Hey Tarek, good to see you. I want to start big picture. Prediction markets seem to be such a massive topic that people are talking about, but I feel we never get a chance to maybe take a step back and, in true Actin fashion, talk about why do they matter. So from your vantage point, what are they solving for? Why are they important?
I think they're a new source of information. I mean, one of the things that has been interesting to sort of watch over the last few years, or one of the interesting statistics I always like to talk about, is 80% of our customers don't — they don't trade. 75 to 80% of our customers — today is probably going to be more like 95% of our customers — just look at the information, they're not actually trading. And really what markets do, and I always say this, Kalshi is not the inventor of prediction markets. They predate us, long before I was even born. Economists always loved the concept or this idea of applying free markets to the pursuit of truth.
And what markets do is they provide a very elegant, clean incentive to pursue truth, because if you're right, you're going to make money, and if you're wrong, you lose money. And they're sort of weighing machines — they aggregate the wisdom of the crowd by weighing everybody's opinions, some of which agree with each other, some of which disagree with each other, right? And that sort of weighing of many diverse and conflicting opinions is a price which ends up being the way to arrive at that definition of truth about what is true.
Exactly. Exactly. And like this is sort of the interesting thing about this. It's like it's a mechanism where anyone, no matter who they are, can come and challenge the status quo and disagree with it. Right now we're saying, you know, that the House is pretty much, you know, 97% Democrat and the Senate is still around — I don't know what the latest, I mean, it's going to be moving like crazy right now, but 75, 80%. Tony, do you have the number? Okay. But like the point is, like over the next few hours, you're going to see this sort of consensus being challenged both from the downside and upside. And that's really the point of a market. It's enabling anyone to come participate and state their opinion.
Let's go deeper on that. Oh, sorry. We're on election night, right? They're playing a huge role in this. Tell us what you've learned, like, as unveiling these markets in political forecasts, and how to watch tonight.
Yeah. Well, you know, the one way to think about these markets is they're a mechanism for aggregating people's opinions bottom up, right? It's one of those unique sources of information that have historically not existed. I mean, most information that we've historically gotten is flowing top down, is really coming from the elites to people. Whereas this is from people to elites, because millions of opinions are being aggregated by market. What's going to be very interesting tonight is not just what the markets are predicting right now. Where markets really shine is that they incorporate new information in real time extremely fast, right? One way to think about it is when Apple has their quarterly earnings and they release a new product that's exciting or something, the stock moves quickly, immediately, pretty much. And where you're going to see polls start coming in, coming in, and new information start coming in, the market is going to price that in incredibly quickly and pretty effectively, actually much faster than what you're going to see on CNN and Fox and other kind of news channels. So if you really want to figure out who's winning different elections and you want to be first, Kalshi is a very good place to figure that out.
And you'll see it. I mean, you'll see it across the Senate race, the House race, and really across the board. But this is really what excites me — is we're bringing a certain like — we're so rigorous about evaluating stocks, right? Or commodities in general, because you have a financial market for it. Now that we have that for politics, we're going to get increasingly more rigorous about evaluating the political process and what kind of information matters, what's misinformation, because markets are very good at like weighing that knowledge.
And we'll be able to see that today. People can take out their phones as soon as we're done up on stage here and watch this in real time as new data points come in, as new results are delivered. I think what you were telling me behind backstage, which is interesting, is just like to watch how quickly that moves and the time it takes people to process and go on talk about it, and like on television or on X, the markets are moving immediately. That is something that we should be watching for.
I mean, what I'll tell you certainly is like most campaigns right now are watching their Kalshi predictions, pretty much most campaigns. And you know, some of them are like, why is it so high, why is it so low, what are you looking at, how is it pricing things. And it's because it works, it's accurate, and it's real time. And so I really encourage you all to basically look at the predictions over the next few hours, because that's when the magic happens, that's when you're really going to grasp and get a good feel of what makes these prediction markets different from the polls, different from traditional sources of information, and then weigh them against other things, weigh them against the polls and the information and early vote or the voting numbers are going to start getting rolled out. But it's a very, very exciting night for us.
I want to talk about something adjacent to politics. A particular topic that I'm obsessed with is compute and the price of compute. It's like the new oil, the new electricity. And that's something you folks are working on as well, is how you can create prediction markets on the value of that. Tell me how you're approaching it.
I mean, you know, it's interesting, like prediction markets is this sort of very fancy, sexy term that people like, you know, like using. Prediction markets are not really that unique. I mean, one way to think about the stock market or oil futures market is they are prediction markets, right? They just predict the price of oil, right? And so from that same logic, we are essentially working on prediction markets for a much larger set of things that matter. I mean, recently we've launched a national debt forecast, which is a prediction market for our debt. It's a way to kind of predict our debt over the next 10 years and how it reacts in real time to different things that Congress enacts or doesn't enact. And compute falls in that category. I mean, it is so incredibly important over time that we price AI more effectively, like what's actually going to happen with AI, whether it's memory usage, compute, token costs, and things even that are a little bit less, I would say, commoditized in some way, like how much job displacement is going to come from AI in different sectors. And prediction markets are uniquely suited for that.
When it comes to compute cost, I mean, this is a market that I'm incredibly excited about because what you're starting to see is, I would say, two things are usually a good place for a financial market to start thriving. One is you're starting to see a need for the market to commoditize what does compute mean, like what am I selling. And the reason for that is because you have such massive infrastructural sort of capex, basically expenditure, where people have to go and get loans for these things, but people don't know what they're backing, all these contracts are bespoke, and so it's time to kind of bring it into an open market. And the second thing, when that sort of starts happening, is you have — if it's true that we're going to have a trillion dollars of compute spent over the next year or two, people are going to need to hedge a lot of that risk, manage that risk much more effectively, whether it's predicting what the kind of cost is going to be in a year, so they can make investment decisions more decisively, or take offsetting positions. In the case, like let's say you buy a bunch of compute, compute costs go down in a year, you're now left holding the bag, but you could essentially take an offsetting position in the prediction market or the futures market to hedge that risk. And that's why we're very...
Like there has to be some source of truth on the value of those things, and that's the role that you think prediction markets can play.
That's right. I mean, I think we have to first develop what does compute actually mean. That's what financial exchanges really do. That's what the Chicago Board of Trade or ICE and New York Stock Exchange have done for a lot of traditional commodities, and I think Kalshi is hoping to do that for compute. And then once you have that, then people actually have a reference. It's like, you know, crude oil. We know what it is. We understand it. It's usually pretty correlated with the price of oil, and the hope is you develop an index that is going to be pretty correlated with the price of compute.
Let's spin this forward. If we're back here in two years on election night having a conversation again, what will we be talking about? Like what's exciting coming on the horizon that we should keep an eye out for?
