What Is Kalshi? The Platform That Made Prediction Markets Legit

Prediction Markets 101, Part 1

Kalshi: What is a Prediction Market / Kalshi

Most overnight sensations take years to build. Kalshi is no exception.

The company was founded in 2018 by Tarek Mansour and Luana Lopes Lara, two MIT graduates who spent the next several years — and reportedly more than $30 million in legal fees — working to establish that the event contracts they were building fall under federal commodities regulation rather than traditional gaming frameworks.

In 2020, the Commodity Futures Trading Commission (CFTC) approved Kalshi as the first Designated Contract Market (DCM) authorized to list event contracts in U.S. history. The platform launched publicly in 2021. By 2025, it had processed tens of billions of dollars in trading volume. CNN and CNBC became broadcast partners. Robinhood integrated Kalshi contracts into its trading interface. Donald Trump Jr. joined as a strategic adviser.

Here’s how it works — and why it matters.

How Kalshi and Predictions Market Work

Every market on Kalshi is structured as a binary question with a defined resolution date. For example: Will the Federal Reserve cut rates at the March meeting? Will the Cowboys win the NFC East? Will Shai Gilgeous Alexander win MVP?

Participants purchase “Yes” or “No” contracts that trade between $0.01 and $0.99. Each contract settles at $1.00 if the specified outcome occurs and $0 if it does not. At any given moment, the price reflects the market’s collective probability estimate. For example, a contract priced at $0.73 implies a 73% probability.

Kalshi operates through a quote-driven order book in which participants post limit orders and transact with counterparties. Structurally, this resembles a financial exchange model. Positions may be entered and exited prior to resolution, and contract prices can fluctuate as new information becomes available. As with all trading, both gains and losses are possible.

Why Federal Regulation Matters for Prediction Markets

Kalshi’s CFTC designation places it under federal regulatory oversight. In contrast, traditional sports wagering operates under state-by-state regulation, creating differing rules and availability across jurisdictions.

Because Kalshi operates as a federally regulated exchange, it is positioned to offer event contracts more broadly, subject to regulatory interpretation. However, the scope of that authority continues to face legal challenges. Several state regulators have contested certain sports-related contracts. Litigation is ongoing, and the outcome will shape how broadly specific categories of contracts can be offered.

Regulatory clarity remains a key factor in the evolution of the event contract market.

Kalshi and Robinhood Partnership

In 2025, one of Kalshi’s most significant growth catalysts was its integration with Robinhood. Through this partnership, event contracts became accessible within the Robinhood trading interface, expanding visibility among retail brokerage users.

This integration introduced prediction markets to a broader financial audience. At the same time, it has intensified regulatory and policy discussions about how sports-related event contracts should be categorized and supervised.

As with any developing financial product, market adoption can bring both increased participation and increased scrutiny.

Prediction Market Behavior and Pricing Dynamics

Academic research analyzing a large sample of event contracts has identified pricing patterns similar to those observed in other speculative markets. Some studies suggest that contracts with lower implied probabilities may underperform relative to their pricing assumptions, while higher-probability contracts may perform differently than expected.

These findings illustrate that market pricing is not always perfectly efficient and that contract outcomes can vary significantly from implied probabilities. Participants should recognize that event contract pricing reflects collective market sentiment at a given moment — not certainty.

Trading event contracts involves meaningful risk, including the possibility of total loss.

Can You Use Kalshi in the U.S.?

Kalshi is designed for U.S.-based market participants seeking a federally regulated platform that supports U.S. dollar deposits and offers exposure to a range of event-based markets, including economics, politics, and sports.

Event contracts are speculative financial instruments. They are not suitable for everyone, and participation should be approached with a clear understanding of the risks involved. Individuals should carefully consider their financial situation and risk tolerance before participating.

Just as with other forms of commodity interest trading, outcomes are uncertain and losses can occur.

“Trading is risky, always trade responsibly. If your activity is becoming a problem, support is available by calling 1-800-522-4700.”