# Kalshi

Kalshi Inc. is an American financial exchange and prediction market based in Lower Manhattan, New York City, offering event contracts. Launched in July 2021, it offers a platform where both retail and institutional traders can place trades on various future events, including economic indicators, weather patterns, awards, as well as political and legislative outcomes. The platform enables users to trade on yes-or-no questions, with contracts priced based on the market's estimated probability of an event occurring. The exchange provides contracts that pay out $1 for correct selections. In October 2024, Kalshi received approval to reintroduce election markets, allowing users to wager on political outcomes, such as congressional control and presidential elections.

## History

Founded in 2018, Kalshi was established by Tarek Mansour and Luana Lopes Lara. The idea for the company emerged during their tenure as financial analysts, where they identified challenges faced by investors attempting to hedge their investments amidst uncertainties such as the Brexit referendum. The founders note that the absence of a direct safeguard against unfavorable outcomes was what prompted them to envision a platform that would allow investors to engage in wagers on future events, providing a means to hedge uncertainties and capitalize on insights.
After attempting for 18 months, Mansour and Lara obtained a federal license from the Commodities Futures Trading Commission (CFTC) on November 3, 2020, registering as a designated contract market. Kalshi's case was strengthened by the presence of several prediction markets that operated without seeking regulatory approval, such as Polymarket and Augur. The name "Kalshi" signifies "everything" in Arabic. Kalshi's trading platform launched in July 2021.
In January 2025, Donald Trump Jr. announced that he would be joining Kalshi as a strategic adviser.

## Trading services

As a trading exchange, Kalshi allows both retail and institutional traders to place trades on various future events, spanning topics like weather and climate change, the Oscars, tax changes, inflation, music festival cancellations, album sales and digital streaming milestones, Covid vaccine uptake, recession likelihood, and the potential for the United States to default on its debt by the year's end. The platform also covers markets related to presidential approval rating, significant legislation passing Congress, and U.S. Supreme Court cases.
Trading is based on opinions about specific yes-or-no questions. Users pick a side and price (1 cent to 99 cents), and when the opposing yes and no sides total $1 per contract, a trade occurs. Whichever side turns out to be correct keeps the full $1. The contract price reflects the market's estimated probability of an event happening. The exchange provides contracts that pay out $1 for correct selections. Traders are not allowed to use margin to take positions on the platform. As of April 2023, the bet limit allowed on the platform is $25,000, although certain contracts allow a maximum wager of $7 million. Users are prohibited from wagering more than the amount they have deposited. Kalshi charges transaction fees per trade but does not rely on traders' losses for its revenue.

### Election contracts

On October 2, 2024, a federal appeals court in Washington D.C. allowed Kalshi to revive the first fully regulated election markets in the U.S. by lifting a temporary freeze on trading. The three-judge panel rejected Wall Street regulators' emergency request to halt the markets during an appeal process. Judge Patricia Millett highlighted the CFTC's failure to prove that these contracts threatened election integrity. described the ruling as a "major win for the burgeoning political betting complex in the U.S." It enabled Kalshi to offer trades on which party would control Congress, with plans to expand into other political contests, including the presidential election. Kalshi CEO Tarek Mansour described it as a "new era for financial markets." Fully regulated by the CFTC, Kalshi allows wagers of up to $100 million on election markets, unlike offshore markets and academic ventures, which previously restricted American traders to small wagers of a few hundred dollars.
On October 3, Kalshi introduced a contract on the presidential election winner, providing a mechanism for hedging potential losses. Following the favorable ruling, the platform listed over two dozen new options related to political outcomes, including the presidential race, popular vote, Electoral College margins, and individual Senate contests. By October 9, more than $3 million had been traded on Kalshi's site, primarily on contracts concerning whether Vice President Kamala Harris or former President Donald Trump would win the election. Additional options covered outcomes of individual Senate races, the tipping-point state in the presidential election, swing state results, and the margin of victory.
Mansour has emphasized that these contracts serve as a tool for investors to hedge against financial impacts from various political outcomes, rather than trying to influence elections, and that they capture risks such as the potential effects of presidential tariffs on financial situations. He has also noted that Kalshi's political outcome contracts offer a more direct hedging approach compared to traditional investment bank "bundles" that hedge against the election of specific candidates and has highlighted a diverse customer base that includes both risk hedgers and speculators.

### Comparisons with PredictIt

Kalshi has been described as a "new competitor for PredictIt", offering a similar experience but with regulatory approval as a traditional futures market. PredictIt operates as a nonprofit research project, restricting the number of traders to 5,000 per event and capping trade sizes at $850 per person per question. In contrast, Kalshi operates as a designated contract market and allows users to invest up to $25,000 on a single contract (and up to $7 million on certain contracts).

## Regulatory history

Although Kalshi lacks formal standing with the Securities and Exchange Commission (SEC), its current offerings are limited enough that it is expected to operate under the regulations of the Commodity Futures Trading Commission (CFTC) alone. Matthew Kluchenek, a partner at Mayer Brown, stated that the SEC may intervene if the contract market is perceived to have an impact on securities prices in other markets. Kalshi has engaged in talks with brokerage firms to include its platform in their listings and with other investment firms to act as market makers on the exchange. Orders on Kalshi remain on the books until a second trader is willing to take the opposing side of the contract, potentially resulting in lower volumes and liquidity. The company has an affiliate called Kalshi Trading, which trades and provides liquidity for many of its contracts.
Kalshi faces challenges in dealing with questions that have continuous answers and providing clear results to a large user base. The company aims to attract larger investors who may leverage it for hedging purposes and capitalize on opportunities presented by less-informed participants. However, broader adoption faces hurdles, such as the zero-sum nature of prediction markets and the need for increased liquidity to entice larger investors.

### Election markets proposals

Kalshi has faced regulatory challenges in its efforts to create markets regarding political control of Congress. The company has sought approval from the CFTC to introduce election contracts resembling options or futures. These contracts are "cash-settled, binary contracts" based on questions such as which political party will control a specific chamber of Congress.

#### 2022

Kalshi's application faced delays as the CFTC closely examined whether Kalshi's contracts could effectively serve as hedges. Commissioner Caroline Pham, one of the CFTC's top two Republican officials, dissented on the decision to review Kalshi's political event contracts in August 2022. She argued that the underlying activity of the contracts, which involves political control, is not prohibited and that the agency had not established a clear test for what goes against the public interest, eliminating the need for a public interest test. In October 2022, the commission staff recommended against Kalshi's proposal to introduce higher-stakes futures contracts related to the control of Congress resulting from the midterm elections, and the CFTC delayed a decision on Kalshi's application.

#### 2023

In 2023, a monthslong legal dispute began between the Kalshi and the CFTC over political event contracts. The company maintains that its contracts serve the public interest by offering accurate election forecasting data and enabling individuals to hedge against various outcomes. In contrast, the CFTC contends that these contracts constitute illegal gambling and that it lacks the resources to oversee them effectively. Chairman Rostin Behnam has cautioned that allowing election contracts could "ultimately commoditize and degrade the integrity" of the electoral process.
In June 2023, Kalshi proposed a new plan that would allow hedge funds and other major Wall Street firms to wager up to $100 million on which US political party would control Congress. Under the plan, all users could wager up to $250,000, but large trading firms could trade $50 million on the outcome of the next congressional elections, with those demonstrating an economic hedging need allowed to bet even more. The CTFC opted to request a second round of public comment on Kalshi's plans. The two Republican commissioners, who were in the minority on the CFTC's board, dissented against the prolonged process, arguing that the question of whether Kalshi's products constitute prohibited "gaming" should be addressed directly through a clear rule.
In September 2023, the CFTC rejected Kalshi's proposal to offer derivatives contracts on congressional control, which it deemed contrary to the public interest, citing concerns that the planned contracts would violate derivatives market regulations. The decision prohibited the listing, clearing, or trading of Kalshi's political event contracts. In November, Kalshi filed a lawsuit against the CFTC over their denial of the company's bid, alleging that it had exceeded its authority in blocking their proposal.

#### 2024

On September 12, 2024, DC District Court Judge Jia Cobb rejected the CFTC's attempt to delay the company's congressional control contracts, ruling in favor of Kalshi. Cobb stated that the agency had exceeded its authority by blocking these contracts, emphasizing that Kalshi's offerings do not constitute illegal activity or gaming, as they pertain to elections. The CFTC quickly appealed the judge's decision to the DC Circuit Court of Appeals, requesting an emergency stay. They argued that the contracts were illegal and could potentially undermine election integrity. Kalshi launched its election wagers just hours before the appellate ruling. The company warned that pausing Cobb's ruling would severely impact its operations, describing the CFTC's request as a tactic to stall their progress, while also noting the rise of the unregulated prediction market Polymarket following a recent presidential debate.
On October 2, 2024, a U.S. federal appeals court denied the CFTC's request and upheld the lower court's decision, allowing Kalshi to offer political event contracts. The D.C. Circuit Court determined that the CFTC failed to demonstrate any potential harm to the public interest from Kalshi's event contracts. This ruling enabled Kalshi to offer trading ahead of the November 5 elections and may set a precedent for other firms looking to enter the prediction market space. Judge Patricia Millett indicated that the CFTC could renew its request for a stay if new evidence emerges during the appeal process. Politico described the ruling as a "major win for the burgeoning political betting complex in the U.S.," enabling Kalshi to offer trades on which party would control Congress, with plans to expand into other political contests, including the presidential election. CEO Tarek Mansour referred to it as a "new era for financial markets."
Kalshi relaunched its congressional control contracts on the same day, allowing Americans to wager on which party will control the House and Senate in 2025. These contracts were initially introduced on September 12 after the U.S. District Court judge rejected the CFTC's attempt to block them, but the CFTC's rapid appeal temporarily halted the offerings.

#### Support and opposition for Kalshi's election market proposals

Kalshi contends that bringing political trading to their platform would improve oversight and accessibility, transforming a historically underground practice into a legitimate option for everyday Americans. This move aims to help individuals navigate election-related risks, such as the effects of Congress' composition on tax policy, by providing tools for financial hedging. They have argued that political event contracts not only serve the public interest by delivering accurate forecasting data but also empower users to manage financial uncertainties tied to evolving political landscapes, and have highlighted the significant activity in unregulated markets like Polymarket, which has seen over $1 billion in wagers on presidential races.
Critics of election betting contracts argue that the contracts could threaten election integrity. Consumer advocacy groups, such as D.C.-based Better Markets, express fears that such trading could turn elections into a new vehicle for day trading and further erode public trust in election results. In August 2023, in a letter to the CTFC, senators Jeff Merkley, Sheldon Whitehouse, Ed Markey, Elizabeth Warren, Chris Van Hollen and Dianne Feinstein urged the CFTC to reject Kalshi's proposal, raising concerns over electoral integrity. Stephen Hall of Better Markets labeled the ruling "a sad and ominous day for election integrity" in the U.S. following the October 2024 ruling allowing Kalshi to list contracts on election outcomes.
Proponents see election contracts as valuable financial tools. Kalshi's proposals have been backed by prominent figures in the financial industry, including Vivek Ranadivé, co-owner of the Sacramento Kings, Jason Furman, a former White House economist, Intercontinental Exchange, which operates the New York Stock Exchange, as well as several former CFTC officials. Some market participants, including Angelo Lisboa, managing director of JPMorgan's private wealth management division, have expressed their support for Kalshi's proposals, recognizing election risk as a significant concern for their clients and noting the potential impact of bringing such capabilities to a broader population that lacks access to large banks' resources.