Two New Yorkers in their 20s have added a whole new dimension to the 2024 presidential election: legal betting.

The new Kalshi platform offers the first election betting in the United States in more than a century. Its founders believe this will give voters more transparency and allow them to feel more involved in the process.

“It’s actually the best mechanism to get more truth about who’s actually going to win,” said Tarek Mansour, 28, who founded Kalshi with Luana Lopes Lara, also 28. “We let the market speak instead of the experts, the pollsters, the people.” , political figures, people with prejudices or conflicts of interest, people with or without incentives.

In recent weeks, the innovative company has exploded in popularity. Users have staked more than $100 million on Kalshi’s election bet, and the site has been verified by JD Vance, Elon Musk and comedian Theo Von.

“Kalshi is a place I look at,” Vonn recently said in a podcast. “It’s a good tracker, it’s actually people depositing their money.”

The platform functions like a futures exchange where a market facilitates trading on what could happen. Conventional exchanges such as the Chicago Mercantile Exchange bet on oil or livestock prices. Kalshi does the same thing – just for the news.

Someone who believes in the probability of an event – ​​like Trump winning – will place a bet, and Kalshi will pair them with someone willing to take the other side of the bet.

The site is also currently betting on everything from how many rocket launches SpaceX will conduct this year to what score “Gladiator 2” will receive on Rotten Tomatoes.

The initial enthusiasm – particularly from Republicans – is partly because betting markets suggest Trump has a much greater chance of winning than polls do. As of this writing, a bet on Trump will cost you 63 cents with a potential return of a dollar, while a bet on Harris winning costs just 37 cents.

But it’s not just about betting; it’s about giving people a new way to get involved in the democratic process.

“People had this kind of feeling, like ‘I don’t have control over who wins and I’m just going to suffer the impact and the consequences, no matter what they are,'” Mansour said. “People can now participate, engage a little more in the elections.”

While Kalshi has been offering bets on inflation and employment figures since 2021, the exchange only got the green light to launch an election betting service in October after a long and bitter legal war.

Mansour began thinking about the importance of a betting market for elections while working on the trading desk at Goldman Sachs in 2016.

When Trump won that year, his team was flooded with frantic calls to place trades and buy hedges in response to the crisis.

“People want a financial stake in the elections,” he explained. “Trading activity… actually arises from an opinion about a future event – ​​why do we (just) use stocks, bonds and options to do this?

“It is a more direct and more precise method (…) than traditional financial instruments,” he added. “What you buy is the event – ​​Trump will win, Kamala will win, Brexit will happen, Brexit won’t happen – that’s the genesis of the idea.”

While some people use the market for fun or to gauge public opinion of a candidate, Mansour initially envisioned it as a way for individuals or institutions to hedge against risks before a event.

For example, someone with a lot of exposure to fossil fuels could bet on a Harris victory – as a way to balance their portfolio in case Harris wins and gives subsidies to green companies.

Mansour, who grew up in Lebanon, and Laura Lopes – an MIT classmate of his who worked at Bridgewater and originally from Brazil – launched the company in 2018 with investment from heavyweights such as Sequoia Capital, Henry Kravis and Charles Schwab.

Their headquarters is in Soho and they say they couldn’t imagine being based anywhere other than the Big Apple.

“New York is the financial capital of the world,” Mansour said. “We felt this was the right place to build what we believe will be the next evolution of financial markets.”

But they didn’t anticipate the regulatory hurdles they would face. They first requested permission to bet on the 2021 presidential election, but the Commodity Futures Trading Commission rejected them.

While the CFTC allowed them to offer bets on other events – like falling inflation or banning TikTok – the presidential election was deemed too sensitive by regulators.

They believe a handful of individuals could raise the price, making it seem like a candidate is more likely to win, which could lead more people to vote or feel pressure to support a candidate.

After realizing that the CFTC would likely never give them the green light, Mansour and Laura Lopes took the matter to court. Last September, after three years of battle, a judge finally ruled in their favor.

None of them imagined how difficult it would be to get approval, but Laura Lopes thinks their ignorance might have given them an advantage.

They were so naive that they dared to try something other companies thought was impossible.

And they claim that by going through the legal quagmire to gain regulatory approval, they have established themselves as a safe and reliable product.

Other election betting markets, such as Polymarket and PredictIt, have also generated buzz. But Polymarket is not open to US citizens and PredictIt has only been granted the ability to operate temporarily.

“Many startups take the easy way out. But we really think long term,” Laura Lopes said. “If in ten or twenty years, prediction markets have a chance of reaching this magnitude, it is because we started on the right path.”

This story is part of NYNext, a new editorial series which highlights New York City’s innovation across all sectors, as well as the individuals who are leading the way.