Kalshi CEO: Retail Investors Feel Wall Street Is 'Rigged,' But Prediction Markets Give Them An Edge

Tarek Mansour, CEO of prediction market exchange Kalshi, says 95% of his customers avoid traditional financial markets because they believe the system is stacked against them.

Speaking at the FIA Global Cleared Markets Conference in Florida, Mansour made the case that the gambling debate around prediction markets is backwards.

Mansour compared his platform to the options market, where he said retail traders face off against Citadel while their brokers get paid “because they know you’re doing something dumb.” That, he said, is “more gambling.”

His customers, according to internal surveys he cited, say they trade on Kalshi’s economics markets because they believe they can have a real edge on inflation, politics and sports in a way they never could on the S&P 500.

A Federal Reserve paper published last month backs up part of that thesis.

“Kalshi and the Rise of Macro Markets” found the platform’s Fed funds rate forecasts perfectly matched the realized rate the day before each FOMC meeting since 2022, outperforming both professional forecasters and Fed funds futures.

Why It Matters

CFTC Chairman Michael Selig told the same conference that prediction markets are “truth machines.”

The CFTC withdrew its proposed ban on political and sports event contracts earlier this year and is now drafting new rules for the industry.

Leaning into this regulatory tailwind, Mansour drew a sharp contrast between Kalshi’s compliance and the Wild West of unregulated platforms.

Kalshi is committed to the rule of law regardless of administration, he said, while “others based offshore” are doing “anything and everything under the sun.”

Kalshi recently disclosed two insider trading investigations and said it opened 200 probes over the past year, including a case involving a MrBeast editor banned for using non-public information.

What It Means For Investors

The major exchanges are not waiting around. Nasdaq Inc. (NASDAQ:NDAQ) filed with the SEC to list binary options on the Nasdaq-100. Cboe Global Markets (BATS:CBOE) is targeting Q2 for a similar product.

Robinhood Markets (NASDAQ:HOOD) already offers event contracts through its Kalshi partnership and acquired CFTC-regulated exchange MIAXdx to build its own infrastructure.

DraftKings (NASDAQ:DKNG) has called prediction markets a $10 billion revenue opportunity but finished well behind Kalshi in Super Bowl app downloads.

Kalshi is reportedly in fundraising talks at a potential $20 billion valuation. For public market investors, the tradable exposure sits with NDAQ, CBOE, HOOD and DKNG.

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