“A sports book is actually completely different. … Their revenue is equal to customer losses. The more the customers lose, the more money they make.”
Masters of Scale · Startups & Venture · October 2026
Lopes Lara was answering a question about states suing Kalshi as an unlicensed gambling operation. Her defence is that Kalshi is an exchange where users trade against each other and the company takes a fee, so it does not profit when users lose. The host pointed out afterwards that most of Kalshi's volume is sports and that sportsbooks regard it as a competitor.
Transcript
I actually would say it's a very good thing that it happened like so fast because, in a lot of ways, we keep the mentality of very, very early stage, right? And I think it's like when companies, I think they're just like compounding at a kind of like very normal rate. I think it's easier to kind of start thinking, like, oh, I'm a bigger company, I need to hire more people. And you kind of like, you don't realize like you can start making a lot of mistakes and it take a long time for you to realize you're making that many mistakes. For us, because we grew so fast, we also our mentality and our kind of like way that we look at the company hasn't changed as fast. So, because of that, we're able to, for example, have and operate with way fewer people. We just had to like really keep going on like building the product as fast as we could. Early stage team and early stage mentality, very intense in time of like work intensity, keeping the speed, which I think is the most important thing for startups is the speed. You're definitely right that sometimes we'll look at the numbers and like two years ago, like before the election, we were making like way less than $10 million a year, right? Now, in a day, we transact way, way more than we used to do in a year, like two years ago, you know, and it's just like just the transaction volume. And it is crazy, like the numbers we're talking about. And we're very grateful for where we are. But we really, really try to keep the mentality on we're still underdogs. Everyone have a lot to prove it to grow.
I mean, the success you've had has put a bullseye on your back. There, states are coming after you, you know, for being an unlicensed gambling operation. Federal appeals court just ruled that Ohio and Tennessee can regulate Calci through their gambling laws. Like, is that kind of an existential threat? I mean, New York alone is suing you for $36 billion, the state where you're headquartered.
We are very, very confident analysis. And of course, as you said, the appeals court that we enters, but we also won the Third Circuit. What all of these lawsuits are saying is like each of them has a different legal thesis. The more important part, if you take a step back, is that like the mechanics of how Cal Shi operates in a sports book is completely different, right? And that's why they are regulated different ways. That's why we are federally regulated, right? We are an exchange, which means that you trade against someone else. We don't set the price. We don't set the odds. We don't trade against the users. The users are just trading against each other and we take a transaction fee. What matters the most here is liquidity and making sure that we have like national liquidity right to build upon. Imagine if you have, for example, the New York Stock Exchange, but you could only buy stocks in the New York Stock Exchange if you're in New York. The prices would be significantly worse. It would not be a liquid market. It would just be worse for every participant. And also, the market just wouldn't work well. On the sports book, on the other hand, it operates completely different, right? Like, for example, in the exchange, because we also don't trade against our users, we don't make money when users lose. A sports book is actually completely different. They make money, their revenue is equal to customer losses. The more the customers lose, the more money they make. For us, it's not the same. The incentive is not to make people lose because we don't make money when people lose. Because of that as well, we don't cap our winners. So, you know, if you go to a sports book or a casino, you start making money, they'll make sure that you cannot participate anymore. That's the opposite. We want winners. We want people to come and bring price and we want price competition. And all of those kind of like really, there's no like price competition, right? The sports book has a monopoly on the price and they're going to put their margins on top because like they're having a bad month. So they're going to make the prices a little worse or whatever. And because of that, it's like it, they are very fundamentally different mechanics and very fundamentally different products and they need to be regulated in different ways, which is how the federal regulation for exchanges develop a certain way. And, you know, we're growing a lot because an exchange is a fair, fair, more accessible, more transparent way to trade. You can see all the prices. You can see the competition in the order book in real time. And that's why users like it so much. And I think it's fair and it should be that the consumers at the end of the day pick what's better for them.
Something like 75% of the volume of your business is sports. And for some users' point of view, it can seem like it sort of serves the same function for them. And, you know, the draft kings and fandals of the world look at you as competition, even if the engine behind operates in a different way.
Well, the thing is, speculation happens in all financial markets. You know, crypto, stocks, options, futures, there's speculation in all of them. And speculation is actually very important because it drives liquidity, right? If you obviously every market that we're talking about, and it's actually one of the biggest growing parts of Cal Shi right now, is the hedging and kind of small business hedging. And hedging is very important for financial markets. And it is a differentiator from gambling. But speculation is very important. And it happens in every market. And it should happen. And it's fine. There's nothing wrong with speculation, but the mechanics being different really matters. You know, the house always wins. Like, that's not the case of an exchange. And on the DraftKings defendable point, it's actually interesting because Jason, CEO of DraftKings, actually, in their latest earnings, said that they're seeing no cannibalization between sports betting and prediction markets because they are fundamentally different. Users understand they're different and they engage with them in a different way. And because that I think both models can coexist, they are coexisting. And at the end of the day, the users will pick what's best for them. But it's not the same. And I think the users kind of know that.
You mentioned hedging. I did love during the Knicks NBA championship run, there was a bar here in New York that used Cauchy as a hedge so it could offer free drinks to everyone if the Knicks won. And these are great counterpoints to all the betting talk. Do you look for those opportunities to tell those kinds of stories?
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