Kalshi
Based on Wikipedia: Kalshi
In October 2024, something unprecedented happened in American finance: a federal appeals court ruled that betting on elections is not, in fact, gambling. The decision cleared the way for Kalshi, a prediction market platform, to let ordinary Americans wager real money on which party would control Congress. Within hours of the ruling, the bets were live.
This wasn't some theoretical victory. Kalshi had spent years in a bare-knuckle legal fight with the Commodity Futures Trading Commission—the federal agency that oversees derivatives markets—arguing that predicting election outcomes was a legitimate financial activity, not a trip to the casino. The CFTC disagreed, warning that allowing election contracts could "ultimately commoditize and degrade the integrity" of the electoral process. They lost.
The story of Kalshi is really a story about what counts as gambling, who gets to decide, and whether there's any meaningful difference between betting on the S&P 500 and betting on who wins the Senate.
From "Kownig" to "Everything"
Kalshi was founded in 2018 by Tarek Mansour and Luana Lopes Lara, two financial analysts who saw an opportunity in prediction markets. Originally they called their project "Kownig," but that didn't survive first contact with the marketing department. The name they settled on—Kalshi—translates to "everything" in Arabic, which captures the ambition: a platform where you could bet on anything.
The founders spent two years building the regulatory groundwork before ever launching publicly. In November 2020, they secured the crucial license from the Commodity Futures Trading Commission, which registered Kalshi as a "designated contract market." This is the same regulatory category that governs major financial exchanges. The Chicago Mercantile Exchange is a designated contract market. So is the New York Mercantile Exchange. And now, so was this startup from two former analysts.
The public launch came in July 2021. At first, Kalshi focused on relatively uncontroversial predictions: economic indicators, cultural events, the outcomes of award shows. Would inflation exceed a certain threshold? Would a particular movie win the Oscar? These were the safe bets that wouldn't attract regulatory scrutiny.
But Kalshi always had its eyes on a bigger prize.
The Difference Between Trading and Gambling
Here's the core tension that defines Kalshi's existence: What exactly separates a financial derivative from a gambling contract?
Consider a corn futures contract. A farmer sells contracts promising to deliver corn at a set price in three months. A cereal company buys those contracts to lock in their ingredient costs. This is hedging—using financial instruments to manage real business risks. Nobody calls it gambling, even though speculators who have no intention of ever touching actual corn also trade these contracts.
Now consider an election contract. A business that depends on government contracts might genuinely want to hedge against a change in administration. A hedge fund with positions in healthcare stocks might want protection against the risk of new regulations. Is this any different from the corn futures?
The CFTC said yes. For years, they maintained that election contracts were fundamentally different—not because of how they worked mechanically, but because of what they represented. Betting on elections, in the agency's view, was too close to gambling and too likely to undermine democratic institutions.
Kalshi disagreed vehemently. They argued that their contracts served the public interest by providing accurate forecasting data and enabling individuals to hedge against political uncertainty. More practically, they pointed out that unregulated prediction markets already existed. Polymarket, operating offshore, was handling over a billion dollars in presidential race wagers. Why should American bettors be forced into unregulated territory?
The Legal War
The fight between Kalshi and the CFTC became one of the more unusual regulatory battles in recent memory.
In August 2022, the CFTC announced it would review Kalshi's political event contracts. Commissioner Caroline Pham, one of the agency's top Republican officials, immediately dissented. Her argument was blunt: the underlying activity—predicting which party would control Congress—wasn't prohibited. And the agency had never established a clear test for what constitutes the "public interest" anyway.
By October 2022, commission staff recommended rejecting Kalshi's proposal for higher-stakes futures contracts on congressional control. The CFTC delayed and delayed.
In 2023, Kalshi went bigger. They proposed allowing hedge funds and major Wall Street firms to wager up to $100 million on which party would control Congress. Individual users could bet up to $250,000. Firms that could demonstrate a genuine hedging need could go even higher. The CFTC's response was to request a second round of public comment—effectively more delay.
In September 2023, the CFTC formally rejected the proposal, declaring it "contrary to the public interest." Two months later, Kalshi sued, alleging the agency had exceeded its authority.
The case wound through the courts. On September 12, 2024, District Court Judge Jia Cobb ruled for Kalshi, stating that the CFTC had overreached. The agency's contracts didn't constitute illegal activity or gaming, she wrote, because they pertained to elections.
The CFTC immediately appealed and requested an emergency stay, arguing the contracts could undermine election integrity. Kalshi launched its election wagers anyway—just hours before the appellate ruling came down.
On October 2, 2024, the appeals court denied the CFTC's request. The agency, the court found, had failed to demonstrate any potential harm to the public interest. Kalshi could proceed.
What You Can Bet On
Kalshi's contracts work as simple yes-or-no propositions. Will a particular event happen? If you think yes, you buy the contract. If the event occurs, you receive a dollar per contract. If it doesn't, you lose your stake. The price of a contract—ranging from a penny to 99 cents—reflects the market's collective assessment of the probability.
The range of available predictions is vast. Economic indicators: Will inflation exceed 3% next quarter? Will the Federal Reserve cut rates? Cultural events: Will a particular film win the Oscar? Will a TV show get renewed? Political outcomes: Which party will control the House? Will a Supreme Court justice retire?
During the 2024 presidential race, Kalshi hosted bets on the popular vote, Electoral College margins, swing state results, and individual Senate contests. The total volume was modest by financial market standards—around $3 million—but it established the principle.
More recently, in July 2025, Kalshi began offering prediction markets on tech company IPOs—the probability that Databricks, OpenAI, Stripe, or others would go public by year's end. These contracts reflected investor sentiment directly: at the time, the market gave Klarna a 72% chance of IPO but only 5% odds for OpenAI.
But Here's the Thing
Despite all the drama over election betting, more than 90% of Kalshi's actual activity is sports gambling.
This hasn't escaped the attention of regulators outside the federal government. In September 2025, Massachusetts Attorney General Andrea Campbell filed a lawsuit accusing Kalshi of "promoting and accepting sports wagers" without following state gambling laws. Sports betting is banned in Massachusetts, and Campbell argued Kalshi was operating an unlicensed gambling operation.
Two months later, a proposed class action lawsuit emerged in New York. The allegations were even more serious: that Kalshi had "engaged in illegal deceptive activity" by operating unlicensed sports betting and, perhaps more damning, by leading users to unknowingly bet against Kalshi itself or its partners rather than against other users.
This last claim strikes at something fundamental about how Kalshi works. In theory, a prediction market matches buyers and sellers—people who disagree about an outcome put their money where their mouths are. But Kalshi has a subsidiary called Kalshi Trading that actively trades on the platform and provides liquidity. When the house is also a player, the dynamics change.
Kalshi co-founder Luana Lopes Lara called the lawsuit "baseless."
The Economics of Prediction
Let's talk about how Kalshi actually makes money.
As of October 2025, the fee structure works like this: Kalshi takes 7% of your potential upside, weighted by the market's assessment of how likely that upside is. The formula is 7% × (number of contracts) × (1 − price) × price. In plain English, this means the fee is 3.5% of the average expected deviation from the current price.
Why such a complex formula? Because the economics of prediction markets are tricky. You want enough activity to generate meaningful predictions, but every dollar taken in fees reduces the incentive to trade. The formula attempts to balance revenue against liquidity.
Liquidity is actually Kalshi's persistent challenge. Orders sit on the books until someone takes the other side, which can mean lower volumes and wider spreads than traditional financial markets. The company addressed this partly by bringing in Susquehanna International Group as an institutional market maker in April 2024—the first time a major trading firm committed to providing continuous liquidity on the platform.
In March 2025, Robinhood launched a betting markets hub powered by Kalshi's infrastructure, bringing prediction markets to the brokerage's massive user base. The goal is accessibility: turning what was once an exotic financial instrument into something as familiar as buying stock.
The Trump Connection
In January 2025, Donald Trump Jr. announced he would join Kalshi as a strategic adviser.
This is worth pausing on. Kalshi had spent years in regulatory battles with federal agencies, positioning itself as a neutral platform for market-based predictions. The addition of the president's son to the team changed the optics considerably. Whether this represented a savvy business move or a troubling politicization of a financial platform depends very much on who you ask.
By June 2025, Kalshi was valued at $2 billion. Later that year, following a $300 million Series D funding round, the valuation jumped to $5 billion. The company announced worldwide expansion plans.
Do Prediction Markets Actually Work?
Here's the fundamental question that Kalshi's existence raises: Do prediction markets actually aggregate information efficiently?
The theoretical case is appealing. Markets, the argument goes, are excellent information processors. When people put real money on their beliefs, they have incentives to be right. The resulting prices should reflect the best available collective judgment about what will happen.
In December 2025, CNN and CNBC signed deals to become official prediction markets partners with Kalshi. The news outlets said the gambling provided useful indicators of public sentiment in real time. When a major news event breaks, you can watch how the markets move. It's polling with dollar signs.
But scholars have challenged whether Kalshi actually delivers on this promise. The academic case against prediction markets isn't that they're useless—it's that they may not be much better than simpler methods like polling averages or expert surveys, while introducing new problems like potential manipulation and conflicts of interest.
The zero-sum nature of prediction markets also matters. Unlike stock markets, where all investors can theoretically profit if the underlying companies grow, prediction markets are pure bets. For every winner, there's an equal and opposite loser. This creates different incentive structures and potentially different dynamics.
The Integrity Question
Critics of election betting contracts argue something more fundamental: that turning elections into tradeable commodities could threaten electoral integrity itself.
Better Markets, a consumer advocacy group based in Washington D.C., has been vocal about these concerns. They fear that election trading could turn democratic contests into vehicles for day trading, potentially eroding public trust in results. If you can profit from a particular outcome, do you have incentives to influence it?
In August 2023, six senators—Jeff Merkley, Sheldon Whitehouse, Ed Markey, Elizabeth Warren, Chris Van Hollen, and Dianne Feinstein—urged the CFTC to reject Kalshi's proposal on these grounds. After the October 2024 ruling allowed election contracts, Better Markets' Stephen Hall called it "a sad and ominous day for election integrity."
The counterargument is practical: people already bet on elections, just through unregulated channels. Polymarket, operating outside U.S. jurisdiction, has handled enormous volumes. At least Kalshi is regulated. At least there's some oversight.
Whether this is a genuine distinction or just a rationalization depends on your view of regulated gambling more generally. Is a regulated casino meaningfully different from an illegal one? The games are the same. The odds are the same. Only the paperwork differs.
The Campus Controversy
In 2025, Kalshi attempted something that captures both the company's ambitions and its tone-deafness: a "student ambassadors" program encouraging college students to promote Kalshi on their campuses. The stated goal was to bring "the next 100M users to prediction markets."
The backlash was swift. Critics saw it as a gambling company recruiting young people to spread betting culture on college campuses. The social media posts and webpage promoting the program were quickly taken down.
This incident illustrates a tension in Kalshi's positioning. The company wants to be seen as a sophisticated financial platform, a tool for risk management and information aggregation. But its actual user base skews toward sports betting, and its marketing occasionally reveals priorities more consistent with a gambling company than a financial exchange.
Where This Goes
The story of Kalshi is still unfolding. The lawsuits in Massachusetts and New York haven't been resolved. The regulatory framework for prediction markets remains contested. The question of whether election contracts will ultimately help or harm democratic institutions won't be answered for years.
But Kalshi has already achieved something significant: it established the legal precedent that prediction markets on elections can exist within the regulated financial system. Other firms will follow. The prediction market space will grow.
Whether that growth is good for society depends on questions that markets themselves cannot answer. What should be tradeable? When does hedging become gambling? How do we balance innovation against integrity?
Kalshi's founders chose a name meaning "everything." They may be more right than they intended. Prediction markets, once they exist, tend to expand. If you can bet on Congress, why not state legislatures? If you can bet on elections, why not ballot measures? If you can bet on anything, where does it stop?
The answer, it turns out, is wherever the regulators draw the line. And as Kalshi has proven, those lines are more negotiable than anyone thought.