35 Facts About Kalshi

Kalshi Inc. is a groundbreaking financial exchange and prediction market that has changed how people engage with financial markets. Founded in 2018, Kalshi allows traders to speculate on future events through event contracts. Here are 35 key facts about Kalshi that highlight its journey, operations, and impact.

The Birth of Kalshi

Kalshi's story begins with two visionary founders who saw an opportunity to innovate in the financial sector.

1. Founding: Kalshi was established in 2018 by Tarek Mansour and Luana Lopes Lara, both former financial analysts.
2. Name Origin: The name "Kalshi" means "everything" in Arabic, reflecting the platform's broad approach to event-based trading.

Regulatory Milestones

Securing regulatory approval was a significant achievement for Kalshi, setting it apart from many other prediction markets.

3. Regulatory Approval: After 18 months of effort, Kalshi obtained a federal license from the Commodity Futures Trading Commission (CFTC) on November 3, 2020.
4. Regulatory Framework: Kalshi operates under the CFTC's regulatory framework, ensuring adherence to strict guidelines to prevent illegal gambling activities.

Launch and Trading Platform

Kalshi's trading platform offers a unique way for traders to engage with various future events.

5. Trading Platform: The platform launched in July 2021, allowing both retail and institutional traders to place trades on various future events.
6. Event Contracts: Kalshi specializes in event contracts based on specific yes-or-no questions, priced according to the market's estimated probability of an event occurring.
7. Payout Structure: Contracts pay out $1 for correct selections, designed to be straightforward and user-friendly.
8. Trading Mechanism: 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. The correct side keeps the full $1.

Diverse Market Coverage

Kalshi covers a wide range of markets, making it a versatile platform for traders.

9. Market Coverage: The platform includes markets like weather, the Oscars, tax changes, inflation, music festival cancellations, album sales, digital streaming milestones, Covid vaccine uptake, recession likelihood, and potential U.S. debt default.
10. Political Markets: In October 2024, Kalshi received approval to reintroduce election markets, allowing users to wager on political outcomes like congressional control and presidential elections.

Legal and Regulatory Challenges

Kalshi has faced significant legal and regulatory challenges, particularly concerning political event contracts.

11. Legal Dispute: In 2023, a legal dispute began between Kalshi and the CFTC over political event contracts. Kalshi argues that its contracts offer accurate election forecasting data and enable individuals to hedge against various outcomes.
12. CFTC Concerns: The CFTC contends that these contracts constitute illegal gambling and lacks the resources to oversee them effectively. Chairman Rostin Behnam has warned that allowing election contracts could degrade the integrity of the electoral process.

User Base and Trading Limits

Kalshi caters to both retail and institutional traders, with specific limits on trading amounts.

13. User Base: Kalshi allows both retail and institutional traders to engage in trading activities, aiming to attract larger investors for hedging purposes.
14. Bet Limit: As of April 2023, the bet limit is $25,000, though certain contracts allow a maximum wager of $7 million. Users cannot wager more than their deposited amount.

Revenue and Operational Model

Kalshi's revenue model and operational costs are designed to ensure sustainability and compliance.

15. Transaction Fees: Kalshi charges transaction fees per trade but does not rely on traders' losses for revenue.
16. Regulatory Strength: The presence of unregulated prediction markets like Polymarket and Augur strengthened Kalshi's case for regulatory approval.
17. Founders' Background: Tarek Mansour and Luana Lopes Lara were inspired by challenges investors faced during events like the Brexit referendum, prompting them to create Kalshi.

Platform Launch and Market Dynamics

Kalshi's platform launch marked a significant milestone, but the company continues to face challenges.

18. Platform Launch: The trading platform launched in July 2021, marking a significant milestone in the company's journey.
19. Market Dynamics: Kalshi faces challenges in dealing with questions with continuous answers and providing clear results to a large user base.

Hedging and Public Interest

Kalshi provides valuable hedging opportunities and serves the public interest by offering accurate forecasting data.

20. Hedging Opportunities: The platform allows investors to hedge against uncertainties like economic indicators and political outcomes.
21. Public Interest: Kalshi maintains that its contracts serve the public interest by offering accurate election forecasting data and enabling individuals to hedge against various outcomes.

Regulatory Scrutiny and Public Perception

Kalshi has faced regulatory scrutiny and mixed public perception, impacting its operations and growth.

22. Regulatory Action: The CFTC has taken a cautious approach towards Kalshi's political event contracts, raising concerns about their potential impact on the electoral process.
23. Chairman's Warning: Chairman Rostin Behnam has warned that allowing election contracts could degrade the integrity of the electoral process.
24. Legal Dispute Timeline: The legal dispute between Kalshi and the CFTC began in 2023 and has been ongoing.
25. Public Perception: Kalshi has faced criticism and negative press but also received support from those who see its platform as a valuable tool for predicting future events and hedging against uncertainties.

Founders' Insights and Market Competition

The founders' vision and insights have shaped Kalshi's journey, while the company navigates a competitive market landscape.

26. Founder's Insights: Tarek Mansour discussed how Kalshi made it legal to bet on the election, highlighting the company's efforts to navigate regulatory hurdles.
27. Regulatory Framework Evolution: The regulatory framework governing prediction markets is evolving, with Kalshi's case contributing to this evolution.
28. Market Competition: Kalshi operates in a competitive market with other prediction platforms like Polymarket and Augur, but its regulatory approval sets it apart.

User Engagement and Demographic Bias

Kalshi aims to attract larger investors and address concerns about biased betting based on demographic factors.

29. User Engagement: The platform aims to attract larger investors for hedging purposes, though broader adoption faces hurdles like the zero-sum nature of prediction markets.
30. Demographic Bias: Kalshi has addressed concerns about biased betting by implementing measures to ensure fairness and transparency.

Polling Replacement and Revenue Model

Some suggest Kalshi could replace traditional polling methods, while the company's revenue model ensures sustainability.

31. Polling Replacement: Some have suggested that Kalshi could replace traditional polling methods, though this idea remains speculative.
32. Revenue Model: Kalshi makes money through transaction fees per trade, not relying on traders' losses for revenue.

Operational Costs and Competitive Landscape

Running Kalshi involves significant costs, and the company navigates a competitive landscape with other prediction markets.

33. Operational Costs: Running Kalshi incurs significant costs related to maintaining its platform, ensuring regulatory compliance, and addressing legal challenges.
34. Competitive Landscape: Kalshi faces competition from other prediction markets, but its regulatory approval and comprehensive approach to event-based trading set it apart.

Founders' Vision

The founders' vision has been realized through Kalshi, offering a unique service to traders and investors worldwide.

35. Founder’s Vision: Tarek Mansour and Luana Lopes Lara envisioned a platform allowing investors to engage in wagers on future events, which has been realized through Kalshi.

Kalshi's Impact on Financial Markets

Kalshi has changed how people engage with financial markets. Founded in 2018 by Tarek Mansour and Luana Lopes Lara, this platform lets traders speculate on future events through event contracts. With regulatory approval from the Commodity Futures Trading Commission (CFTC), Kalshi ensures a legal and transparent trading environment. Covering a wide range of markets, from weather patterns to political outcomes, it offers unique hedging opportunities. Despite facing legal challenges, especially over political event contracts, Kalshi stands firm on its mission to provide accurate forecasting data. The platform's straightforward payout structure and user-friendly interface make it accessible to both retail and institutional traders. By charging transaction fees instead of relying on traders' losses, Kalshi maintains a fair revenue model. As it continues to navigate regulatory landscapes, Kalshi remains a significant player in the evolving world of financial exchanges and prediction markets.