Kalshi Co-founder and COO Luana Lopes Lara on the Long Fight for Regulated Prediction Markets

0:00That was a very scary moment because I was just like, this is the most important thing in my life. The company is the most important thing in my life. And you're betting the company. And I'm betting the company. Welcome to Confession, where I invite tech veterans to share their painful lessons. We all connect through shared pain. And here I offer an outlet to talk about them honestly and think about the lessons learned. I'm Ali Partovi and I run NEO, a venture fund and mentorship community for startup founders. We've coached and funded the founders of Kalshi, Cursor, Whisperflow, and many more.

0:33In this episode, I sit down with one of the startup founders, Luana Lopez Lara, co-founder and COO of Kalshi. Kalshi is really successful today, but Luana shares the story of the six-year-long struggle with the U.S. government. And she showed unbelievable tenacity and courage to go all in. This is Confession. Let's begin. I'm so happy to be here with you. We've known each other since 2019 when I was just starting NEO and you were just starting Kalshi. And Kalshi today is a reportedly$22 billion startup, pioneered the concept of prediction markets or regulated prediction markets. Tell me a little bit about your journey prior to that.

1:15I'd love to go back to like the beginning. Where were you born? What was young Luana like? Absolutely. And I want to say, I remember the first time we met was actually in this SF, you guys' office. Was it Canopy? Yeah. And it was just like, both Tarek and I were terrified. It's like, oh, we're going to meet this guy so famous. Everyone says he's amazing. We're so nervous that you're going to like us. So I remember that very vividly. But yeah, so I was born and raised in Brazil. Where in Brazil? So I was born in Belo Horizonte, which is like the third biggest city in Brazil. And then when I was like five, my dad, he worked his entire life at IBM.

1:48He was transferred to work in Rio. So I moved to Rio. And I was there till I was 13. And then I got into this ballet school because I used to be a professional ballerina before going to college called the Bolshoi Ballet School. Bolshoi Ballet is like one of the probably the best ballet in the world in Russia. But they have one school outside of Russia that's in the south of Brazil. So I moved there to do three years of high school in the ballet school. So it was like. You moved to the south of Brazil for the ballet school. Right. So I would. With your parents or. So that's the thing. I kind of forced my parents to have a long-distance marriage for three years because my mom went with me because my parents were like, she can't stay by herself.

2:28What is she going to do? And then my dad and my sister stayed behind in Rio. You split up on your own sibling? So every weekend, my dad and my sister would come or we would go. And we would try to do that and to make it happen. So my parents and my sister were just so nice, honestly, to allow that. But yeah, in those three years, I was pretty much like I would wake up very early in the morning, like maybe like 5.36, normal high school in Brazil, a technical school from like 7 a.m. to 12.30. That's the time that in Brazil you go to school or in the morning or in the afternoon. There's no full time.

3:02So I would go to school in the morning. Then I would go to my ballet school and stay there from like 1 to 9 p.m. And then I would go home. Oh, my gosh. And study because I had to learn English to try to come to the U.S. and all those things. So it was the most intense three years of my life, really, was those three years of high school, ballet, a lot of that. Even though ballet was the thing, probably the activity I loved doing the most in my life, I really, really liked the technical side. I was always been a nerd. I mean, my dad is a third grade. IBM is an electrical engineer, but my mom was a math teacher.

3:32My sister did engineering as well. So I was doing all the math olympiads and all of that. And I was very ambitious since I was very little. I wanted to do big things. And getting to last year of high school, I was like, I should, you know, like the best schools in the world are in the United States. Maybe I should try and who knows, maybe I'll get in. So I decided to apply and that's kind of the background of how I got into MIT and everything. You said you were very ambitious since you were very little. What does a little girl who's ambitious? Whoever I would learn about in school that I thought was awesome, I would write their name in this paper that was like right next to my bed.

4:09And I would be like, one day I want to do something that's like them in one way, shape or form. And the funny thing is, like, I never even got even close. I mean, like the names were like Churchill, Alexander the Great or whatever. And I'm like, you know, very, very far from any of that. But I think it was just like the concept of I want to do something that will matter in some way. I thought it was insane that like thousands of years later, you'd still know and learn about these like very key figures that like changed the history of the world. I was always kind of thinking like I want to be the best and how can I be the best and kind of put myself in a position like this.

4:42Obviously, I'm not even close to anyone on that list. But I think it was just since I was very little, honestly, like since I was probably six or seven. I was very nerdy. I remember also school in Brazil was January to December because of the calendar. But then the books for the year come out beginning of December that you need for the other year. So you can buy and you have a summer vacation. I would buy all the books the day that they would come out, read all of them before Christmas. and then reread them during the school year as needed for exams. So it's like I was like weird. I was a weird child for sure.

5:14That's why I also really wanted to go to do ballet in the Bolshoi was because it was the best school. And I was like, well, why wouldn't I go to the best place? And when I decided to come to the U.S., it's like they're the best place in the world. Why wouldn't I want to go to the U.S.? Why wouldn't I want it? So it's always kind of like common sense to me, which I guess is weird. So you wanted to be like Alexander the Great conquer that would be awesome yeah that would have been awesome but so you went to MIT so I was picking between schools so I was between Harvard MIT Yale and Stanford and everyone was telling me I shouldn't go to MIT because my entire background isn't even though I did do the you know math olympia and all those things like I was a ballerina that's kind of like if you had to be like a one-word description and MIT of course would be the worst place if you're a ballerina to go there's no really anything related to ballet there whatsoever and the other schools have a lot more and everyone's like well you're first of all you're not very good at math so you're not going to do well at MIT and then two is like what you really like they don't have but I thought it was important to really force kind of really force myself out of my comfort zone and really like if I'm here to try to be very good at math I should go to the place that's going to really really force me to be to like just focus and try to get as good as I can be and like four years where it's just try to kind of like hedge my position and be like well I can do whatever I want to do in engineering but I also have the safe the safety of if it doesn't go well I can just study something else or or stuff like that so I decided to go to MIT because I thought it would kind of push me the most what about ballet like did you continue ballet at the same time so that is a great question my thinking at the time because I'm very good at compromising I'm very bad sorry bad terrible I compromised so what I said was I'll go to MIT and it's not gonna be an issue because I can just go to the Boston Ballet and I'll take classes there and then the Boston Ballet is better ballet than any of the other schools I was choosing from and um and you know MIT is better at the math and computer science stuff than the other the other so it kind of be the best of both worlds the problem was the first time I went on a Saturday to the Boston Ballet to take first class after like a month that I was traveling and like you know getting to school orientation all that and I just remember looking at myself in the mirror and like my arm like I was losing my form and I remember like at the end of the hour and a half class I was just like I can't do this because I'm gonna see myself just get getting so much worse at something I cared so much about that it's just gonna be very hard.

7:46Ballet was never a hobby to me it was just something like I really really wanted to be very good at it and I thought it was kind of like better to leave on a good note than it was to kind of see myself get worse so I stopped it completely and you know started swimming instead or like whatever I was like trying different things to work out and like soul cycle or whatever but focus really on school yeah at the start it was very tough because I was definitely very very behind on the like in Brazil you cannot really like you can't learn calculus in high school. There's like a mandated government program that every school needs to teach.

8:18Calculus is not for high school. Everything that I wanted to do is kind of like, like I wanted to do this physics class and I was like behind on my math classes that I had to take. So it was like very hard at the start. It took many years of, a lot of nights, very stressful and studying and all of that. But it was fun. Really, I also want to talk about failure and fuck-ups. You know, and it's something that in general, I think in tech, we don't have enough conversation about how difficult it is, you know, getting to whatever success people are at. So I'd love to hear about more about the struggle.

8:49Oh, absolutely. Do you have any regrets or things you do differently if you could go back? Yeah, no, absolutely. And it's funny because, well, 2019, we really started, but it was really 2018. So now it's been many, many years, right? Seven years, really, that we've been around and building this company. And really, the company really started only working a year and a half ago, two years ago. and I think before that there were many many times that I'm way more optimistic than Tariq so the way that we are is like we're completely we're very similar in terms of what we studied what we're good at background and all of that but we're polar opposites in terms of how optimistic and everything's going to be great I am and how pessimistic we're about to die and this is going to be the end of the world Tariq is but for the first five years it really was way over 90 % chance the company was going to die.

9:39Even when we were worth a billion dollars, we were like, what are we doing here? It doesn't make sense. It's a very lonely experience because as a founder, you can't say that to the outside world. You have to project, you know, optimism to the outside world and you have to, whether you're raising money or recruiting employees or talking to the press, say a certain story and then whatever you're personally aware of or afraid of, you have to just keep to yourself. Yeah, and for me, it was always harder even because, so I think, for example, having a co-founder is one of the best things you can do because at least you have someone else to kind of, you know, freak out to, you know, in a way.

10:17Really, it's like the amount of value that is in just having someone that you can freak out to. Obviously, you can do that with your family and all of that, but it's different because your family, like, they don't really get it exactly what you're going through. For me, it was always harder too because I am supposed to be the optimistic one. So even if I was freaking out, I couldn't even do that in front of Tariq because if I even showed a little bit of I might be worried about this or it might not work out, Tariq immediately would be like, oh my God, if you're saying this, it's game over. We're done.

10:48So it's always a complicated thing. But I think that there's a story of the overnight success. It's just like not a real thing. When we started, the biggest question of prediction markets actually was, can this be Leo in the US? There were only 10 financial exchanges becoming one of them. and took three years it was awful like right every day we would Tarek says is it it's like you're climbing a mountain and you think the peak is right above you so you keep climbing and when you get there you look up and you're like shit that was just a little like you know a little plateau and I have like to keep going and keep going because it's just always harder than you think and I actually think that helped us because we always thought we were close so if you always have a next goal, it's a little easier.

11:30You're like, well, I know what I have to do for next one to two months. So it's a little easier than thinking about this is what we have to do for three years. It would have been, I don't know if we'd have done it in a way. It's a lot easier to think there's one to two. So that helped us kind of get through this. It's just like, it's one to two months. Let's just push through it. We need to see it through. And then we'd go and then the government would like, here are the answers to your 100 questions. And they would be like, well, we agree with 5 % of them. We have follow-up questions and 90 % of them and we disagree with 5%.

11:58So we'd have to go and rework everything and do more data analysis to show kind of how these markets behave and all of that. You would expect that anything that takes three years, it would be immediate product market fit. Because it's like, imagine, okay, it's an FDA approval or whatever. But for us, it wasn't the case. It was if we are able to get this done, which people thought it was like 1 % chance it would get regulated. Then all we have is the shot of trying to build this and trying to get product market fit into this thing. It's not guaranteed that people like trading like this and that is actually a better way to do it.

12:36It's just that was our thesis at the time. Yeah. So first, the three-year-long marathon of proving legality. Right. Then begin the starting line of what all normal startups have of, can you actually They build a service that people want and get traction and make money. I remember when we got regulated, we were like, well, now it's maybe where we should be going to an accelerator program after the three years. You just reached the starting line. Obviously, it was like cool and everyone's like, oh, they got approval. But no one really cared when we launched. It was like there were some people that were the nerds, right?

13:12They were the prediction market nerds. They were in predicted. They tried these like crypto offshore stuff like Augur and stuff before. And they were there. But we were like, I don't know how many people of these there are. Maybe they're just all here already. They're already waiting for us to launch. And we were an objectively worse product because they really like trading on elections. They really like these types of markets that we couldn't offer at all. And right when we launched, we were like, well, at least now we have something else. So at least we can iterate, talk to users and, you know, get metrics and kind of view something.

13:43But at the time, it was clear, like, we needed to figure out how to get election markets. Because on the more sports side, we weren't even thinking about that at the point because we were like, the next step is like the next type of contract we need to bring really is the election. Because it's kind of like the first and only step we can take in that kind of like expanding the type of markets direction. And then we're like, all right, let's talk to the government again and see if we can do it. The first time was already like, no, from the start. And then we sent something else. They're like, no, but this time we're going to let you have a comment period.

14:13So we spent months like rallying every single person we knew We're doing like a public campaign to get all these people to write in kind of why election markets are good. And we got a bunch of professors and academics. And you probably submitted a letter to support of those markets. And we really wanted to get this by the 2022 election and a midterm election, even though I think it was 80 to 90 percent of the comments were very positive. Maybe 85 was positive. 10 was kind of neutral and more like if you do this, you need to have safeguards and all of that. And then 5%, I think, was very negative.

14:47Even like that, it didn't matter. They said no. This is now... 2022. Fall 2022. You had been trying to get permission to list a contract on the midterm elections. Right. The 22 congressional elections. Right, exactly. And we've been doing this and we were trying to do it since the beginning of 2021. So we worked with them for like a year and nine months. And it's like what they were trying to do is like everything they would ask us to send, they would send it and it would be like six months to get back something like, oh we don't agree we need to open for common period and it was kind of like that very slow process but we still had that kind of clear if we get the midterms we're good the midterms come we obviously lose the midterms and then we're like well you lose meaning you don't get the right mission in time for yeah yeah so yeah it was really surprising because when the cftc published their decision there was like a public dissent by one of the commissioners saying that like we've departed from right the rule of law here that not everyone follows this kind of stuff but it's not common for a government regulator to have like individual members publicly saying they disagree with their own commission's decision yeah and that's kind of what was so frustrating to us is that usually most things felt somehow somewhat in our control it was like the approval was somewhat in our control because we could just you know work harder and push for more questions and do more they're like learn the law and comply with it basically and also just like there were clear like next steps that we could do but with the election the problem is that now after the 2022 election i think it was when we weren't able to list this market the first thing that like came to my head was like wow i don't know if there are things we can actually do because we were clearly legal and right on the law in your own opinion yeah and i mean and then the judge two years later agreed with us but yeah it's like in our opinion we're clearly right on the law and these markets were objectively good and then we also look at these comments and we're like we couldn't have had a stronger kind of track record like a stronger record of all the people approving and supporting this and that was kind of like the first time i interacted with politics in a way that sometimes people were just like more worried about their agendas and they're like i want to get crypto jurisdiction so i'm gonna not look at anything that might rock the boat and i'm worried my party's behind or all whatever it wasn't the type of growth that we needed or wanted for the company to be successful it just we would have been like a cool like experiment i guess like social experiment but and then yeah so after 2022 we start continuously engaging with the government and then as you said even inside the government they were dissenting with each other and disagreeing and saying that they were being political and there was all this drama around it and we try again and they open it for comment period again so we're like alright let's call everyone again let's get them to submit letters and support and all of that what happened this time is that the actual the government was actually calling people asking them to submit things against us which is crazy it's like they would actually call these like thing things or whatever that they thought were going to be very against us say what they wanted them to say they would do it and we we were like that's insane it's like if they're right on the law first of all if they actually think they're right on the law they need they don't need to do this if they think they're wrong then like why why would they do this why wouldn't they just you know apply the law and that again was kind of like a very like powerless moment for us because we were like okay i mean in some ways it's fair we are reaching out to people to help us but the government shouldn't be kind of like just taking an opposite side they should just be applying the laws should be a neutral party exactly all of that goes we get rejected again and then they ask us another time to engage with them we're like please like is there a direction and then one of the commissioners was like maybe if you do this product just for institutions it will work So we work again.

18:49We started working this in the beginning of 2021. We are already like end of 2023. And we tried the institution. It doesn't work. We were like 100 million. We were trying to get anything to just get the product out the door. Product meaning trading on election outcomes. Trading on election outcomes. And at that time, it was a very hard time because, first of all, between Tarek and I, I was always the, we need to do elections. I was like, there's no way this company is going to really work if we don't do elections. And Tarek was like, well, maybe we switch and we start doing more on like financials and crypto and we just focus on that type of market or maybe we do this.

19:24And I was like, no, we absolutely need elections. And every time that it didn't work, I was like, shit, he's going to get mad at me. That's going to be on me yet again. In the beginning, it was easier to convince him that it was just like, we should do it again because, well, we just tried once. We know this market is very big, so it's going to be hard to get. And at this point, it's been almost two years. a big amount of resources in the company has always gone into this our mind space was always like 20 on this owns this market and the only option for us was to sue the government and i was like i i remember i thought about it i was like well i'm gonna have to argue that we need to sue the government how am i gonna do that sue the government because you believed it is legal to trade on elections right and that their rejection of you was unlawful yeah so basically the only reason they would have to stop it is legalese.

20:19But there's a way that you can read the statute, the CFTC statute, and you can see kind of like what the CFTC actually has the right to block. And there are very few things. There's like contracts associated with war, terrorism, assassination. I'm thinking to myself, what is my argument? How am I going to do that? Your argument to convince Tarek? To convince Tarek, because I feel like... Your co-founder doesn't love suing government. I think it's him and like 99.99 % of the world wouldn't like it. I think there was a part of me that was worried that the time that I would talk to Tariq about this, he was going to come into a conversation with like, amazing, this proves we need to move on from elections.

20:58It's just not going to work. That is just like, we need to move on and do something else and let's just give up on the election thing. And I was like, he's going to be thinking that? So if he's thinking that, how am I going to convince him? And I remember, so Lior actually that we hired through Neo and it's like, I say that he's better than Tarek and I combine times 10. He joined us like five years, six years ago as an intern. And I remember I was walking with Lior to get tea. I told him, I was like, so I think I'm going to tell Tarek that I think we should sue the CFTC to get elections. What do you think I should tell him?

21:34And he's like, wow. Yeah, that's going to be a tough one. and I mean and at the point I was like look whatever I'm just gonna tell him what I actually think and we'll see how it goes and then I sit down with him he's like all right so what's the plan for for the quarter we need to move on like we need to move I mean we like the employees are very upset about this and and by the way I something I forgot to say right before this so when we got the no I mean 2023 we kind of didn't have another plan yeah so we had to like a lot of employees started leaving because they were like these people were delusional they just keep thinking that elections are going to come and they don't come we also fired kind of did a layoff fired some people because we're like well we're not really making money how are we gonna figure that out and it was kind of a very like bad morale moment for the company because i think not just that i think that like obviously we've always had investors like yourself like alfred that were very like supportive of us whatever we did but there was also a lot of the like small investors that we had from like our demo day round at YC that started like you know kind of like asking questions and what are you doing and we just felt like people were just weren't trusting our decision making and how we were thinking so it was very like tough time and we were kind of like okay the company's smaller it's just the people that we want here so like what are we gonna do and by the way what we did for the people that wanted to stay was actually we did the layoff and then a lot of people left and we announced it on the same day the people that were leaving in the layoff.

23:03And then we said, if anyone wants to leave the company that wasn't laid off or didn't leave, you can get the same deal. So like the three month or whatever. Severance. Severance. And we did get people that took that and left the company. But then after that, we were like, okay, this is the team and we're going to figure something out. And there's five people from that period. Rainer also from Neo, who was amazing. And yeah, and I sat down with Tarek and I was like, you're going to kill me, but I will be honest with you. I think we should sue the government. And he's like, you have to be kidding me.

23:36There's no way that your conclusion after this three, two years is that we should sue the government. And I walked him through kind of how I was thinking about it. That was like, it was a mix of like, they are not, there's not that much more damage they could do. They were doing like death by a thousand paper cuts. Everything we wanted to do, they would ask like a hundred thousand questions and all these things. And they started dictating the font that we had to use on our website. like the size of the font they're like you need this needs to be like a 14 plus which is insane like they can't do this type of thing and i told him i was like it's the holy gray of the markets we're right legally we know that they're not approving this because of political reasons the judges you know the judicial system is supposed to be independent they're going to look at this with fresh eyes and all of the lawyers say we're right so there's that's the side i remember i was like this is very clever it was very clever but i was like was very clever i want to tell him is that it could actually be a good thing because if they are in a lawsuit with us if we sue them they might actually think that they should retaliate less against us because they're worried of like the repercussions with the with the if it looks like they're being if it looks like they're being impartial exactly so i was like and maybe it would be a positive and they'll stop retaliating and kind of being so against us on everything else and it's always like well that's bullshit that's not gonna happen we know it's gonna be infinitely worse because if we actually even try to claim to the court there's retaliation that would be like infinitely more complicated there's discovery there's all these things i kept saying i was like we have to sue that's the only way we go and and i had a plan of like how we actually detach it because a lot of his argument was we can't have the company focus on this again and i was like well i agree so we're gonna hire a law firm they're gonna handle this and we're not we're only allowed spend an hour a week on this when in the meeting with with the litigators and that's it he thought i was insane but honestly i feel like he he was at that point he's also like i'm not gonna keep arguing with you and he's like but you're gonna tell the board and i and and he was like you know he's like our i'm i have to say it's very interesting that when you're thinking about this challenge it's not just the challenge of the government had rejected you it's the fear of how to tell Tariq that you're still going to push for this after two years of failure and how to convince how to bend your own co-founder to your will yeah to try one more time via a lawsuit against the federal government the funny thing about Tariq and I do is like the company really would not be close to here if it wasn't for both of us being here because I'm the over optimistic mistake like let's just do it let's try again and I just like don't get phased but in our business and in our company we need to kind of like be always looking at every single possible edge case of thing that can go wrong right and that's what Tarek is like amazing at like for example we a lot of like how we think about how the company will be in like five ten years is Tarek thinking about all the single edge cases and things that can go wrong so that we start preparing for it now that I wouldn't even think about it because I'm like things are great and everything's great so in a lot of ways I think that a lot of my work and his work is trying to convince each other and I think that's actually one of the best forcing functions we have because the debate that I have with him to convince him that we should take a massive bet and try it again or with him that it's like we should be very worried about this thing and we need to start tackling it now and we need to focus and we need to put people to to solve this big problem and I think because of that is like a lot of our thinking is how do we convince each other and kind of put ourselves in the other person's position so that we can kind of like calibrate our decision making better.

27:20I don't know if you know this, Luana, but I might have been involved in convincing Tariq as well at this time. Oh, nice, nice, nice. There was a phone call. I remember clearly we had lots of conversations during the era that you were trying to get approval the nice way, you know, talking to senators and so on. And I remember Tariq calling me saying it's failed, it's been rejected. not only that it's been rejected but we're in this place now that the cftc is micromanaging all sorts of little stuff that they shouldn't be and it's not following the law it's just like their capricious whims and you know and i asked like well what other option do we have and he said the only other option is to file a lawsuit against them and i said you know i'm not on the board we're one of your earliest investors but we don't take board seats yeah so i said you know like what do your other investors think about this and he said all of them think it's a bad idea and i said so why are you calling me and he was like because i kind of think we should do it and i said to him we should do it nice thank you well i really appreciate it partly i will say it's partly because of my own experience my second startup we had this aspect of living another day we'd have all these small failures but we like found some way to survive right there were situations where we could have gone all in but we were afraid and so instead we found some way to avoid right the potential disaster or potential you know big swings in order to survive another day that just dragged it out after seven years that company failed and if i could go back i would have gone all in and either have a success or a catastrophic failure but like right you know get it done and i said like if you guys hadn't sued the government at that time it would have just been a drawn out you know four or five years later kind of fade into obscurity i fully agree i think it's more like there's this kind of thinking in silicon valley which i kind of disagree with which is like the company that like success is if you never die but then you're optimizing for the wrong thing you're not optimizing for how big your company can be you kind of optimize it for just like staying like extending another like couple months or something and I think it's it's more important to this is what the company should be and that's what you want to be and you should just go for it and and be less afraid but I think there's this thing in Silicon Valley that it's more well if you do this the company might die it's like yeah well it might die but it's not necessarily like it's not it might also survive it might also survive and become massive and that's one of the reasons for example like why we're based in new york i feel like the whole when you mentioned the beginning that is just like people in silicon valley and it's just like you can't really say you have to always be projecting that the company's going great and all those things one of the things i hated about san francisco is like whenever you go anywhere every single person to talk to their company is doing amazingly well and i'm like statistically this is impossible There's no way everyone is at the top 10 % of startups.

30:31And I think in New York, you kind of isolate a little bit yourself from there, which also helps with decision making. Because at that point, I've always kind of like really isolated myself from this whole Silicon Valley kind of a lot of the founders. Even here in New York, I like my friends from college. And it's like it also gives you more clarity that you're like less afraid of like what are people going to think if you yet again try to figure something out and yet again fail. being free from like external expectations in a way. Obviously you have investors and all that stuff that still have that.

31:01But when I went to talk, the board, our board is Michael Saibel from YC and Alfred Lin from Sequoia at the time. And as you said, they were very against it. They were like anti-pattern. We've never seen a company that's this - You don't do lawsuits, period, let alone against the federal government. Your own regulator, exactly. And we were making like no revenue. like really it's like very little revenue it was funny because we did the whole board meeting and update and then Tarek's like Luana wants to talk to you and I'm always the quiet one in the board meetings I'm like let's just Tarek speak and I'm like okay so um we are gonna sue the government and do this and I kind of made it more as a decision because at that point Tarek and I were on the same page and um yeah and I mean at the end they were like we are against this but if you guys want to do it.

31:53Sure. It's like an anti-pattern. But most times when you said something was very unlikely and you really wanted to do it, it worked out. The same with getting regulated and all of that. So we sued them. And it was... And Tarek was right and I was wrong. We were retaliated against that lot. My little trick there that I thought that maybe they would retaliate less wasn't the case. Fonts had to be even more... The fonts were like... Every single... Even the font family had to be a certain one. and we sued them and it was they delayed our clearinghouse application which you probably remember for like months and months and months like by law it needs to be six months they took two years at this point everything was awful but we went in october october 6 which was like insane it was like you remember we got the news we called you you came to the office with a bottle of champagne.

32:45We were all drinking champagne. It was amazing. Everyone was crying. I was in your office that day by coincidence. By coincidence. Yeah, that's true. And I remember looking around and everyone was like reloading on their browser like, is the news in yet? Nope. No verdict. It was the most insane moment. I remember one of the first times in my life that I actually felt, when people say weight off their shoulders, I never actually understood what that meant. Up until that moment that I remember I was walking home and I was passing by this Whole Foods here in Bowery. I remember I was just like, I just feel lighter.

33:16I just feel like there's like, I'm actually light on my back. But the problem was next day, the government tried to get an appeal in the state pending appeal, which would again lose us the 2020, like the entire election cycle by delaying the decision a year to the appeals court looked at it. And then we had, then we couldn't launch. We had a hearing, all of those things. And finally, in October 6, we actually get it for real we get the final the final okay from the appeals court saying that they weren't going to give the government a stay and we were going to win it and we we were going to get the election for for that year at least and then it was like amazing it was like the best month ever I remember I stopped I usually try to work out in the morning I think it's like something wired in my brain with all the ballet I did that if I don't do something like physical I just can't work but that month it was just like I was not working out I was not eating we were just like all in the office trying to like build everything for for a month and it was like kind of like a vindication moment but also like we felt so much responsibility over the whole space because it's now it's real we legalize this whole thing and after 100 years to build the actual business the actual business and we're like and then obviously there was enough thinking in our heads it's like we're going to sprint everything that we can to for this election night and then we need to figure out how to retain them and what actual markets we're going to do to continue to go forward but the lawsuit actually cemented this kind of view, legal view, that the CFTC can't just decide whatever they want, right?

34:45They need to follow the law and they need to own... Congress was very clear with what they can and cannot stop. And I think that lawsuit kind of like open grounds for us to have now, we went from 80 contracts right before the election at a time, now we have over 5, 10, like I think it's like 7 ,000 live in the platform right now. And it's just like that lawsuit was actually ended up having a lot of other positive externalities on top of the... It changed the power dynamic. It changed the power dynamic. It kind of put us in the position where we should be, according to Congress, which is a self-regulating entity that we can do things and the government's there to watch it versus not, versus like stop everything.

35:21Exactly. Change the fonts. So what was the hardest period or was there a moment where you felt particularly lonely or afraid of what's going to happen during those couple of dark years? The worst part actually was Right before we actually sued. Because when I had, Tarek and I were like, okay, we're going to sue. We told the board, they were against, but we did it. We decided to do it. Then we like picked the lawyers and all those things. But then there was like the actual, like, we're going to file it. And there was a couple of days that Tarek started like going back and he's like, I don't know if we should actually do this.

35:59The expected value was that it wasn't going to work and we were going to get all the bad things with it. I was like, and that is unquestionably going to be on me. I'm the one saying like we need to do this I remember how this we were talking whatever and I was like well if we if you if you pull this out now and if we don't do it I'm gonna leave the company and then the cop is gonna die and then he's like no we're not you're not gonna leave and it was a it was this very complicated thing but I thought that the only way we were actually gonna see it because it's always like it's always easier to have a plan when you actually have to do it in the last like 10 minutes that's where the hardest thing is it's like you have to do it I remember I thought to myself it's like I'm gonna have to bluff I'm gonna say I'm gonna have to say that that this needs to happen at that time.

36:38And I said it and he was like, all right, so we'll do it. Wait, what do you mean by bluff? Because I wasn't going to leave the company. So you were bluffing to your co-founder Tarek that if we don't follow through with this, you would resign. I basically said like, look, everything has been in motion for now months at this point that we have to do this. And it's insane for us to just change our minds like this. And I think this is the most important thing that we're going to do. and it doesn't make sense for me to be here if we're not doing things like this. He was a little bit like, that's insane.

37:10You don't actually mean it. And I was like, no, I do. And then he was like, all right. And then we ended up going and doing it. But in my head, I was like, I'm obviously not going to leave the company for any reason ever. But I was like, well, if it doesn't go well, then it's 100 % on me. And then that kind of like thinking to myself, should I just be like, never mind? and not send the brief or whatever the name is. And that was a very kind of scary thing because I would talk to my fiance and be like, I don't know and whatever. And he's a very positive guy too. He's like, no, it's going to be fine.

37:48And worst case, Tark's going to forget it. Don't worry. And I'm like, I don't know. I don't know if he will. You guys had already raised like$100 million of investor money. You weren't making a lot of money, but you had a lot at stake. We had a lot of stake. And if this lawsuit had been lost, or if you had left the company, you know, all these investors would have lost their... I think Tariq would have figured something out. But I'm joking, by the way. I would not have actually left. Tariq, like, saying that I would have, I wouldn't have actually left. It was more like, sometimes when Tariq is very, very worried about something, he needs, like, a very strong show of hand on the other side of, like, this will happen.

38:24And then he kind of calms down a little. So it was kind of like a little bit of strategy, I guess, on my end there. but that was a very scary moment because i was just like this is the most important thing in my life the company is the most important thing in my life and and and you're betting the company and i'm betting the company and it's all on me yeah but now now the company's doing amazingly well and we're very everyone's very happy and excited and all of that do you have any regrets any regrets that's a good question i don't think so but that's the hard thing with these things is that like everything is about probabilities right so even if we were right on the law there's always like maybe 80 % chance we win, there's still a 20 % chance we lose.

39:03So it's just very hard to like know if we're here because we made the right decisions or we were lucky or how to actually think about that. So I think it's like everything worked out very well, but it could have very easily not worked out very well if just like, you know, the coin flipped in another direction. But I don't think any regrets with the company, no. If you could go back and give a message to the, you know luana of i guess three or three years ago or so when you were just beginning that almost four years ago you were beginning the election effort right would you say just keep keep going just do it i think it's very easy to kind of like i have a lot of smarter friends than i am by by a large margin and i think when people are very very smart they become overly obsessed with probabilities and expected value and all those things and i think they're like You can psych yourself out.

39:52You can psych yourself out of doing anything by it. Because first of all, you never start a company because the expected value is awful. Even like changing jobs. Like why would you do that if you're like have a very clear career for the next 20 years? And I think that like just going for it, taking the risk, kind of believing that, you know, somehow things would work out. I think it's very important. I think. But yeah, I think just doing it, I think is an important point. If you have a culture that everyone is only thinking about, you know, the math of like, is it going to work or not at every point in time, it becomes a super negative culture that overreacts to every new information you have.

40:31So it's just important to kind of really have a lot of optimistic people and they want to build things in the company. I doubt that Alexander the Great would ever have conquered Europe if he was doing the expected value the whole way. That's fair. Well, thank you so much, Luana. Thank you for having me. It's wonderful having this conversation with you. And thank you for all the, honestly, like I tell you this and I tell you so many times that NIO has been, is by far my favorite investor. You guys always support us and back us and everything. Well, you're an inspiration to me. I wish I could be more like you in my decisions.

41:06And certainly an inspiration to lots and lots of founders. Thank you so much. Before you go, if you're enjoying Confession, please subscribe for more. and leave me feedback, like what's a question that you wish I'd asked or who do you wish I'd interview next? We've got a lot more ahead, including conversations with Alfred Lin, Shuo Wang, Ali Gozi, Jeff Lawson, Rose Wang, and more. I'm Ali Pertove. Thanks for joining me and see you next confession.