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Chapter 1: What is the main topic discussed in this episode?
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Subject to credit approval, Apple Card issued by Goldman Sachs Bank USA, Salt Lake City branch. Terms and more at applecard.com. Bloomberg Audio Studios Podcasts, radio, news. Arizona has filed criminal charges against Kalshi, accusing the company of operating an illegal gambling business. Lumex Tim Stenevik joins us now with Kalshi co-founder and CEO. Tim, take it away.
Hey, we're joined by Tarek Mansour. He's the CEO and co-founder of Kalshi. Tarek, good to see you. Thanks for joining us on this. Look, even though other state regulators have taken steps to crack down on what they say is unlicensed betting on Kalshi's site, Arizona appears to be the first to escalate to criminal charges. What is your response to these charges?
Look, I mean, these charges have nothing to do with gambling or the merits. If it was about gambling or the merits, they would let the judicial process run its course in the federal courts. You know, five days ago on Thursday, Kalshi filed suit against Arizona in federal courts on the merits on whether Kalshi is subject to exclusive jurisdiction of the CFTC.
And, you know, we're confident in our position and wanted to let the court process play out. And instead of letting that happen, The Arizona Attorney General decided to subvert the judicial process and weaponize it and go to state court and file these criminal charges, which we view as meritless and baseless. We see this as a total overstep, and we look forward to fighting it in court.
Well, experts are saying this could be the first of many charges such as these from other states, too. How does it change your legal strategy? Well, this is the whole point of federal preemption. So this is not about gambling. The charges that the attorney general filed are not about gambling. They're not even about sports only. They're about prediction markets writ large.
It's just, you know, attacking the entire business model. And nothing prevents from the same attorney general or others from fighting the same criminal charges against derivatives markets writ large. They could file the same exact charges under the same analysis against CME or ICE or NASDAQ.
And that's the whole point of federal regulation of these financial exchanges is to prevent this sort of chaos and these sort of attacks on these businesses that could be political in nature or other. And that's a very important distinction. Well, I read the charging document from the Attorney General.
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Chapter 2: What criminal charges has Arizona filed against Kalshi?
It has 20 charges. They're mostly about betting and wagering when it comes to sports. There's some election stuff in there. Would you ever consider limiting your business in Arizona or other states to things that these AGs don't seem to have problems with, like economic data, the price of Bitcoin, what markets are going to do, predictions around those things?
Look, I mean, the AG also claimed that we have war markets, which is incorrect. It's either flat out a lie or it's misinformed take, which is unfortunate for someone filing criminal charges against the company. What's more important here, again, is this is not about the merits. If it's about the merits, let's let the judicial process run its course in federal courts.
This is about something other than the merits, which is what I'm focused on. I don't know what the AG is focused on, but she is up for reelection. They did some press. It does seem to be making some buzz.
But what I'm really focused on is building a great product for our millions of customers, out of which close to 400,000 are in Arizona, and fighting any of these baseless cases in courts, which we're going to continue doing. So you're fighting the cases, as I mentioned, Arizona's not the only state to take issue with your business. What happens ultimately if courts do side with states?
What does it mean for the future of your company? We believe in the rule of law, right? We will always abide by court decisions. The law applies to us, but it also applies to the government, including state governments. And that's a very important thing, right? This is really not about our business model.
Again, if it was about our business model, we would be focused on the federal courts and the lawsuit about the merits. This is a broader attack. And, you know, Many states have sided with us and have granted us a preliminary injunction agreeing with our legal analysis.
We have spent four years getting regulated by the federal government, and we have a federal government in the CFTC that is coming strongly in favor of our position. Following these charges is a total, total overstep and an overreach from an AG that's up for re-election. And we find that unfortunate, but we will stay focused on what we do best, which is building a great product.
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Chapter 3: What is Tarek Mansour's response to the charges?
So certainly the CFTC, we know where the CFTC stands and we know where Mike Selig stands on this. We don't know where courts stand on this. And I'm wondering if we see a state like Nevada, for example, block access to your business, what will you do? Will you continue to operate or will you say, okay, we're not going to operate in Nevada?
Well, first of all, let's get to that point, and we'll have to make a decision as a company what we do. What I can reiterate is we will 100% abide by the law. That's what we will do as a company. It's always been our position. That's why we spent four years getting regulated up front, regulatory first as a company, and always abide by the law.
But what I always say, the law applies to us as much as it applies to the government. And when government oversteps the law and goes out of bound, we're going to fight that in court, which we look forward to. How long does that process take? Because it seems like there's a regulatory limbo happening.
It's almost like your legal team is going to have to play whack-a-mole with all these states that are filing suit or bringing criminal charges. How long is this going to take? And gladly, we have a legal team to handle these types of things. things and what they're going to be focused on. And, you know, maybe it's a question for them.
I mean, look, whatever, whatever long it takes, we're going to fight for prediction markets. I spent eight years building this company, four out of which have, which are getting regulated upfront. I really believe in this marketplace. I'm very excited about the growth that we're seeing. It's one of the fastest growing company companies in America right now.
And so what I'm going to be focused on is keep building a great product. And that's what's sort of most important for me. The more important sort of question is, you know, when it comes to this is not really about, you know, whether this is gambling or not. It's not really about state versus federal, which are both coexisting and both growing both models.
This really is turning into sort of some special interests that like the status quo. The status quo is working very well for monopolies, but not for the consumers that are flocking to prediction markets right now, which we're going to keep fighting for. Tarek, there is this perception, though, that people think this is gambling.
An Ipsos survey from just a few weeks ago, for example, shows 61% of adults say prediction market trading is closer to gambling. 8% say it's closer to investing. So there is this public perception that doesn't necessarily match with what you say the platform is. How do you respond to that and how do you battle that? Like, how is this not gambling? I haven't really looked at these polls.
The thing I will say is there's always been a battle of whether financial derivatives are gambling. Grain futures were called gambling in the 1800s. And there was a Supreme Court decision that said, even though there is speculation, These products have financial structures, the financial markets, and thus are going to fall under financial market jurisdiction.
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Chapter 4: How do the charges impact Kalshi's legal strategy?
Or is it an open, free and fair marketplace where people can enter in and out freely and transparently, which is a financial exchange in which Galaxy falls under? Tarek Mansour, Calshi co-founder and CEO. Tarek, always good to speak with you. Thanks so much for joining us. Donald Trump is rewriting the Washington rulebook and reshaping the global economy.
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