GEOFF BENNETT: As prediction markets continue to grow, they're drawing attention in Washington, D.C., and across the country.

AMNA NAWAZ: Companies like Kalshi and Polymarket allow people to trade contracts tied to the outcomes of real-world events, including elections.

But the call for regulation is growing louder.

Our White House correspondent, Liz Landers, has more.

LIZ LANDERS: Prediction markets are regulated by the Commodity Futures Trading Commission and can operate nationwide.

But many argue they should be subject to state gambling laws.

Members of Congress have also called for guardrails as the industry expands.

For perspective from one of the largest prediction market platforms, I'm joined by Kalshi CEO Tarek Mansour.

Welcome.

Thank you for joining us.

TAREK MANSOUR, Co-Founder, Kalshi: Thanks for having me.

I'm excited to be here.

LIZ LANDERS: Explain to us, what does Kalshi do?

What is a prediction market?

TAREK MANSOUR: So prediction markets is a financial market.

It functions like any other traditional financial market, whether it's on traditional grain futures, commodity futures, interest rate swaps, the stock market, right?

It matches buyers and sellers to basically trade something.

In the case of prediction markets, it's trading a broader set of things.

It's applying the same traditional financial market structure, but on a much wider set of topics.

And, in our case, it's like weather, it's politics, it's elections, it's sports, it's economics, AI, tech, all these topics that people are now exposed to interested in have economic risks related to it and would like to forecast and have difference of opinions on.

LIZ LANDERS: You all have been under scrutiny for how your marketplace is set up.

The New York state attorney general sued, Attorney General Letitia James.

And she said at the time in July that: "New York's gambling laws protect children from underage betting and help combat gambling addiction.

No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple."

They say you are a betting market.

Why are they wrong?

TAREK MANSOUR: An exchange is a place that matches buyers and sellers.

And it's a place that needs a very large diversity of participants that are engaging and competing against each other to figure out the price, promote price discovery, which enables things like people taking a position on something or taking people hedging against something, reducing the economic risk against that thing, right?

And that's the key difference.

That is very different from gambling, where the business model is -- the gambling business model, it's a business model where you're -- the house bets against its customers.

The revenue of the house is equal to the customers' losses.

And that model is a model where the house, what it does over time is, it figures out who wins, people that do smart trading and research, and bans them and figure out the people that lose and figure out how to target them specifically to keep them coming and so on and so forth.

That difference incentive is critical, right?

There, they need to figure out who the losers are and keep them coming, which creates the addiction issues and all these issues that are very important, whereas open financial markets, Kalshi doesn't make more or less money from winners or losers.

When somebody loses, they're losing it, someone else.

It's an open market where people are trading against each other, and that's a key, critical distinction.

LIZ LANDERS: One of the points that she makes in that comment too is the effect on young people.

What do you say to this criticism that it's hurting young people and addicting young people?

TAREK MANSOUR: So, to be clear, there is a -- and this happens.

There's a lot of things going on Twitter and social media and sometimes in the news.

But a lot of these things are not true.

So we don't cater -- the law doesn't let us, and we would never do it, allow minors on the platform.

So we ban minors unequivocally.

We have actually gone beyond what is required from us regulatory-wise, in terms of providing tools for parents to make sure they monitor and make sure that, for example, their kids are not using their I.D.s And these are the ways that kind of minors try to access, whether it's financial platforms, crypto, prediction markets, and so on.

But the risk with any of these financial products is real.

I think that there's a real risk and a real concern, which is when you have a technology that becomes a mass technology.

We have 30 million customers now, right?

I always say this.

There's a lot of upsides.

But at the same time, there's some percentage of activity in any of these platforms, whether big tech, whether prediction markets or financial companies.

There are going to be irresponsible use, right?

And the role of regulation, which Kalshi is very -- has been very forthcoming about -- let's regulate this and figure out the right rules of the road.

LIZ LANDERS: I have heard you say you're pro-regulation, you're a pro-regulation company.

TAREK MANSOUR: Absolutely.

LIZ LANDERS: What does that mean?

TAREK MANSOUR: Well, it means -- when we started the company in 2018, we didn't launch until the general -- for the general public until four years later in '22.

So what were we doing in those four years?

We were actually coming to the federal government and getting regulated proactively before launching our product.

We said, let's get regulated before we do anything, before we launch, before we do anything.

And then, once we get regulated, we basically build the product and launch, and it's been a very successful strategy.

Now, how do we take that to today?

Today, our message to Congress and others is, like with any markets, there's going to be some risks.

We are self-regulating those risks.

So, for example, we ban any markets on war, assassinations, death, things that can create moral hazards.

We have never done them.

We will never do them.

We have a comprehensive customer protection regime to make sure that we're limiting irresponsible use and banning it.

We ban insider trading.

We ban members of Congress and administration from participating in markets they may have influence over.

And we want these to be standard for the entirety of the industry, because we're not the only players.

There's now tens of players in the industry.

And our message is, we want more guardrails, and I think this is what they should look like.

LIZ LANDERS: You talked about the elections.

Kalshi launched a midterms hub a few months ago, which you all dubbed the wisdom of the crowds without the bias.

Sports prediction markets is one thing, but are you concerned about trading on elections and candidates?

And is this better than polling?

TAREK MANSOUR: So the answer is, the data shows that it is, right, very clearly is.

And so what is the purpose of these markets, why we're so excited about these markets is, this is the first time we have a metric that is coming from people.

And historically you could have polls, but there's issues with polls.

People sometimes commission polls that they bias the .

They want to -- they reverse-engineer for the story and the narrative they want to tell.

There is -- a lot of the information that comes from a small handful of elites are in D.C., whereas prediction markets is people.

It's millions of people basically with skin in the game predicting what they think is going to happen.

And we're very excited about the midterms hub, because the way we're structuring it and our message is always use it as an alternative or in a complement to all the other data sources.

But what's nice about prediction markets is, the incentive structure is truth.

If you say something that is not super smart, you will probably lose money.

And if you say something that is smart and you're doing research and you're reading about things and you're digging in, you will probably make money over time.

And that's the whole point.

It's in some ways depolarizing the conversation around politics and making it a little bit more truthful.

LIZ LANDERS: I want to ask you.

Donald Trump Jr.

is an adviser to Kalshi.

Are you concerned about that being an ethics concern, because Kalshi is regulated by the CFTC and that is a part of the Trump administration?

TAREK MANSOUR: No, we -- when we got regulated, we actually got regulated in 2020, when we got our exchange license.

And I always say this.

Like, we will work with all administrations.

And when I engage with Congress right now, we're engaging with both sides of the aisle pretty much equally.

I always say, like, this doesn't need to be a partisan issue.

But we should have sensible guardrails to make sure people don't fall off a cliff.

LIZ LANDERS: But what does Donald Trump Jr.

bring to Kalshi?

TAREK MANSOUR: You know, we did it in close to the middle of 2024, and it was really about at the time we were a very small company.

We were, I mean, around 20 people, tiny company.

Nobody knew about us.

We were pretty much a small start-up.

And at the time, we were figuring out ways to get our word out about how to use these markets, and it was very hard.

People weren't talking about prediction markets two years ago.

And we're very excited about -- like, we're partnering with like people on Twitter and people that had a big microphone that could talk about these markets and tell people this is an alternative to the polls and you should use them.

And that's why we got very excited about Don, who had a big microphone and was excited about these markets.

And as I always say, we have people on both sides of the aisle that are excited about prediction markets.

They're advisers on our board.

They're investors, they're partners, and so on and so forth.

And we're excited about anyone who's excited about prediction markets.

LIZ LANDERS: I want to ask you about a story that The Wall Street Journal had earlier this week about a series of trades.

There were about a million of them that were in one market on your platform and they were all $5,500.

Do you believe that that is wash trading, which is a practice that amplifies the quantity of trades on a platform to make it look active?

Were you aware of this?

TAREK MANSOUR: Yes, unequivocally not.

It's not wash trading.

It's actually very typical of exchanges.

Mainly, my message is, don't hear all the rumors that you find on X. And there's people that are self-interested in some ways, some competitors and others that are promoting a variety of different things.

But, no, that this is not wash trading.

There's no artificial inflating or other.

It gets a little bit technical, but people that have sort of run exchanges understand this.

What exchanges do when they're developing new products is, they provide small incentives for what we call liquidity providers, people that go out there and provide the supply of liquidity to get going, to get the marketplace going.

And that's what we do.

And this comes with minimum obligations.

It says you have to provide a minimum size and a maximum spread.

So you have to provide - - you will have to always be there so that when someone wants to buy, you're there to sell, and when someone wants to sell, you're there to buy.

That fosters liquidity and makes sure that people can do the things that they're supposed to do.

And so sometimes with those types of liquidity conditions or requirements, people basically trade against those with fixed size.

It's like a fixed slot, which is very common in like the stock market, very common in traditional commodities markets.

Some people misunderstand them.

Some people were, I think, intentionally misleading.

We can't control what everyone says on Twitter.

LIZ LANDERS: Tarek, thank you so much for your time.

I appreciate it.

TAREK MANSOUR: Thanks so much for having me.