John Collison: evaluation

Transcript context

…I mean, maybe we won't share numbers, but what we call direct, Kalshi Direct, which is our Kalshi.com, Kalshi app, the consumer business. That has grown. That has sort of dramatically outpaced the rest, our other sort of intermediary or broker business. And I think it's just that the brand has gone mainstream. I think people, when they think about, have a difference of opinion on something, it's sort of becoming synonymous to like, "Oh, let me pull up Kalshi and see the odds," or "Let me sort of place a position on Kalshi." And that's contributing... There's just a lot of organic growth now. And I think that's going to continue over the next few months. You're describing how you grow the individual retail side of the market, whether people are coming through brokers like a Robinhood or people coming directly to the Kalshi website. There is also, when you're an exchange like this, you have to spin up market making. And in the end, the New York Stock Exchange doesn't have to think too much about market making because just the economic incentive is there. And so when something is at large scale, that's not as big of an issue. But I'm curious what that was like in the beginning. Were you guys doing the market making? Did you work with market-making partners? Now, how do you incentivize market makers to participate? I'm just curious what the market making scale-up has looked like. So there's actually two groups of contracts on markets on Kalshi, and they behave very differently, and the market-making incentives are actually pretty different. So you have the long tail of markets, right? The ones like, will One Direction have a reunion or all those things. And they are actually very hard to price. And because there's not necessarily a lot of demand, we actually have to incentivize market makers to come in. And there's like liquidity incentives, all those things for them to come in. And it's actually how we think about how to build our moat long term is how do we get very sustainable, solid liquidity in this long tail of markets so we can get... We have like, I think, 10,000. How do we get to 50,000, 100,000 markets? We've still... But on the other side, you have the more classic like crypto, sports, all of those guys. And on that side is actually a lot easier to market because you have very clear proven demand, is a lot easier to price. So the market-making incentives on this side is actually we don't pay them for it. We just rebate fees. But they have very, very, very hard conditions to meet. They need to have uptime of a certain amount, spreads, and top-of-book size and all of those things. Because we see it more as like incentivizing stability of the book than it is incentivizing them being there.…

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