Why Kalshi Chose Crypto Perps for Its First Move Beyond Prediction Markets

Transcript

tell us why Khi decided to launch crypto pers for its first big fora into crypto. >> Yeah, well um Koshi's uh crypto prediction markets are actually also quite popular right now. Um we've grown I think around 15x since the start of the year. Um and it's it's the second largest category on the platform. Um currently around like three billion two to3 billion dollars um a month in volume. So it's it's quite a lot. Um but uh aside from that we did yes enter uh perpetrols into the US. Um and we are starting with crypto. The reason why we chose this asset class um is kind of

similar to uh why we started with prediction markets. They both originate from you know academic papers from decades ago for by like Nobel Prize winning and very uh consequential economists and Kauaii is essentially taking this you know financial instrument that um people have like a very strong demand for and bringing it to the US in a regulated way with the liquidity and the infrastructure um to support it and uh obviously it's a huge outside of the US given the as you said $90 trillion headline number um but we we see it as like a frontier of finance.

It's essentially um a new derivative uh that you know gives you the capital efficiency um and uh sort of uh like leverage that options or futures might but without many many of the complexities involved. Um and uh yeah we we hope to make this kind of our next chapter um as Kawhi bringing um Kawi towards our you know ultimate vision of creating the next generation extreme >> and so as we mentioned already this is a huge offshore market but it's something that's basically new here in the US. So for Americans who are listening who haven't really ventured into PERPS

trading offshore already, explain what a PERP even is and why or how a trader would use PERPS in their trading. >> Yeah, so PERPS stand for perpetual futures. Um, and so it's essentially uh the most in my opinion like the most pure trading instrument where you can trade on the price of an asset going up or down. Um so you can profit from both rising and falling markets. Um and then you can also uh hold that position for as long as you want. So unlike options or futures or like you know the traditional types of derivatives that we're used to, they kind of those kind of expire at a certain date which means you have to roll over your contract um

start again you know pay the costs of entering the position again. with perpetual futures, it's actually sort of a much more seamless and simple trading experience. Um, and then obviously uh leverage is is also a component of this. You're able to trade more with less. Um, you know, putting up less capital and having still the same uh size of exposure or um being able to kind of amplify your exposure based on leverage. Um, so yeah, th those are kind of the main uh value props of of you know, perpetuals um as like the next tool in a trader toolkit.

>> And so I've noticed on the platform that the leverage amount is different from asset to asset. It's 6x on Bitcoin, 4.4x on ETH, 2.1x on Hype, etc. How do you decide the leverage max on each asset? And is the CFTC involved at all in helping to determine that? >> Yeah. So um the asset leverage numbers they are kind of uh not clean numbers as as you noticed like they're um 5.8x or like 3.4. So these numbers are determined by our risk engine um and our risk models that we did um you know obviously have to go through the CFTC

with in order to review and approve those. Um and so they vary based on the coin and the asset um based on you know conditions such as like market conditions the historical volatility um and returns of the asset and the liquidity scenarios for each asset. >> Okay. And you initially launched with Bitcoin. Now I see there's ETH, Saul, XRP Doge Hype uh Sweet Link Bitcoin Cash, Shibainu, and Litecoin.

And I found this list kind of interesting because it's a mix of majors, but then there's also some assets that uh, I'm just going to call it are in the zombie chain category. And then we also have recent upandcomers like Hype. uh suite would probably also be in that category. How are you deciding on which crypto pers to offer? Like is there a set of criteria that you've established? >> Yeah, I think um it's a function of multiple factors. one like user demand and two like regulatory um sort of approval or or maybe like let's say like precedence for them like

have we seen these assets listed on other CFTC regulated exchanges um then it's kind of like very easy for us to list them here as well but we are just getting started and um you know we we will be expanding the asset list going forward into the future um we don't really have like strong um I guess like preferences for not listing assets or listing assets. We we do want to provide like the best asset diversity. Um so it's yeah it's I would say it's it's primarily just a function of like um user demand and also your regulatory bandwidth >> and um how how is it even kind of figuring out what the price is because

there are so many exchanges around the world. Is it limited to US exchanges because you need to be regulated by the CFTC or does it include other venues or just Yeah. How does it work on the back end? >> Yeah. So, um if you're asking about like the index price which the petrol is pegged to um we utilize um a regulated benchmark provider called CF benchmark. they also power crypto markets and it is a combination of multiple um like crypto exchanges. Uh so yeah, it's it's it's a bunch of CFTC regulated ones, US ones.

Um and we kind of aggregate the like uh average prices amongst them. Um there's a whole methodology to it to ensure that it's like as tamper proof as possible. Um and you know so far has been um at least for the many months that we have our crypto prediction markets running which also run on the same infrastructure. >> And is it um like volume weighted? It's or is it just truly an average or how does that work? >> Yeah, it's it's honestly there's like there's there's actually like a 30page methodology document on it. Um so there's like a lot of nuances to it. Um for uh for purpes it we we just take the

the price as it comes in through that that feed. Um for prediction markets we take a 60-second um time weighted average. >> Okay. So Arthur Hayes was on the show recently and he was talking about how the metric to track when it comes to per is trading volume versus open interest. I actually tried to figure out what this was on Gali. could not figure it out. Um, is that like a public figure that people can see? Like it it looks like that you know you guys have have touted some trading volume numbers but not open interest or you know feel free to correct me if I'm wrong about that.

>> Yeah, it's um those are definitely all important metrics and um we are in our early days still as an exchange. Uh, I mean we really um launched publicly well our weight list was kind of live like around like two weeks ago and then real public access I'd say like over the past two to three days. Um, and so it's it's very early days for us. Um, we uh are you know getting into the motion of things. I think it's um like these types of metrics um are probably more meaningful to look at um as a function of growth over time. Um so yeah, I think uh they're they're both

quite important and we're we're definitely looking at them to grow both. >> Will you be revealing the open interest and and can you reveal it now? >> Oh yeah, it's it's on the website. Um, uh, it's publicly available. >> Oh, okay. I don't know why I couldn't find it. Is it on the pers page or >> I didn't see it there. >> Uh, yeah. Yeah, it is. Yeah. >> So, so when I'm on the pers page, it's just listing um the per. If I go into Yeah. If I if I search for it on a

specific purpose doesn't list it. >> Oh, it should be available if you click into like the page. Yeah. >> Okay. Okay. I I don't see it here, but Okay. Um, so I did also want to ask so as we talked about pers have not existed before in the US and actually sorry before I move on. So what is the open interest then right now? So you've had five half billion dollars in volume and open open interest is what's the number on that?

>> Um I'm not sure the exact number as of today but uh um yeah not not sure on the exact number but I think it's like um on the order of like seven to eight figures um for for Bitcoin but I have to check. Yeah. >> Okay. Okay, you just caught a piece of Unchained. I'm host Laura Shin and the full conversation is in the description below. We go live every Monday and Thursday. Subscribe so you never miss it. If you hold crypto on your phone, your biggest vulnerability isn't your wallet, it's your carrier. AT&T, Verizon, and T-Mobile have been breached again and

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