00:00Look, even though other state regulators have taken steps to crack down on what they say is unlicensed betting on
00:05Kalshi's site,
00:07Arizona appears to be the first to escalate to criminal charges.
00:10What is your response to these charges?
00:14Look, I mean, these charges have nothing to do with gambling or the merits.
00:18If it was about gambling or the merits, they would let the judicial process run its course in the federal
00:22courts.
00:23You know, five days ago on Thursday, Kalshi filed suit against Arizona in federal courts on the merits
00:28on whether Kalshi is subject to exclusive jurisdiction of the CFTC.
00:33And, you know, we're confident in our position and wanted to let the court process play out.
00:36And instead of letting that happen, the Arizona attorney general decided to subvert the judicial process
00:42and weaponize it and go to state court and file these criminal charges, which, you know, we view as meritless
00:48and baseless.
00:48We see this as a total overstep and we look forward to fighting it in court.
00:51Well, experts are saying this could be the first of many charges such as these from other states, too.
00:56How does it change your legal strategy?
00:59Well, this is the whole point of federal preemption.
01:01So this is not about gambling.
01:02The charges that the attorney general filed are not about gambling.
01:07They're not even about sports only.
01:08They're about prediction markets writ large.
01:10It's just, you know, attacking the entire business model.
01:12And nothing prevents from the same attorney general or others from fighting the same criminal charges against derivatives markets writ
01:18large.
01:19They could file the same exact charges under the same analysis against CME or ICE or NASDAQ.
01:25And that's the whole point of federal regulation of these financial exchanges is to prevent this sort of chaos and
01:31these sort of attacks on these businesses that could be political in nature or other.
01:35And that's a very important distinction.
01:37Well, I read the charging document from the attorney general.
01:40It has 20 charges.
01:42They're mostly about betting and wagering when it comes to sports.
01:44There's some election stuff in there.
01:47Would you ever consider limiting your business in Arizona or other states to things that these AGs don't seem to
01:54have problems with, like economic data, the price of Bitcoin, what markets are going to do?
02:00Predictions around those things.
02:02Look, I mean, the AG also claimed that we have war markets, which is incorrect.
02:06It's either flat out a lie or it's misinformed take, which is unfortunate for someone filing criminal charges against the
02:13company.
02:13What's more important here, again, is this is not about the merits.
02:16If it's about the merits, let's let the judicial process run its course in federal courts.
02:20This is about something other than the merits, which is what I'm focused on.
02:24I don't know what the AG is focused on, but, you know, she is up for re-election.
02:28You know, it does they did some press.
02:30It does seem to be making some buzz.
02:33But what I'm really focused on is building a great product for millions of customers, out of which close to
02:37400,000 are in Arizona and fighting any of these basis cases in courts, which was which we're going to
02:44continue doing.
02:44So you're fighting the cases.
02:45As I mentioned, Arizona is not the only state to take issue with your business.
02:50What happens ultimately if courts do side with states?
02:54What does it mean for the future of your company?
02:56We believe in the rule of law, right?
02:59We will always abide by court decisions.
03:02The law applies to us, but it also applies to the government, including state governments.
03:07And that's a very important thing, right?
03:09This is really not about our business model.
03:13Again, if it was about our business model, we would be focused on the federal courts and the lawsuit about
03:19the merits.
03:20This is a broader attack.
03:22And, you know, many states have sided with us and have granted us a preliminary injunction agreeing with our legal
03:29analysis.
03:29We have spent four years getting regulated by the federal government.
03:31And we have a federal government in the CFTC that is coming strongly in favor of our position.
03:37Following these charges is a total, total overstep and an overreach from an AG that's up for reelection.
03:44And we find that unfortunate, but we will stay focused on what we do best, which is building a great
03:48product.
03:48So certainly the CFTC, we know where the CFTC stands and we know where Michael, Mike Selig stands on this.
03:55We don't know where courts stand on this.
03:57And I'm wondering if we see a state like Nevada, for example, block access to your business, what will you
04:06do?
04:06Will you continue to operate or will you say, OK, we're not going to operate in Nevada?
04:13Well, first of all, let's get to that point.
04:16And, you know, we'll have to make a decision as a company of what we do.
04:18What I can reiterate is we will 100 percent abide by the law.
04:22That's what we will do as a company.
04:23It's always been our position.
04:24That's why we spent four years getting regulated up front, regulatory first as a company, and always abide by the
04:30law.
04:31But what I always say, the law applies to us as much as it applies to the government.
04:34And when government oversteps the law and goes out of bound, we're going to fight that in court, which we
04:39look forward to.
04:40How long does that process take?
04:43Because it seems like there's a regulatory limbo happening.
04:46It's almost like your legal team is going to have to play whack-a-mole with all these states that
04:50are filing suit or bringing criminal charges.
04:53How long is this going to take?
04:55And gladly, we have a legal team to handle these types of things.
04:57And that's what we're going to be focused on.
04:59And, you know, maybe it's a question for them.
05:01I mean, look, whatever long it takes, we're going to fight for prediction markets.
05:04I spent eight years building this company, four out of which, half of which, are getting regulated up front.
05:09I really believe in this marketplace.
05:11I'm very excited about the growth that we're seeing.
05:12It's one of the fast-growing companies in America right now.
05:16And so what I'm going to be focused on is keep building a great product.
05:19And that's what's sort of most important for me.
05:21The more important sort of question is, you know, when it comes to this, this is not really about, you
05:26know, whether this is gambling or not.
05:28It's not really about state versus federal, which are both coexisting and both growing, both models.
05:34This really is turning into sort of some special interests that, like the status quo, the status quo is working
05:39very well for monopolies,
05:40but not for the consumers that are flocking to prediction markets right now, which we're going to keep fighting for.
05:45Tarek, there is this perception, though, that people think this is gambling.
05:49An Ipsos survey from just a few weeks ago, for example, shows 61% of adults say prediction market trading
05:55is closer to gambling.
05:578% say it's closer to investing.
05:59So there is this public perception that doesn't necessarily match with what you say the platform is.
06:05How do you respond to that and how do you battle that?
06:07Like, how is this not gambling?
06:09I haven't really looked at these polls.
06:12You know, the thing I will say is there's always been a battle of whether financial derivatives are gambling.
06:19Grain futures were called gambling in the 1800s, and there was a Supreme Court decision that, you know, said even
06:24though there is speculation,
06:26these, you know, products have financial, are structures of financial markets and thus are going to fall under financial market
06:31jurisdiction.
06:32So I always say this, you know, whether something feels and looks like gambling doesn't necessarily make it gambling.
06:38Speculation exists in all financial markets.
06:40If we're going to take a line that speculation is gambling, then the stock market with retail participation is gambling.
06:46Then buying options for retail or zero data expiry options is gambling.
06:49Then retail buying crypto is gambling.
06:52The more important line and the historical line that we've been taking under the law, but also, you know, as
06:56you think about it societally,
06:58is is the business model a gambling business model, which is a model where the revenue of the business and
07:03the profits are equal to the customer's losses,
07:05in which case the incentive is to promote more losses and block the winners,
07:08or is it an open, free and fair marketplace where people can enter in and out freely and transparently,
07:14which is a financial exchange in which Calgary falls under.
