Kalshi is a CFTC-regulated prediction market and financial exchange where users trade event contracts — yes/no derivatives that settle to $1 based on real-world outcomes. Founded in 2018 by Tarek Mansour and Luana Lopes Lara and launched to the public in 2021, Kalshi is widely described as the first fully regulated U.S. venue dedicated to event-based contracts, positioning itself at the intersection of derivatives markets and real-time information about politics, macroeconomics, and current events.
Overview
Kalshi operates as a designated contract market (DCM), the same regulatory category used for major futures exchanges, but focuses specifically on contracts tied to discrete real-world outcomes. Traders buy and sell “yes” or “no” contracts on questions such as whether a particular inflation print will exceed a threshold, if a central bank will change interest rates, or which party will control a chamber of Congress after an election. Contract prices between $0 and $1 are intended to reflect the market’s aggregated probability of each outcome.
The platform pitches itself as a tool for both speculation and hedging, allowing individuals and institutions to express views on events that affect portfolios, businesses, or personal finances. Kalshi’s markets and probabilities are increasingly referenced in coverage of macro data releases and political events, alongside more traditional indicators like polls and analyst forecasts.
History and Background
Kalshi was founded after its creators observed that investors lacked direct instruments to hedge or trade around key macro and political events, despite those events having material impacts on markets. After an extended review process, the Commodity Futures Trading Commission (CFTC) granted Kalshi approval as a designated contract market in late 2020. This authorization allowed the company to operate as a federally regulated exchange for event contracts, a milestone that differentiated it from earlier prediction markets that had run outside the traditional derivatives framework.
The platform opened to the public in 2021, initially focusing on macroeconomic data and policy-related markets. Over subsequent years, Kalshi expanded its catalog to thousands of contracts across economics, politics, weather, and other real-world categories, drawing both retail users and professional traders. By the mid-2020s, reports indicated that Kalshi had scaled to billions of dollars in annual trading volume and had raised several hundred million dollars in venture and growth capital at multibillion-dollar valuations.
Event Contracts and Core Products
Kalshi’s core product is the event contract, a binary derivative that settles to $1 if an outcome occurs and $0 if it does not. Each market is framed as a clearly worded yes/no question with a defined resolution source—for example, a specific government data release, official election results, or a recognized index reading.
- Macroeconomic markets: Contracts on inflation data, interest-rate decisions, GDP prints, unemployment figures, and other economic indicators.
- Policy and politics: Markets around election outcomes, control of legislative bodies, and selected policy milestones.
- Market and sector events: Questions related to index levels, volatility ranges, or sector-specific developments that can affect portfolios.
- Other real-world events: Weather, benchmark-level outcomes, and special one-off events that meet regulatory requirements.
Prices move as traders buy and sell positions, with the difference between entry and settlement values representing profit or loss. Kalshi earns revenue from transaction fees and exchange services rather than from users’ net trading losses.
Technology and Market Design
Unlike fully decentralized prediction markets, Kalshi operates as a centralized, regulated exchange with an order-book model. Users connect via web and mobile interfaces or through APIs geared toward high-frequency and institutional participants. The platform’s matching engine and risk systems are designed to resemble those of traditional derivatives exchanges, providing low-latency order execution and real-time position management.
Kalshi uses standard account-based onboarding, including identity verification and know-your-customer checks, and enforces trading rules that prohibit insider trading on certain event types, wash trading, spoofing, and other forms of market abuse. Position limits and maximum contract sizes are set at the exchange level to help manage risk and align with regulatory expectations.
Regulation and Legal Context
Kalshi’s defining characteristic is its status as a CFTC-regulated designated contract market. This classification requires the exchange to comply with extensive rules around market integrity, surveillance, disclosure, and customer protections. It also gives Kalshi the ability to list and self-certify new event contracts, subject to CFTC review and the broader requirements of the Commodity Exchange Act.
The platform has been at the center of high-profile regulatory debates, especially around political event contracts. Legal challenges and court rulings have examined whether certain election-related markets qualify as permissible financial derivatives or as prohibited gaming contracts. At the same time, Kalshi has faced friction with some state-level regulators, who view event markets through the lens of gambling law, underscoring the unresolved tension between federal derivatives regulation and state jurisdiction over wagering products.
Use Cases and Market Position
Kalshi is used by a mix of retail traders looking to express views on news events and more sophisticated participants seeking hedges or alternative data signals. Portfolio managers might use event contracts to hedge exposure to rate decisions or inflation surprises, while politically engaged traders may use them to take positions on election outcomes. For researchers and media outlets, Kalshi’s prices offer a continuously updated crowd-based probability estimate that can complement polling and expert analysis.
Within the broader prediction-market landscape tracked by CryptoSlate, Kalshi is a key example of a regulated, centralized approach, contrasting with decentralized platforms that emphasize permissionless access and smart-contract-based settlement. Its focus on formal regulatory approval, institutional partnerships, and integration into mainstream financial and media channels positions it as a leading player in regulated event-based trading.
Risks and Considerations
Trading on Kalshi involves financial risk. Event contracts can expire worthless, and traders may lose their entire stake on a given position. Liquidity varies across markets, which can contribute to slippage and volatility around important data releases or news events. As with all derivatives, participants need to understand contract specifications, position limits, and fee structures before trading.
There are also regulatory and structural risks. Changes in CFTC policy, court decisions, or state-level actions could affect which markets Kalshi is allowed to offer, how it onboards users, or how it operates across different jurisdictions. While federal oversight and exchange registration are intended to provide safeguards and transparency, they do not eliminate market, legal, or operational risk. For observers of crypto-adjacent financial innovation, Kalshi provides an illustrative case of how event-based trading is moving into regulated capital markets while navigating complex legal and policy terrain.
