Kalshi vs DraftKings

Tarek Mansour grew up in Algeria and came to MIT on a scholarship. Luana Lopes Lara grew up in Brazil, the daughter of a schoolteacher, and danced at an elite ballet academy affiliated with the Bolshoi before choosing mathematics. They met in an MIT classroom, ended up in many of the same courses, co-authored papers, and interned at the same firms — Mansour at Goldman Sachs and Citadel, Lara at Bridgewater and Citadel. What they observed across those firms was the same thing: an enormous amount of financial decision-making was being driven by opinions about future events, but there was no clean, direct way to trade on those events. You could trade the equity of a company that would be affected by an election result, but you could not trade the election result itself. In 2018, they founded Kalshi to close that gap. The approach was different from every prediction market before them: instead of operating offshore, accepting cryptocurrency, or relying on a fragile regulatory no-action letter, Kalshi would become a fully licensed US exchange. They joined Y Combinator in 2019 and spent the next two years in direct negotiation with the CFTC — a process that had never been completed by a prediction market operator.

The CFTC approval came in November 2020, making Kalshi a Designated Contract Market — the highest regulatory designation available and the same category as the Chicago Mercantile Exchange. Mansour and Lara were among the youngest founders to win CFTC approval in over a decade. The platform launched its first contract in July 2021. Sequoia Capital led a $30 million Series A. Henry Kissinger and Robert Shiller joined as advisors. The 2024 presidential election was the inflection point: over $800 million was wagered on political markets. When the CFTC under the Biden administration moved to block Kalshi's election markets — arguing they were contrary to the public interest — Lara made the call to sue the federal government. "The only option," she later said, "was to sue." Kalshi won in federal court in September 2024. The ruling opened election markets. Sports markets followed. $238 billion in annual trading volume followed that.

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DraftKings was founded in December 2011 by Jason Robins, Matt Kalish, and Paul Liberman — three former Vistaprint colleagues who quit their jobs and started building from Paul Liberman's spare bedroom in Watertown, Massachusetts. Their first product was a one-on-one baseball contest launched on Opening Day 2012 with $100 prizes. The idea was to compress season-long fantasy sports into a single day: draft a new team every contest, win or lose in hours rather than months. Major League Baseball invested within a year — the first US professional sports league to back a daily fantasy company, a signal that DraftKings was not a fringe product. By 2014, the platform had one million registered users. By 2015, DraftKings and rival FanDuel were spending $750 million combined on television advertising in a single football season, flooding every commercial break with green-and-black branding. The spend was unsustainable. The business model was about to face a different kind of threat.

The attorney general investigations of 2015 nearly killed daily fantasy sports as a legal category. New York, Illinois, and Texas challenged DFS as illegal gambling. DraftKings survived — the legal arguments held — but the experience forced the company to build compliance infrastructure that would later become its competitive advantage. The 2018 Supreme Court ruling striking down PASPA transformed that infrastructure into a license-printing machine. DraftKings launched the first mobile sportsbook in New Jersey within months of the ruling, using its DFS customer database, brand recognition, and state-by-state regulatory experience to outrun competitors who had to start from scratch. By 2020, DraftKings went public via a SPAC merger with Diamond Eagle Acquisition Corp and SBTech, a turnkey sports betting technology provider, raising the capital to scale nationally. By 2024, DraftKings and FanDuel controlled 80% of the US online sports betting market. Revenue reached $4.77 billion. The company finally delivered the profitability it had been promising investors for four years.

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