Creating prediction markets (and suing the CFTC) with Tarek Mansour and Luana Lopes Lara
TL;DR
Kalshi founders Tarek Mansour and Luana Lopes Lara recount their four-year battle to launch the first CFTC-regulated prediction market in the US, culminating in a lawsuit against their own regulator to offer election contracts, and why their 'permission-first' approach ultimately enabled $10+ billion monthly volumes.
⚖️ Regulatory Strategy & Legal Victory 3 insights
Permission-first vs forgiveness model
Unlike Silicon Valley's typical 'ask forgiveness' playbook, Kalshi spent three years (2019-2022) seeking CFTC approval before launch, prioritizing regulatory legitimacy over speed to avoid risks inherent in financial services.
Suing the CFTC over election contracts
After the CFTC blocked election markets for two years via 'pocket vetoes,' Kalshi sued and won in late 2024, establishing that elections have economic impact and don't fall under prohibited categories like war or terrorism under the Commodities Exchange Act.
Self-regulated operational framework
Kalshi operates as a self-regulated entity where every new contract receives a 24-hour CFTC review window, creating a 'regulatory-market fit' through iterative collaboration with regulators.
📈 Market Growth & Product-Market Fit 3 insights
$10.4 billion monthly volume milestone
Kalshi processed $10.4 billion in contract volume in February alone, with 80% of users engaging as information consumers rather than active traders.
Election markets as the holy grail
The 2024 election served as the definitive use case, with prediction markets proving significantly more accurate than traditional polls and demonstrating the value of truth-based forecasting mechanisms.
Modern media tailwinds
Rising media polarization, algorithmic feeds, and widespread distrust of traditional information sources created the necessary conditions for regulated prediction markets to thrive—a demand that didn't exist 10-15 years ago.
🧠 Founder Psychology & Resilience 3 insights
Optimist versus paranoid partnership
Luana's optimistic, risk-taking approach balances Tarek's 'paranoid,' expected-value mentality derived from his trading background, creating decision-making tension that proved crucial during crises.
The 'try again' survival strategy
After the CFTC's 2022 pocket veto forced layoffs and caused investors to lose faith, the founders maintained morale by adopting a dogmatic 'try again' strategy despite overwhelming evidence suggesting failure.
Board resistance to legal action
Board members Alfred Lin and Michael Seibel initially opposed suing the CFTC as a dangerous 'anti-pattern' for a 25-person company, but eventually supported the 'no other option' challenge that bet the entire company.
Bottom Line
When building in regulated industries, solve the hardest regulatory problem first to create defensible market position, even if it requires suing your own regulator to establish legal precedent.
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