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Welcome back to Squawk Box on Friday. New York State sued prediction market Kalshi. The lawsuit alleging the platform is quintessentially gambling, allowing, quote, a bettor to stake or risk money upon the outcome of a contest or chance or a future contingent event not under the bettor's control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.
Joining us right now is Tarek Mansour. He is the co-founder and CEO of Kalshi, and we should mention that Kalshi and CNBC have a commercial relationship that includes customer acquisitions and a minority investment. Good morning. Let's talk about this because this is really a shot across the bow, not just at Kalshi. Ostensibly, they didn't bring the suit against others, but this could change the whole prediction market story if you believe it changes the story. And this is really a states' rights issue versus a federal law issue.
I don't really think this is like about a state or federal or any of these questions. I mean, that same lawsuit, you know, and it's not about sports. It's going after all prediction markets in their entirety, the entire business model. You could copy-paste that lawsuit and apply it against Nasdaq, the building that we're in. I mean, they could shut down this building for the same exact reasons that you just read, the same thing that you outlined. I mean, I think the more interesting thing that's at play here is that you have an industry, the prediction market industry, that is disruptive, that is growing fast, consumers are adopting it, and it's threatening a legacy incumbent industry that is unhappy about that. And that has played out over and over. It's played out with taxis and Uber. It's played out with hotels and Airbnb. And you know, those are usually pretty well galvanized industries with large lobbies that are effective at getting actions against the new thing that's coming around. And the playbook is very simple: it's litigate, then you try to legislate, and then finally, when you realize that consumer demand is not going to go away, you finally try to compete and innovate. And that's the cycle that we're going through right now.
Now the key thing here is, and what's very important, is that we have a federal regulator. Like this notion that this is the Wild West, or we're skirting some laws or regulations. We have federal regulators, we're abiding by all the rules that were basically being put in front of us, and we're operating under those rules. We took years to get that license, and you know, we stand firmly by that license. And on the policy side, I mean, there's a bit of a question of like, what exactly is the sort of intended outcome? You know, we have over a million customers.
You're saying the intended outcome from the state of New York.
The lawsuit. What is, I mean, what is the intended outcome out of this whole thing, right? We have a million.
Like they plan to shut you down is what.
They say, well, you're going to have a lot of off New Yorkers if we got shut down in New York, right? You have a million. I mean, here's a question: how much do you think, if you add up all the profits and losses of New Yorkers so far this year on Kalshi, what do you think that number is?
Over a billion. Over three billion.
$200 million. Over $200 million. You know, Chris Christie and the gaming guys come in here and like, you know, all these customers are losing cash, etc. They have made over $200 million because New Yorkers are smart and they're doing a good job. You know why that's not possible on the sportsbooks? That is impossible on DraftKings or on casino. It's impossible in the gambling.
Because the house always wins.
Always wins. They banned the winners. It's impossible for that number to exist. Actually, that number is -$200 million for the sportsbooks in that same period. So when we talk about customer protection, like what exactly are we.
Let me ask you a different question because effectively what's happened here is, right, you are right in sort of an Uber sense that when I say Uber, meaning the car service, that technology evolves, sometimes the companies try to move faster than the regulators, try to get to a place where the customer loves everybody so much that then the regulators have to basically capitulate and decide, well, we're just doing this because the customer actually likes this, and we think politically it's painful. Otherwise, if you were the governor of New York, recognizing what's going on right now from a policy perspective for the state of New York, either to maximize tax revenue, to minimize losses for citizens in the state, to take advantage of this moment in some way, what would you do?
I would pick New York over special interests. I mean, that's what I would do. I mean, so the two concerns I brought up is customer protection and taxes. We've gone to the government and said, look, if there are genuine gaps in customer protection that Kalshi is not doing, let's have a conversation. We'll implement them. You know, we look at the things that are required from the state and sportsbook and what we're doing, and we see what we're doing as being superior. And if you ask consumers on the ground, which one do you feel is safer? Which one do you trust more? They would tell you unequivocally, Kalshi. Now, the tax piece is the other really interesting piece. We put out a proposal in front of the governor that would, you know, do some sort of taxation.
We've been negotiating with the governor, and there would be some sort of taxation on the prediction market industry that would raise close to $10 billion over the next five years from the prediction market industry. Why? Because, I mean, the prediction market industry is a fast-growing industry. Outside of AI right now, we're probably the fastest-growing company.
But what was the tax rate? I read that it was like 10%. You were offering something.
Yeah. I mean, there's a tax on the prediction market operator, and then there's tax on unrealized gains. There are a few things on that thing. But the point is that you would have raised a substantial amount of money.
But no, I think the point is the amount that you were talking about, was it 10% on the prediction markets?
Because there's like a few.
Levels, they get 51% at the tax.
