Why FaZe FAILED, Kalshi's Downfall & More - Matt Kalish Interview

Okay. You're the founder of DraftKings, correct?

Okay. So, this goes way deep. I mean, 14 years building this platform.

Well, the main premise is I quit DraftKings back in November, so I don't work at DraftKings anymore, but I love gambling and I'm trying to get my bet on for PGA Championship. I bet on a gang of shit. Anybody who knows me knows I'm a pretty regular gambler. And I'll use all the platforms, including Kalshi. You know, I read how amazing it is and all this stuff. I'd bet on MGM, I'd bet on Caesars, whatever. You know, I'm not like that. But, you know, I go on to place this bet for the PGA Championship and, you know, I say I want to bet $10,000 on Brooks Koepka to win. And we're talking before the match, like Thursday morning. And I hit bet. And what do you think happens? You know, if you're a gambler and you put $10,000 in and the website says 93 to one and you hit bet, what do you expect to happen?

Yes. And so it turns out my bet's getting dumped to Wall Street market makers for a fraction of the amount. It was like, you know, 60% vig basically on this bet.

My take is who the fuck cares? You go on Kalshi and what do they say? Legal betting in all 50 states. You know, it's not talking about how liquid is our order book and all this Wall Street shit. They're not saying that in their marketing. When you download the app, legal gambling on sports in all 50 states, guys. Like, come on. And it's bet against your friends, bet against your homies. So when you click this, I'm like, what the fuck happened? Why? You don't just say 93 to one and then you book somebody at 38 to one or whatever. And I even let this one go. And then the next day I log on again and I do the same thing and the same thing happens. And that's when I post it on the internet and I'm saying why is it if I bet $10 I'm getting 93 to one and if I bet $1,000 now it's suddenly 38 to one. That's not sports betting. That's some other shit. I don't know what that is. And that really was the jump off point for this whole like, you know, what do they really do with these sports bets that they're supposedly taking? Like what do they really do with these dollars that people are putting in representing it? Like sports betting, who's benefiting from that, right? And you know, they pretend we have all this liquidity. You know, we're the hottest shit in sports. We have bazillions and gazillions of dollars. Wall Street and all these people behind it, like you don't have liquidity to book me a bet for $1,000 without moving the number on me to 38 to one. And that's where I was like, fuck these guys. They have no chance to win in the US because normal people like me, I lose money gambling. I do it for fun. Normal people want to see a number you're showing them, click bet, and you get the bet you want, right?

Yeah. The way I would say it is it's an extremely niche product, right? Like the people who know this, you're talking about 1%, right? Like it's normal people like me and the people that see the marketing, who see, you know, it's a sportsbook. You bet on this, you know, all 50 states. You bet on whatever sports you want. The people who see that, they don't know anything about that. The people who know that are the 1% of people that are you. It's Wall Street. It's professional gamblers. And that's why 97% of people, the normal people who are responding to their marketing like me, pull up and you think, 'Oh, I see the number on the site. I click bet and I get the bet that you're saying, right?' And then that's like these are the people getting decimated by market makers. When I say market makers, you know, I'm talking about Kalshi through Kalshi Trading. They book, you know, some amount of the bets. I'm talking about Wall Street. This is Susquehanna. This is, you know, the other kind of big Wall Street trading firms. This is professional gamblers who are putting millions of dollars in and they're using the APIs. They're using the algorithms and all this shit they build to optimize basically milking me as fast as possible. And it's not that I don't think these things should exist. What I'm saying is you can't go market things one way like, oh, this is some nice, you know, site where Main Street has an advantage over Wall Street like Trick posted or it's some mainstream product when every single person who's the 99% of normal users are getting their ass handed to them and losing at a 90% rate plus.

It's gaslighting customers. It's lying. I mean, so it's one thing when it's convenient. It's another thing when it's not convenient, right? Like when it's convenient in marketing to say legal sports betting in all 50 states. We don't limit people. We don't book any bets in house. All this stuff. Super convenient for them to use that in marketing talking to somebody like me like a normal customer. On the back end you have a company that is Wall Street to the core. It is built as an infrastructure company in Wall Street, right? Like they're like a funny one I saw parlays. Like when they talk to a consumer they said we launched parlays. When they talk to Wall Street and regulators it's we launched these like combinatoric athletic option contracts. Go fuck yourself. Like if you're gonna say it's a parlay to consumers, say what it is. Say what it is. That's all. It's gaslighting customers to think, okay, this is some normal, nice, friendly sportsbook without ever acknowledging like who you're really betting against. It's not me. You're not betting against me. You're not betting the homies. You're betting against Wall Street. You're betting against professional gamblers, right? You're betting against Kalshi Trading. Like that is who is on the other side of the bets virtually 100% of the time. And so that's the issue that I have. And the more I've dug into it, there's just thing after thing after thing about Kalshi that is so fake. And I didn't even want to be posting on X out of Cabo. I swear to God, I would have loved to just be chilling, but every single stone you turn over, there's some fake shit and I just like I've had it with that. So, that's really...

You know, I've never actually used Polymarket and so I try not to speak on things that are my own personal experience and like the stuff I post are the things I actually bet like I actually have this in my bet history, right? And I do think Polymarket has a better pulse on customer like the kind of intuition around it. Kalshi just has no instinct. It's like no instinct for the sports bettor. And I'm not speaking on any of the stuff that's not sports. But when 90% of your business is sports and you have zero instinct, you just sound brain dead talking to a normal person. You're in these arguments like it's order book. It's like have you ever heard of a limit order, dumbass? It's condescending to me like and I'm just the one saying it but I am not the only person that looks at sports betting this way. That's like how everyone looks at it except experts. And so that's like why I'm saying it's niche today. I think they're years away from building a product that has any sort of instinct for customer where people will look at it and think it's a good experience if you're like a normal person, you know.

They're making a very hard pivot which is Wall Street infrastructure company that's like a platform and you're talking to Wall Street bankers and doing all this stock stuff. Now suddenly you have to become a consumer product company building consumer apps, marketing to regular people, right? That's not in their DNA. That's not in their culture there. What's in the Wall Street culture, right? It's how do we be nameless, faceless, money-making machines that just suck the life out of anything we touch, right? That's Wall Street culture. Fair enough. Like, they're going to make as much money as possible doing whatever they can. Nobody will know their name. Nobody will know their face because you're behind an API. You're behind everybody. I've been working gambling 14 years. Everybody knows who I am. If you think I'm... you don't like me, I'm not hard to find. Like people are like, 'Fuck you for doing this or whatever.' Right? It's not nameless. It's not faceless. It's they have to come, I think, to this full circle where suddenly you're a consumer-facing consumer product company that can build something compelling that a normal person like me would like. And I don't see them doing it. I'm like, how are they going to compete with Polymarket, DraftKings, FanDuel, Coinbase, Robinhood? Like, how many people are launching exchanges that are infinitely better at building consumer products, marketing to consumers, and having like more than zero instinct on how to make a customer happy, you know, that they're directly competing against, right?

Well, there's two big things. One is legal regulated sports betting is only available in about half of the country. So about right off rip half the people have no choice. You're like I have no choice but to accept this really subpar experience, right? The sportsbook product I would say has like a few things that are really established that are you know what make it such an easy experience for a normal person. One is if you see a number you click it you make a bet that's what you get. It's not like oh depends on how many Wall Street market makers feel like getting behind this thing or whatever. Right. Second thing is like it's completely transparent that it's a gambling business. Like everybody knows like how does a gambling business work? It is there's a house edge. You know what the house edge is? It says minus 110. It says minus 105. Whatever. You know what the house edge is transparently. You know if you gamble longterm you're going to lose. Nobody's pretending like this is like some job you can get, right? It's an entertainment product. And that's why billions of dollars get spent on the entertainment side of a gambling business. Like it's why casinos are super nice. You go in and you have a great time. It's why 30-40% get is given back in rewards, loyalty, benefits, other thing. The entire thing is built. It's not saying this is some job that you should have, right? It's an entertainment product that's fun and whoever does the best job providing the best experience tends to have the most market share. That's DraftKings right now. That's FanDuel, right? When somebody is coming out, you know, on the contrary and they're saying, 'Oh, Jim and Jill and Mike from Oklahoma have an edge over Wall Street and this can be your job.' Fuck you. Like, that's the worst to me is trying to put these ideas in normal people's heads who don't have data. They don't have algorithms. They're not Wall Street bankers. Like you can be super financially successful on this platform. Like no, you don't do that. Like the marketing that I've seen from Kalshi, multiple times I've seen things where like they would lose a gambling license running the marketing that they're running or they would get fined millions of dollars for running the...

Because it's in this wild west phase where you know the states are being handcuffed from easily taking action on it because they're not getting gambling licenses right and they're hiding under this kind of like oh it's CFTC whatever like the one person who is the CFTC the one person board who if they feel like doing something, they do it. If they don't, they don't. It's... We know what it is. We know what it is.

I use the word gaslighting, but I think it's basically fake ass marketing. Yeah, like PR and marketing, which you've seen my like not so articulate, I'm sure, posts and things, but it's fake. I mean, you can't pretend you're one thing and then be something totally different and come across trustworthy or authentic to somebody like me who just wants to make a normal bet and have fun. I don't want to worry about any of that. I want to make a bet on the thing you put on your site and trust that it's going to get, you know, priced fairly and paid out. It's not that complicated.

DraftKings, FanDuel, all of them. I don't think anybody's anti that an exchange product should exist. No. Like DraftKings owns all of the tech stack to build an exchange. Many do. You know, it's nobody I don't think is saying this product shouldn't exist. I think what we're saying is Kalshi is fake as fuck. They lie about their volume to try to make it sound bigger than it is. They mislead consumers with marketing tactics that are obviously like we know, right? Like you just know as a person with a brain that Main Street does not have an advantage over Wall Street for example. And they also just I feel like love to hide the ball on things like for all these years it was oh it's a trusted marketplace that is an open free marketplace that we don't limit people. We don't do this and then we find out oh they're just sending everybody's user data over to their market makers so you know exactly who it is. So the market makers can share who are all the good sharp players, who are not. They know who you are. They're using that and they can just say, 'We don't limit people, you know, we just politely decline to provide liquidity on that bet or whatever.' You know, it's full of shit. If it looks like a duck and it quacks like a duck, it's a sportsbook. It's a sportsbook with the same mechanics fundamentally as what other sportsbooks have with just a much worse experience for the user and no rewards. That's basically what it is.

That's already known factually. I actually posted a chart on this that only 9% of the time Kalshi actually has the best price. DraftKings is like 48%. Polymarket was like 40%. And that's not even factoring in rewards. That's not even factoring in that 30 to 40% of revenue that a sportsbook like DraftKings makes just gets given right back to the customer. The only people rewarded by Kalshi is Wall Street. They'll be like liquidity, you know, we'll give you like a discount for providing liquidity or something. It's not a thing. Like that is all fake PR marketing stuff. This is why I got worked up, man. This is why I got worked up because I just get so sick of the fakeness and that like if somebody's saying what it is transparently and people make informed decisions and they like that product, I do think some people it's a great product for. It's usually professional gamblers and it's Wall Street bankers who want to book sports. Like those are the people who love this product and I think it's like custom built for them. I really do. It's a great product for pro gamblers and for Wall Street. Everyone else though, like these are just lies and the data is starting to come out that they're lies and it is not close. It's not close to being true. So I hate to be the messenger on this. I don't think I'm a particularly great messenger for it. I'd rather make no content to be honest, but I do know the space. I know ball and I know how this shit works. And I'm telling you like just straight facts. Every single person who's had something, which has been a lot, who's had something negative to say to me. And look, I mean, look at my X. I have 4,000 people follow me who are market makers from Wall Street. 4,000 people. Every negative thing I said, I don't give a fuck what you think about me or your opinion. Name one thing I said about Kalshi that's wrong. Not a single thing in a week. Not a single thing has come up where somebody's like, you're wrong about this. It's just the people making money on it right now, you know, like if you're making money on it right now, you don't want that to stop. And so that's what it is. That's just... you know what? That's what it is, right?

No, I think it is likely to happen. Everybody. There's not a sportsbook in the US who's not building an exchange right now. A lot of them are on like temporary products that maybe aren't very good. You know what I'm saying? But like every single sportsbook, if you like Google any of them, you know, DraftKings, FanDuel, Fanatics, MGM about exchange, you'll see, you know, they acquired a... like DraftKings acquired a DCM called Railbird. So it's literally the same thing as Kalshi basically like it'll just be all in-house and stuff built by real consumer product teams that have real instinct around the customer and know how to make a normal person happy. That's going to be why... that's the whole reason I just don't think Kalshi has anything durable here. I think it's you have a couple months where maybe you're a first mover, but once the competition is going to be there and it's going to decimate them.

Um, it sounds like that's what Kalshi's saying, right? So sure.

Yeah, they would. They would. That's why you don't see normal people talking about Kalshi. Normal people aren't on there like, 'Oh my god, I love this.' It's Wall Street market makers, employees, investors, PR teams with paid media, paid and bought for affiliates that are there to post. Like, these are the noise on social media. It's not hard to find. I mean, these there's out of the box social listening tools and stuff that will tell you this. You don't have to take my word for it. And normal people don't fuck with it. And I think somebody like a DraftKings, like a FanDuel, like a Coinbase with time absolutely want that product available in 50 states. They're just going to do a way better job. Like it's going to be a product that makes consumers way happier. Like all my criticism is not like it shouldn't exist. If you go through it's not...

Um, I'll be thoughtful about some stuff. I think maybe sensitive information, you know, competitively wise. Like companies wouldn't just want their whole road maps and plans out there, of course. But I'll tell you this, like if you put a number up on your site and you pretend like you have all this liquidity and that it's like some huge big thing and you're betting against regular people, you damn well better have the liquidity. You damn well better have people matching up against regular people, right? You better book the bet. You damn sure better not be limiting anybody. Let me just tell you that. They better have any hyper shark mega pro that wants to get down a bet, they damn well better take that whole bet because I'm seeing their marketing and they damn well better take it because I don't want to hear any of that. Like, you know what I'm saying, right? And it's just being honest. Like so much of a gambling business is about experience and trust. Like once you find out somebody's lying to you, they're lying about who's behind your bet and who's on the other side. They're lying, you know, like when these sorts of things are happening. It erodes trust from normal people. Not somebody as sophisticated as maybe you, your kind of hardcore stock people from Wall Street. That's their edge, right? It's like their whole edge is the informational asymmetry of like I know the micro mechanics of how this works. I'll just take advantage of all the people that don't that they're marketing to with these simple messages. Right? So the point is it has to be a product like sufficiently simple and trusted where you're not constantly getting these news cycles about like oh insider trading on this. Oh, I just found out it's not my buddy on the other side of my bet, it's Wall Street. Oh, I just found out they're giving my data to their market makers from Wall Street so they know who I am and can profile me. Like you know what I'm saying? Trust. Trust. Just be honest.

It's not. It's not. I mean, that's fake, right?

I mean, what's a private company valuation? It's whatever somebody's willing to put in a tiny amount of money in and say it's worth. Yeah. That's not real. Like if you're public, if you're public and people are trading your stock and you're reporting real metrics using GAAP accounting, you know, it's not all just information controlled by your PR team and shit. You don't know the side deals, the back deals, any of that, right? Like you don't... it's private. It's private. The... I think the simplest way to put it is I would love somebody to do this calculation. How much money does Kalshi need me and people like me, regular long-term losing retail gamblers to lose on Kalshi to make that worth $22 billion? I think it's like the entire money supply of the country times four or something. And they better hope, you know, the Fed prints more money, too, because the money is astronomical. And it can't do that without a halfway decent consumer product. You just can't.

Uh, you know, I never take anyone lightly but I think they're years away from any kind of reasonable consumer experience. I wouldn't be shocked if they just... I don't know, 95% down tick and then rebuild up from there. Something like that. Like where's the... the problem is where does the money come from, right? If your only real customers are Wall Street, Wall Street's there for profit, professional gamblers, they're there for profit. Where's all this money they're supposedly making coming from? It's like, come on, man. And if there's competitors as well, Hyperliquid has got so much liquidity they're building. Yeah, it's a shell game. I mean, it's not like... it's not like it damages any public company traders because it's not a public stock, right? So, there's no... they're not harming anybody buying stocks off the market. But if I'm one of their investors and I'm being told these things, I'm being shown these fake numbers about their volume that are like, you know, the way they do their volume, right? It's how much you bet plus how much you would win if you win equals what they say is their volume. The person matching it, the person that matches the other side of your bet, they count that as volume, right? And it's a 99% on their side to win one. Yeah. And then they try to compare that to sports betting handle which is just the real customer, right? Yeah. And so yeah, I would say if somebody invested in their private round and got manipulated into thinking certain things, like I'd be pretty pissed off.

Right. Um, do you have any other thoughts? Because I kind of want to talk about social media and that business. Um, if you're interested.