediction to put something on the line, to put
1:11
Speaker 1: some skin in the game. I want the people predicting
1:14
Speaker 1: the future to gain if they're right and lose if
1:17
Speaker 1: they're wrong. I'm Jacob Goldstein, and this is What's Your Problem,
1:23
Speaker 1: the show where entrepreneurs and engineers talk about how they're
1:26
Speaker 1: going to change the world once they solve a few problems.
1:29
Speaker 1: My guest today is Luana Lopez Laura, co founder of
1:33
Speaker 1: Calshe dot com. Alshi dot com. You gotta spell it
1:38
Speaker 1: every time I do. It's a hard name. Calshe is
1:42
Speaker 1: an exchange kind of like a stock exchange, but when
1:45
Speaker 1: people use Calhee, they don't make bets on stocks. They
1:48
Speaker 1: make bets on what's going to happen in the world,
1:51
Speaker 1: everything from what bills Congress is going to pass to
1:54
Speaker 1: what's going to happen with inflation. Calshe's problem, Luana's problem
1:58
Speaker 1: is this, how do you become the New York Stock
2:01
Speaker 1: Exchange of real world events. It turns out that in
2:07
Speaker 1: the United States, if you want to let people bet
2:09
Speaker 1: on real world events that are not sports, you have
2:13
Speaker 1: to get the approval of US financial regulators. Last year,
2:17
Speaker 1: cal She became the first major prediction market to get
2:22
Speaker 1: that approval. Their site went live and started taking bets
2:25
Speaker 1: from ordinary people. Last summer, Louno, inter co founder, went
2:28
Speaker 1: to MIT and in the summers they did internships on
2:32
Speaker 1: Wall Street trading desks. That was where they got the
2:36
Speaker 1: idea for calsh But it wasn't what the traders did
2:39
Speaker 1: for work that inspired them. It was what they did
2:41
Speaker 1: for fun. Constantly placing these tradeable bets with each other
2:46
Speaker 1: on everything that was happening in the news. They called
2:49
Speaker 1: it the market maker game. So we used to do
2:51
Speaker 1: that like all day and the jobs video like just
2:54
Speaker 1: turned around. Then you make a market on this news
2:57
Speaker 1: going up on the TV, and and it was pretty
3:01
Speaker 1: much the whole day. Because it's a lot of like
3:02
Speaker 1: just trading stocks, this kind of behaves the same way,
3:05
Speaker 1: right if it gets low and you want to buy
3:06
Speaker 1: low sell high, you think there's a fair value. And
3:09
Speaker 1: we did that all the time. So how did that
3:12
Speaker 1: lead you to start the company? Right, So this is
3:15
Speaker 1: one part of it. I think the other part that
3:17
Speaker 1: was pointing us more into this prediction market route was
3:21
Speaker 1: really that through our trading experience and fro our Finest experience,
3:25
Speaker 1: we really realized that most trading is just based on events.
3:28
Speaker 1: I think the best one example of this is, for example, Brexit.
3:31
Speaker 1: Right like when my co founder was a Goldman, a
3:33
Speaker 1: lot of different firms were calling up like his exotics
3:37
Speaker 1: trading desk a Goldman and being like, I want to
3:39
Speaker 1: get exposure to Brexit. So they would come up with
3:41
Speaker 1: this very complicated type of bundles of like volatility swaps,
3:45
Speaker 1: effects and things like that. So it's basically investors are like, well,
3:48
Speaker 1: I think Brexit will affect the market in a bunch
3:50
Speaker 1: of different ways, and I want to either make a
3:52
Speaker 1: bet or hedge some risk that I have. But there
3:55
Speaker 1: was no way you could just say give me money
3:58
Speaker 1: if Brexit happens, or I will give you money if
4:00
Speaker 1: Brexit happens. You couldn't just bet on the event. No,
4:03
Speaker 1: and yeah, And for us, when we saw this like
4:07
Speaker 1: repeated in many different experiences and coupled with like how
4:11
Speaker 1: much we saw people just like to trade on things,
4:14
Speaker 1: it was just nagging on our head. Why is there
4:16
Speaker 1: no direct way that people can just trade on what
4:19
Speaker 1: they think is going to happen, trade directly on events
4:21
Speaker 1: to get direct exposure. So we decided to that if
4:25
Speaker 1: someone was going to do it, it it should be us,
4:27
Speaker 1: and we embarked on this crazy journey for the past
4:29
Speaker 1: three years and a half. But that was kind of
4:31
Speaker 1: the start. If the question is why doesn't a market
4:33
Speaker 1: like this exists, Why isn't there a place where people
4:35
Speaker 1: can just bet on events happening or not happening. What
4:38
Speaker 1: was the answer why didn't it exist? The answers planning
4:42
Speaker 1: clears was regulation. Basically, the background is events are deemed
4:46
Speaker 1: as commodities and commodity derivatives trading are regulated by the CFTC,
4:51
Speaker 1: which is a Commodity Future Trading Commission, a US regulatory
4:54
Speaker 1: agency that never sees things like what oil futures and
4:58
Speaker 1: wheat futures and lots of things like that right now,
5:01
Speaker 1: giant markets, right yeah, So huge big regulator, big market,
5:05
Speaker 1: and it clearly falls under their jurisdiction. So you decide
5:07
Speaker 1: you want to do this, You realize that you have
5:10
Speaker 1: to get the approval of this big US regulator, the
5:13
Speaker 1: commadi's Futures Trading Commission, yep, and then you just go
5:17
Speaker 1: to them and say, can we do it? No, not
5:19
Speaker 1: at all. I said my background before, but I'm a
5:22
Speaker 1: computer sciences I have nothing to do with I don't
5:25
Speaker 1: know anything about the law. But we knew regulation was
5:27
Speaker 1: a big thing, and we also knew we didn't know
5:29
Speaker 1: anything about it. So the first day of what we
5:31
Speaker 1: did is we just created a spreadsheet of like sixty
5:33
Speaker 1: names of possible lawyers that we could call. You knew
5:36
Speaker 1: you needed a lawyer, We knew I needed a lawyer.
5:39
Speaker 1: So we went like one by one and really like
5:42
Speaker 1: everyone was saying no, it's not even worth your time,
5:44
Speaker 1: like you need ant same amount of money, and they're
5:46
Speaker 1: gonna say no, Like they're gonna say no, They're gonna
5:48
Speaker 1: say no, They're gonna say no, they're gonna say now.
5:49
Speaker 1: So you're calling all these lawyers on the list and
5:51
Speaker 1: people are like, don't bother. Bad idea, not gonna work.
5:54
Speaker 1: And then what happens, right, And then I had a
5:57
Speaker 1: friend who went actually to Harvard Law school, and then
6:00
Speaker 1: she had another friend who had a friend who had
6:02
Speaker 1: a friend and then like for fourth degree connection, we
6:05
Speaker 1: got connected to this law firm in New York and
6:08
Speaker 1: then that law for New those lawyer that works with
6:11
Speaker 1: us too today. His name is Jeff Ben. Then he
6:13
Speaker 1: was an x XCFTC official. Okay, and he said maybe
6:17
Speaker 1: let's think about it, and we're like, look, we're gonna
6:19
Speaker 1: take anything we can get it and maybe it's better
6:22
Speaker 1: than know. And then it's just a huge long engagement
6:25
Speaker 1: of like present to them, you send certain materials, They
6:28
Speaker 1: give a lot of feedback on what they think is bad,
6:30
Speaker 1: which is always massive list, and then you go back
6:33
Speaker 1: to them and they are like, okay, these ones maybe
6:36
Speaker 1: and then like this one's was still concerned about this
6:38
Speaker 1: and now we have all these other concerns. How long
6:40
Speaker 1: did you think it was gonna take when you started, Um,
6:42
Speaker 1: we initially very very optimistic and thought it was gonna
6:45
Speaker 1: take around six months. And then and it was four months.
6:49
Speaker 1: We were like, we were crazy to think it six months.
6:51
Speaker 1: It's probably like a year. And then it's nine months.
6:54
Speaker 1: We're like okay, and many mum, a year and a half.
6:56
Speaker 1: And they kept going, and I remember when it passed
6:58
Speaker 1: through the two year mark, we were like, what are
7:01
Speaker 1: we doing? Like we just you know, graduated from my team.
7:04
Speaker 1: We should like be making some money, have a job,
7:06
Speaker 1: and we're just here, like, you know, fighting through this
7:09
Speaker 1: thing and like nothing launched, no contract traded, nothing. If
7:12
Speaker 1: I told you from the beginning, we knew what was
7:14
Speaker 1: going to happen, and we knew it was gonna work,
7:16
Speaker 1: and it would take this amount of time that'll be
7:17
Speaker 1: a lot. We knew. We didn't know anything, honestly. So
7:20
Speaker 1: is part of the case you have to make to
7:22
Speaker 1: the CFTC why your exchange is useful and not just
7:26
Speaker 1: a casino? Yeah, so what is that case? Simply, what's
7:29
Speaker 1: the simple version of why calcy is useful. Well, there
7:33
Speaker 1: are people have a lot of risks that they don't
7:36
Speaker 1: have access to hedging for nowadays, Like normal people cannot
7:41
Speaker 1: hedge mortgage rates going up or things like gas prices
7:44
Speaker 1: or things like taxes going up. And these are real
7:47
Speaker 1: risks a normal everyday American face, and it's the job
7:51
Speaker 1: of the CFTC to regulate the way for them to
7:54
Speaker 1: also get access to this hedging things that the big
7:56
Speaker 1: guys can do. I will say, it's not clear to
8:00
Speaker 1: me that regular people would on average be able to
8:05
Speaker 1: hedge in a useful way using prediction markets. I feel like,
8:09
Speaker 1: to me, what seems like a more interesting possible case
8:13
Speaker 1: for the utility of Kelshe is sort of a wisdom
8:17
Speaker 1: of crowds idea, right, like the idea that people go
8:21
Speaker 1: on the news or whatever and say things about the future,
8:24
Speaker 1: but like they might be lying, they might be wrong,
8:26
Speaker 1: They might be saying something because they have an investment
8:28
Speaker 1: they're not telling you about. But when people are betting
8:30
Speaker 1: their own money on something that's going to happen in
8:32
Speaker 1: the future, I am more inclined to believe them. Right. So,
8:34
Speaker 1: if there's a big, well functioning market where lots of
8:37
Speaker 1: people are betting lots of money on something that's going
8:39
Speaker 1: to happen in the future. That seems like useful information. Absolutely,
8:43
Speaker 1: we call this like the tax on bullshit, right, It's yeah,
8:46
Speaker 1: it's so cheap to just go on Twitter and look
8:49
Speaker 1: at inflation. Right last year everyone is like, oh inflation,
8:52
Speaker 1: it's nothing. Oh we're going to see hyperinflation. And if
8:54
Speaker 1: you just have a market where people can put money
8:56
Speaker 1: where their mouth is and actually be like, I actually
8:59
Speaker 1: bought this position, this is what I believe in, you
9:01
Speaker 1: really take out a lot of like the bullshit, a
9:04
Speaker 1: lot of the you know, just exaggeration for like hype
9:07
Speaker 1: and things like that. So let's actually look at it.
9:09
Speaker 1: Signed up for Kelsey a couple days ago and I
9:11
Speaker 1: put one hundred bucks in my account, and I want
9:14
Speaker 1: to I want to make a bet. I'm not supposed
9:16
Speaker 1: to call it a bet, right, What am I supposed
9:17
Speaker 1: to call it a prediction? To take a position? Yeah,
9:19
Speaker 1: I trade the prediction anything. You want to call it
9:21
Speaker 1: a tanne. It feels like a bet to me, I'm
9:23
Speaker 1: gonna call it a bet. Um. So okay, So I'm
9:26
Speaker 1: looking now, So it looks like there's a lot there's
9:30
Speaker 1: a lot of econ stuff, like you'd expect what's going
9:32
Speaker 1: to happen with fed interest rates? What's gonna happen with inflation? Weather?
9:36
Speaker 1: The weather in New York, the weather in Chicago. It's
9:39
Speaker 1: like the weather tomorrow, right. Yeah? There are some some
9:43
Speaker 1: of our users like a crazy satellite data to trade
9:45
Speaker 1: on these markets. Interesting yea? And how big are they?
9:50
Speaker 1: I'm seeing numbers here, but it's hard to know exactly
9:52
Speaker 1: what they mean. Like how much money are people betting here? Um,
9:55
Speaker 1: I think we're doing around like more than two million
9:58
Speaker 1: dollars a week. I think two point five million dollars
10:01
Speaker 1: a week. By the way, what's is there a limit
10:03
Speaker 1: on how much people can bet or invest or steak? Yeah?
10:08
Speaker 1: Right now, we have a twenty five thousand dollars limit
10:11
Speaker 1: on how much you can lose, so not in how
10:13
Speaker 1: much you can win. So you can win up to
10:14
Speaker 1: I guess two point five million if you get the
10:17
Speaker 1: one percent long shot, but you can lose up only
10:20
Speaker 1: up until twenty five k at the moment. Okay, why
10:23
Speaker 1: why that limit? Did that come from the CFTC. No,
10:26
Speaker 1: that's actually came from us. We wanted to, you know,
10:30
Speaker 1: start slow and make sure we're not breaking things. I
10:32
Speaker 1: think we worked very hard on the regulatory piece, so
10:34
Speaker 1: we want to make sure we keep everything going the
10:36
Speaker 1: right way, slow and don't break Facebook zactly. We are.
10:40
Speaker 1: We are the anti Facebook for sure. So we started
10:43
Speaker 1: this way. I think that we are going to have
10:45
Speaker 1: to raise the limits going forward, especially as we grow
10:48
Speaker 1: to bigger players and bigger institutions. We're here, so let's
10:51
Speaker 1: pick one. Um, So here's one permanent daylight saving time
10:55
Speaker 1: bill becomes law. Yep uh. It's a fun one, like
10:59
Speaker 1: I kind of care about it. It's a little bit silly,
11:02
Speaker 1: like I want to I want to bet on that one.
11:03
Speaker 1: I want to take a position on that one. Okay,
11:04
Speaker 1: So I'm going to click on it, and it says
11:07
Speaker 1: and it's by the end of the year. Basically, it
11:11
Speaker 1: says buy yes sixteen cents, buy no eighty seven cents.
11:17
Speaker 1: So what does that mean? That means right now you
11:20
Speaker 1: can buy a yes position for you said sixteen cents, Yeah,
11:23
Speaker 1: sixteen cents, So you would walk in sixty cents to
11:26
Speaker 1: be able to get eighty four. So if you're if
11:28
Speaker 1: you buy a yes, you're you're locking in sixteen to
11:31
Speaker 1: get eighty four. If you're right. Okay, great. So so
11:34
Speaker 1: it's like, uh, what is that five to one or so?
11:37
Speaker 1: I think so around that yeah, math on a math
11:39
Speaker 1: on a podcast, and so just I mean the context
11:44
Speaker 1: on this one. The Senate passed a bill earlier this
11:47
Speaker 1: year that would make daylight saving time permanent, and now
11:49
Speaker 1: it's kind of stalled out, and so the market is
11:51
Speaker 1: clearly saying this is probably not going to happen. Yep.
11:54
Speaker 1: But it's not like it's not one hundred to one
11:55
Speaker 1: shot that it won't happen. It could happen, right, And
11:59
Speaker 1: I mean I want kind of a long shot, right,
12:00
Speaker 1: I don't want to win ten bucks? Who cares? Right?
12:03
Speaker 1: And the fact that it says buy yes or sixteen,
12:05
Speaker 1: does that mean someone is offering to sell it for
12:07
Speaker 1: that price some other market participant. Yeah, someone's willing to
12:11
Speaker 1: buy the note for eighty four. Okay, so that's why
12:13
Speaker 1: you can buy the yes for sixteen. And it's Calci
12:16
Speaker 1: in the middle on this. Are you just taking a fee? No,
12:19
Speaker 1: we are in exchange, so we just match people on
12:22
Speaker 1: both sides. So we just matched the yes in the No.
12:24
Speaker 1: Let me take a small fee. So okay, so I'm
12:25
Speaker 1: gonna beat one hundred bucks right now, I'm just gonna
12:27
Speaker 1: do it. I'm gonna wild own. This is big for me.
12:30
Speaker 1: I'm not much of a much of a gambler trading
12:32
Speaker 1: for contract amount, okay. So I just type one hundred
12:34
Speaker 1: bucks one hundred okay, So for my hundred bucks, if
12:38
Speaker 1: I'm right, I'm gonna win four hundred and fifty five dollars. So,
12:42
Speaker 1: so it says fees five dollars and fifty one cents.
12:44
Speaker 1: It's about five percent, is what you're taking on this trade? Yes? Yeah,
12:47
Speaker 1: that's why we take a calci. Okay, and what are
12:49
Speaker 1: your fees? Just on average on average reaction at point
12:53
Speaker 1: eight percent? Wow? So I got hose. Yeah, because you
12:57
Speaker 1: were taking a position you actually paid. So so when
13:01
Speaker 1: I sell, when I get out, I don't have to pay.
13:03
Speaker 1: You won't pay anything. Okay, Well that's right. So it
13:05
Speaker 1: takes the sting off a little. Right If if you're
13:07
Speaker 1: building limit orders, if you say adding up price or
13:09
Speaker 1: saying I want to buy or I want to sell
13:11
Speaker 1: out this price, you pay no fee. So oh interesting, Okay,
13:13
Speaker 1: because I'm bringing liquidity to the market, okay, Okay, I'm
13:17
Speaker 1: submitting the order. Okay, So now I own it. Yeah,
13:21
Speaker 1: that's it. Now. The thing that's interesting to me is
13:25
Speaker 1: I don't have to wait and see if this thing happens, right,
13:27
Speaker 1: I can sell to somebody else who wants to take
13:32
Speaker 1: a position. Absolutely. So if you go to if you
13:35
Speaker 1: click sell on the screen and you go to a
13:37
Speaker 1: limit order, okay, so I'm gonna sell for forty cents
13:41
Speaker 1: and I'll get paid back two hundred and twenty two
13:44
Speaker 1: dollars if it happens. Yeah. So like maybe I feel
13:47
Speaker 1: like for that if some powerful person in Congress just says, yeah,
13:52
Speaker 1: maybe we're gonna do this right, it's in the news.
13:54
Speaker 1: If there's one little blip, maybe the market will move
13:57
Speaker 1: my way and then you just sell automatically. You just
13:59
Speaker 1: made two hundred dollars yea, and that can made one
14:02
Speaker 1: hundred bucks one hundred year, and that can happen any
14:06
Speaker 1: time between now and the end of the year. Yep.
14:08
Speaker 1: So like I got some action now, yeah right, And
14:10
Speaker 1: I do feel like, I mean, you know, people have
14:13
Speaker 1: different feelings about gambling, but like I'm definitely gambling here
14:16
Speaker 1: and it's okay, right, Like I'm a grown up. I
14:18
Speaker 1: have a hundred bucks. Yeah, no, it's I mean, any
14:21
Speaker 1: futures market has speculators and has headers, right, Like obviously,
14:24
Speaker 1: even if you look at the grain market, like the
14:27
Speaker 1: big firms on Wall Street that has the entire desk
14:29
Speaker 1: dedicated to shading grain, they are not hedging, like they're
14:33
Speaker 1: not worried about their farm production, and they are also speculating,
14:36
Speaker 1: but they're speculating it with a lot of data and research.
14:39
Speaker 1: It's just degrees of speculation. And like price discovery is
14:42
Speaker 1: a useful function of markets, right, ABU tells the world
14:44
Speaker 1: what people betting a lot of money think is going
14:47
Speaker 1: to happen about important things. Absolutely, with inflation, our markets
14:50
Speaker 1: predicted inflation will get this high and actually beat the
14:53
Speaker 1: Bloomberg forecast six out of the seven past reading is
14:56
Speaker 1: just because again, if you put money where your mouth is,
14:58
Speaker 1: and if you have an actual market dictating the probability
15:02
Speaker 1: of things where it's just you know, people going out
15:04
Speaker 1: and saying, oh, I believe this is going to happen,
15:06
Speaker 1: you get like way better data and this data, so
15:09
Speaker 1: I think it's so important for especially the world are
15:12
Speaker 1: in now Okay, well let's talk about inflation. That maybe
15:15
Speaker 1: the big one right now, right in terms of the economy,
15:18
Speaker 1: what are traders on CALCI predicting about inflation for the
15:21
Speaker 1: next oh what for the rest of the year. Say, yeah,
15:24
Speaker 1: so this month now June, it's predicted to be around
15:27
Speaker 1: one to one point one percent the month over month CBI,
15:30
Speaker 1: and for the whole year between eighty nine percent. I
15:34
Speaker 1: think the markets do think it is going to start
15:36
Speaker 1: going down, but I guess not at the rate that
15:38
Speaker 1: everyone wants to. How big is the calcie market for inflation?
15:41
Speaker 1: How much money are people betting in that market? It
15:43
Speaker 1: goes around like two hundred three hundred a per per month. Okay,
15:46
Speaker 1: so small, that's very still small. Yeah, you know, as
15:49
Speaker 1: I'm looking over the things you can bet on here,
15:52
Speaker 1: I mean I want there's a couple of questions come
15:54
Speaker 1: to mind, right, Like one, what are things you're not
15:57
Speaker 1: allowed to make markets in or that you don't make
16:00
Speaker 1: markets in. There are certain notorious cases, right like war
16:04
Speaker 1: or terrorism or assassination, and I assume you wouldn't do that.
16:08
Speaker 1: Oh no, not at all. And these actually are explicitly
16:11
Speaker 1: You're you're completely right, like more assassination, terrorism, these are
16:15
Speaker 1: actually explicitly cut off. And are there people who are
16:18
Speaker 1: prohibited from trading like can insiders trade. No, yes, there
16:23
Speaker 1: are people who are prohibited from trading. Insiders cannot trade.
16:26
Speaker 1: Let me ask you this. Members of Congress sort of
16:28
Speaker 1: notoriously are allowed to trade on the stock market, even
16:31
Speaker 1: if they have inside information about what Congress is going
16:33
Speaker 1: to do. There are on your market. There are things
16:37
Speaker 1: is Congress going to pass this law or that, including
16:40
Speaker 1: the daylight savings law. Can members of Congress trade on Kelsey? No,
16:44
Speaker 1: they cannot. They can trade on markets that are not
16:48
Speaker 1: on the ball of this market. So if they want
16:49
Speaker 1: to trade on I don't know the weather in New York,
16:52
Speaker 1: they can do that. But no, no congress person or
16:56
Speaker 1: or their staffers can trade on the Funnily enough, we
16:58
Speaker 1: have this market on whether the stock trading band for
17:02
Speaker 1: Congress is going to happen this year because it was
17:05
Speaker 1: very big news and we opened the market us to
17:09
Speaker 1: be clear, members of Congress can still trade stocks, but
17:13
Speaker 1: they cannot trade the CALCI contract on whether they are
17:16
Speaker 1: going to ban themselves from trading stocks. I'm pretty sure
17:19
Speaker 1: that's a metaphor for something, but I don't know what
17:22
Speaker 1: it is. In a minute, the problem CALC has to
17:26
Speaker 1: solve to go from being a little site that almost
17:28
Speaker 1: nobody has ever heard of to being the New York
17:31
Speaker 1: Stock Exchange of event trading. That's the end of the ads.
17:43
Speaker 1: Now we're going back to the show. So what do
17:46
Speaker 1: you want to do that you're not doing now? I
17:49
Speaker 1: think for us that the biggest thing is growing roading.
17:52
Speaker 1: What we have our vision is to be like the
17:55
Speaker 1: New York Stock Exchange for events. And we really think
17:57
Speaker 1: that events have the capacity to grow and be like
18:00
Speaker 1: a mainstream and you know, boring commonplace asset class. And
18:04
Speaker 1: our dream is to get there and really like be
18:06
Speaker 1: the exchange and help you the environment around it. So
18:09
Speaker 1: for us, it's always about innovating and releasing new contracts
18:12
Speaker 1: that are very relevant and then hopefully growing the pipe.
18:15
Speaker 1: But we want to integrate with for example, biggest other
18:18
Speaker 1: parts of all streets are getting brokers to offer our markets,
18:21
Speaker 1: getting marketmakers to come and provide liquidity. So our goes
18:24
Speaker 1: to really like buel this exchange up with more contracts
18:28
Speaker 1: and more more liquidity, more people and I mean your
18:31
Speaker 1: customers now our retail. Right, they're just people like me,
18:34
Speaker 1: just like ordinary people, which I would not have guessed. Right,
18:37
Speaker 1: there's another universe where what you start with is institutions, right,
18:41
Speaker 1: big companies working through investment banks betting not one hundred
18:45
Speaker 1: bucks but you know, one hundred thousand bucks or a
18:47
Speaker 1: million dollars right like that in a way seems like
18:49
Speaker 1: a more I don't know logical place to start. Yeah,
18:52
Speaker 1: our goal is to have these guys and institutions also
18:55
Speaker 1: come to Kaushi. I think our strategy was pretty much
18:58
Speaker 1: like on the liquidity building. We thought it was easier
19:01
Speaker 1: to start with retail and then built some base of
19:04
Speaker 1: retail users, then bring in specific marketmakers who provide liquidity,
19:09
Speaker 1: and then with the market makers who bring brokers. That
19:11
Speaker 1: will increase a number of users and then more liquidity.
19:14
Speaker 1: The issue with starting in exchange with very big players
19:17
Speaker 1: is that the level of liquidity you need is very
19:21
Speaker 1: For somebody to take a big position, you need a
19:23
Speaker 1: ton of money on the other side, and with a
19:27
Speaker 1: very new asset class like hours, it's very hard to
19:30
Speaker 1: find the person to be on the other side. We
19:32
Speaker 1: thought it would be a better strategy to kind of
19:34
Speaker 1: like do beauting up versus like trying to to start
19:38
Speaker 1: from from that side, because then we would need like
19:40
Speaker 1: hundreds of millions of dollars on the other side. Very
19:42
Speaker 1: complicated to to start from there. For us, now, it's
19:45
Speaker 1: really about bauting liquidity, right. It's it's about having what
19:48
Speaker 1: we have that's working and making this a massive scale.
19:51
Speaker 1: Like you know, when you think about stocks, you're like,
19:53
Speaker 1: you can buy almost any amount in any price, yeah,
19:57
Speaker 1: tiny spreads. Right, it's really exactly easy and efficient to
20:00
Speaker 1: trade stocks, right, And it's for us, the strategy is
20:03
Speaker 1: not to just like try We obviously want to get
20:05
Speaker 1: a lot more traders on the platform, but it's also
20:07
Speaker 1: about having key partnerships with some Wall Street firms, having
20:10
Speaker 1: partnerships with specific brokers that have traders that do this
20:13
Speaker 1: themselves and bring them in and start having these kind
20:18
Speaker 1: of like we'll call like step functions in terms of liquidity.
20:21
Speaker 1: I think for us, our next challenge is like, Okay,
20:23
Speaker 1: you guys were able to get this through the regulation,
20:26
Speaker 1: you're able to start playing the game. But for us
20:28
Speaker 1: to start winning the game, we need to start building
20:30
Speaker 1: liquidity and getting more traders. And it's it's really about
20:33
Speaker 1: that for us, it's what we're focused on. And so
20:34
Speaker 1: it's that move like getting Calcy onto the robin Hood
20:37
Speaker 1: app or like the Schwab app is it on the
20:39
Speaker 1: retail side or like is it getting traders at some
20:42
Speaker 1: firm to trade on Kelcy, Like what is the next
20:44
Speaker 1: step two sides there. I think on the market making side,
20:48
Speaker 1: we want to integrate and have like the big Wall
20:51
Speaker 1: Street companies who can think about that, the generally provide
20:56
Speaker 1: Citadel maybe like Citadel, Jump Trading, Optiver, all of these
21:00
Speaker 1: big high frequency traders who essentially make the market on
21:03
Speaker 1: the stock market right And for them, it's what's interesting
21:05
Speaker 1: at cal She's that obviously is very uncorelated to everything
21:07
Speaker 1: else they do. But also because the spreads higher, they
21:09
Speaker 1: make more money for them than what they think about
21:12
Speaker 1: is the problem that it's too small for them. Well,
21:14
Speaker 1: that's what we're working for you. I think that. So
21:17
Speaker 1: most of the month's work out ship we were very
21:19
Speaker 1: much focused on learning and getting the product to a
21:21
Speaker 1: right point. Now we're really starting to focus on growing
21:24
Speaker 1: the use case and the user base. Sorry. And this
21:28
Speaker 1: fits with the other part, which is actually integrating with brokers.
21:31
Speaker 1: So like getting the exchange connected to interactive brokers, Schwab, Ninja,
21:35
Speaker 1: Trader e Trade. We built all of these guys. It's
21:38
Speaker 1: kind of a game of like we need a time
21:39
Speaker 1: This very well to be able to get the brokers
21:41
Speaker 1: and the market makers out the same time. But the
21:43
Speaker 1: idea is to start doing that, getting at least like
21:45
Speaker 1: one broker, one market maker, then more then it's like
21:48
Speaker 1: a real big thing. That's the goal. And so that
21:52
Speaker 1: is interesting, right because that's not like, oh, we just
21:54
Speaker 1: need to grow five or ten percent, right, It's like
21:56
Speaker 1: what you have now is almost it's like proof of concept.
21:59
Speaker 1: It's like, hey, here's the thing that works. But it's
22:01
Speaker 1: not real money. I mean, if if you're thinking about
22:04
Speaker 1: like the real finance amount of money, it's not yet.
22:07
Speaker 1: And our goal now is to is to get it
22:09
Speaker 1: to be there. We were one hundred percent focused on
22:11
Speaker 1: on this and is something about to happen? Is there
22:14
Speaker 1: something in the works? There's some partnerships that can comment on,
22:17
Speaker 1: but there's there's some cool things coming along. How like
22:20
Speaker 1: by the end of the year for what do you
22:23
Speaker 1: mean the partners Yeah, yeah, I think our goal is
22:26
Speaker 1: to buy the end of the year have let's say
22:28
Speaker 1: at least the one worker and at least one market
22:29
Speaker 1: maker on the platform. That that's our goal. Like that
22:31
Speaker 1: would be a big jump, right, yeah, it would be
22:33
Speaker 1: because it would be like a year and a couple
22:36
Speaker 1: of months after launch, and I think it would really
22:38
Speaker 1: be able to take the business to the next step.
22:40
Speaker 1: Why did nobody do this before? Why did no exchange
22:43
Speaker 1: do this? The Chicago Mercantile Exchange is this giant exchange
22:46
Speaker 1: that has markets and things that are kind of like
22:49
Speaker 1: what you have markets in some of them are even
22:50
Speaker 1: the same, right the oil price. Why didn't they do
22:53
Speaker 1: this or why didn't some other giant well funded, uh,
22:57
Speaker 1: you know exchange do what you're doing. I just don't
23:00
Speaker 1: think they're very like innovative in some way. No, no,
23:03
Speaker 1: not trying to criticize, but if you ask me if
23:05
Speaker 1: they're going to come in, I'm sure. I'm sure we're
23:07
Speaker 1: going to get a lot of competition. I think there's
23:10
Speaker 1: a lot of eyes into the space. And I think
23:11
Speaker 1: that's actually very good for us because for Coushi to
23:14
Speaker 1: be very successful, we need a vent contract to be
23:16
Speaker 1: very successful for us. So we've more players, and we
23:18
Speaker 1: believe the industry can grow and we think we can
23:21
Speaker 1: win if it's if it's had to have a regulated
23:23
Speaker 1: company like CME, but but it's always good to grow
23:26
Speaker 1: the pie. There have been small election prediction markets for
23:29
Speaker 1: a long time, but not that much money is allowed
23:32
Speaker 1: to be traded on those people have been so interested
23:35
Speaker 1: for so long, but it has never really been a
23:37
Speaker 1: thing until now. And I still don't think I understand why,
23:40
Speaker 1: Like why didn't anybody do it before? Nobody has done
23:43
Speaker 1: it until now, or nobody has been nobody's gotten regulatory approval. Right,
23:47
Speaker 1: there's like unregulated crypto prediction markets. Why didn't anybody do
23:52
Speaker 1: this until you did it? Yeah, I think, I mean
23:54
Speaker 1: the regulatory piece is the biggest one. Most of the cases,
23:58
Speaker 1: what actually happened is they tried to launch it, and
24:01
Speaker 1: then when the CFC went to say what you're doing
24:03
Speaker 1: is illegal, it was it's too late, like there's no
24:06
Speaker 1: like you know, moving fast, and then saying like I'm sorry,
24:09
Speaker 1: I didn't know, Like this is not how it works
24:11
Speaker 1: with financial regulation. So most of the cases were actually
24:14
Speaker 1: people doing it illegally and then the CFC saying you
24:17
Speaker 1: shut down right now, and they're like okay, And obviously
24:19
Speaker 1: if they've done something illegally before, it's very hard to
24:22
Speaker 1: sell to the CFTC that you actually care about compliance. Yeah,
24:24
Speaker 1: but there's obviously a lot of other timing things right
24:27
Speaker 1: that helped us. I think the rise, as you mentioned
24:29
Speaker 1: of unregulated crypto prediction markets, it's it's very hard for
24:33
Speaker 1: the CFTC. It's a game of alcamole if you're just
24:35
Speaker 1: waiting for the next crypto thing to show up, and like,
24:38
Speaker 1: how are you going to work on enforcement? In all
24:40
Speaker 1: those cases, I think it's important for them to have
24:43
Speaker 1: a regulated alternative. That's say interesting. So the fact that
24:47
Speaker 1: crypto allowed more unregulated prediction markets to crop up gave
24:51
Speaker 1: the CFTC and incentive to say yes to somebody who
24:54
Speaker 1: wanted to play by the rules. Right, I don't actually
24:56
Speaker 1: know if they thought about that. That's something I think happened.
24:59
Speaker 1: So just to be clear, they never said anything like that.
25:01
Speaker 1: It's it's what I think about it, because obviously something
25:04
Speaker 1: I asked myself, well, like why why us Luana and
25:07
Speaker 1: her co founder did the work. They did it at
25:10
Speaker 1: the right time, and they kept doing it until the
25:13
Speaker 1: CFTC said yes. Now they just have to solve that
25:16
Speaker 1: hard problem of getting lots more customers by partnering with
25:19
Speaker 1: retail brokerages. At the same time they're getting lots more
25:22
Speaker 1: liquidity by partnering with marketmakers. If they can do that,
25:27
Speaker 1: they can go from being this weird little website where
25:29
Speaker 1: you can bet on the weather to being a giant
25:32
Speaker 1: financial exchange. We'll be back in a minute with the
25:36
Speaker 1: lightning round. Now, let's get back to the show. Okay,
25:45
Speaker 1: let's do the lightning round. Let's do some fast questions.
25:47
Speaker 1: I'm good. What's the biggest bet you ever made? Oh?
25:51
Speaker 1: I've made a big bet on the election with my
25:53
Speaker 1: best friend. How'd you do? I won? I bet? Aga?
25:58
Speaker 1: How big? That's big? It's a big bet. I know,
26:03
Speaker 1: I know, I am. I have a lot of the
26:05
Speaker 1: trader nature in me. You like you like gambling and
26:09
Speaker 1: general No, no, really, this is actually no, this is
26:13
Speaker 1: actually my only I'm very bashion about politics in general.
26:16
Speaker 1: So this was like kind of my first and only think.
26:19
Speaker 1: Never did any like sports batting, for sure not. I'm
26:22
Speaker 1: like a very actually traditional investor. So you were you
26:25
Speaker 1: were a ballet dancer yep, earlier in your life. So
26:28
Speaker 1: what's harder running a company or dancing the Nutcracker? Oh?
26:34
Speaker 1: The Nutcracker is easier, So I would say the running
26:36
Speaker 1: running I picked the wrong ballet. Yeah, that's iving sw
26:40
Speaker 1: on lakes harder. It's just it's it's yeah, but it's
26:43
Speaker 1: swan Lake versus running a company swan Lake harder. I
26:48
Speaker 1: think so because the level of like physical uh demand
26:53
Speaker 1: that you have with ballet is like it changes our
26:56
Speaker 1: entire life. Like nowadays, if I want to still, like
26:58
Speaker 1: I don't know, take Saturday night off and go to dinner,
27:00
Speaker 1: I can still do that with ballet. It's like it's
27:02
Speaker 1: about everything. If everything goes well, what problem will you
27:06
Speaker 1: be trying to solve in five years? If everything goes
27:09
Speaker 1: well in five years, I think at that point we
27:13
Speaker 1: would be focused more on like international expansion. And at
27:17
Speaker 1: that point, I think we would really be on boarding
27:19
Speaker 1: what we really called like natural hedgers. So if you
27:21
Speaker 1: think about like I don't know, on Heiserbusch coming to hedge,
27:27
Speaker 1: a change on beer legislation and putting like hundreds of
27:30
Speaker 1: millions of dollars in one position, I think that's why
27:33
Speaker 1: we would be focused on if everything goes we all
27:35
Speaker 1: liquidity wise, I think five years is very ambitious to
27:38
Speaker 1: be doing that, more likely ten. But we're getting these
27:41
Speaker 1: like massive natural hedgers to come to the platform. That's
27:44
Speaker 1: like the end game. How will you know when it's
27:46
Speaker 1: time to do something else? You know what? I ask
27:48
Speaker 1: myself this question multiple times. I actually have no idea.
27:53
Speaker 1: I actually have no idea. I think it's probably when
27:55
Speaker 1: we run out of all of our money and all
27:58
Speaker 1: of our employees leave, and then probably I don't know,
28:01
Speaker 1: my family or my friends would be like, come on,
28:02
Speaker 1: I think it's time to try to do something else
28:05
Speaker 1: or move on. But I don't really see that happening
28:08
Speaker 1: unless it is kind of like a discomplete catastrophe or something.
28:12
Speaker 1: I mean, that's the sad ending. There's a happy ending
28:14
Speaker 1: where the company is doing great, right, But you don't
28:17
Speaker 1: think of that one. Oh yeah, no, I don't think
28:20
Speaker 1: of I mean, you know, for every startup, it's very
28:22
Speaker 1: likely that you're going to fail. Like in the beginning,
28:24
Speaker 1: it was like like now it's probably a little less
28:29
Speaker 1: than that, but it's uh, it's still very likely that
28:31
Speaker 1: will fail. And if you if you start thinking about that,
28:33
Speaker 1: there's no reason to take risk and start a company
28:36
Speaker 1: and try to actually do something different than make a change.
28:39
Speaker 1: So I try to focus exclusively on the happy hay
28:42
Speaker 1: scenario and the good things and and keep pushing and
28:44
Speaker 1: see how, see how it's gonna go. Maybe I am wrong,
28:47
Speaker 1: I know, in the future, but yeah, when do you
28:50
Speaker 1: think another company will get CFTC approval to let people
28:54
Speaker 1: trade events. I think the window could start by like
28:58
Speaker 1: end of this year, beginning of next year, well soon,
29:02
Speaker 1: I think they couldn't like start like getting more serious.
29:06
Speaker 1: Let's make a market in this one though, Let's have
29:08
Speaker 1: it day right, there's a day, Okay, you could have
29:11
Speaker 1: a market on cal you could head, Oh, you're not
29:13
Speaker 1: allowed to bet, We're not. We're not. I would say.
29:16
Speaker 1: I think there's like, um, thirty percentons that by the
29:19
Speaker 1: middle of next year, we're gonna see someone else like
29:21
Speaker 1: fully focused on events. I think that by the middle
29:25
Speaker 1: of next year, someone will get a yes from the CFTC.
29:28
Speaker 1: Trying to think which side of that. It's a subtle
29:31
Speaker 1: it's you set the line just right. Also, you have
29:33
Speaker 1: more information than I do, so i'd be afther. Luana
29:43
Speaker 1: Lopez Lara is the co founder of calshi dot Com.
29:48
Speaker 1: Today's show was produced by Edith Russolo, engineered by Amanda Kwong,
29:52
Speaker 1: and edited by Robert Smith. I'm Jacob Goldstein. Next week
29:55
Speaker 1: on What's Your Problem, we make the case for why
29:58
Speaker 1: America must pass a permanent daylight saving time bill before
30:02
Speaker 1: the end of the year.