Kalshi's Combos and the Rise of Prediction Markets as a Mainstream Asset Class

The prediction market landscape in 2025 has undergone a seismic shift, driven by innovations in market structure and a surge in institutional adoption. At the forefront of this transformation is Kalshi, a U.S.-regulated platform that has redefined the boundaries of speculative finance through its Combos product. By introducing combo bets-multi-leg wagers that mirror the mechanics of sports betting parlays-Kalshi has not only captured retail investor enthusiasm but also positioned prediction markets as a legitimate asset class. This analysis explores how Kalshi's structural innovations, coupled with institutional backing and regulatory milestones, are accelerating the mainstream acceptance of prediction markets.

Market Structure Innovation: Combos and RFQ Mechanisms

Kalshi's Combos feature, launched in late 2025, leverages a Request for Quote (RFQ) mechanism to enable users to bundle multiple binary outcomes into a single wager. This innovation, inspired by traditional sports betting, allows traders to hedge correlated events or amplify returns through strategic combinations. For example, a user might combine predictions on Federal Reserve rate decisions, regulatory approvals, and geopolitical events into one trade, effectively creating a diversified yet concentrated bet.

The RFQ model further distinguishes Kalshi by allowing market makers to dynamically price these combos, reducing liquidity constraints that plagued earlier prediction market platforms. According to a report by , this approach has driven record-breaking trading volumes, with Kalshi hitting $340 million in daily volume shortly after Combos' launch. Critics, however, argue that the one-sided risk profiles inherent in combo bets-where market makers retain a structural edge-resemble gambling rather than traditional finance. Kalshi counters this by emphasizing its regulated status and the product's alignment with financial derivatives principles, framing Combos as a novel tool for risk transfer rather than speculative gambling.

Institutional Adoption and Regulatory Legitimacy

Kalshi's rapid ascent is not solely attributable to retail demand. Institutional adoption has been a cornerstone of its growth, fueled by regulatory clarity and strategic partnerships. In December 2025, the platform secured $1 billion in Series E funding at an $11 billion valuation, a valuation leap driven by its status as the first U.S.-regulated prediction market. This funding round coincided with Kalshi's reported $4.47 billion in Q3 2025 trading volume, outpacing rivals like Polymarket and cementing its dominance in the sector.

Regulatory legitimacy has been a critical enabler. Kalshi's collaboration with the CFTC to establish compliance frameworks has attracted macro hedge funds and institutional investors seeking alternative hedging tools. For instance, macro hedge funds now use Kalshi to hedge against macroeconomic surprises, such as inflation data or central bank policy shifts, which are traditionally difficult to manage with conventional derivatives. Additionally, Kalshi's partnership with CNN to launch event-based prediction markets has expanded its appeal to media and entertainment sectors, further diversifying its user base.

The platform's influence extends beyond its own ecosystem. In late 2025, Kalshi co-founded the Coalition for Prediction Markets (CPM) with industry peers like Crypto.com, aiming to advocate for federal oversight and standardize market integrity protocols. This coalition reflects a broader industry push to distance prediction markets from their "gambling" stigma and position them as a regulated asset class capable of enhancing market efficiency.

Broader Implications: Prediction Markets as an Emerging Asset Class

The explosive growth of prediction markets-now generating $10 billion in monthly trading volumes-has prompted traditional financial institutions to reassess their role in capital markets. Citizens Bank, for example, has highlighted prediction markets as a solution to a key flaw in traditional finance: the inability to directly trade on real-world events. Unlike options or futures, which derive value from underlying assets, prediction markets allow investors to bet directly on outcomes, creating a more granular and liquid market for event-driven risk.

This shift is particularly resonant in macroeconomic and regulatory contexts. Prediction markets now serve as real-time sentiment indicators for events such as FDA drug approvals, election outcomes, and regulatory rulings, offering investors a new lens to price uncertainty. For institutional players, this represents a paradigm shift: instead of relying on analyst forecasts or opaque derivatives, they can access crowd-sourced probabilities that aggregate global information efficiently.

Conclusion: A New Frontier in Financial Innovation

Kalshi's Combos and the broader rise of prediction markets underscore a fundamental evolution in how markets price uncertainty. By innovating market structure through RFQ mechanisms and securing institutional adoption via regulatory partnerships, Kalshi has transformed prediction markets from a niche curiosity into a $10 billion-a-month asset class. While skeptics remain, the industry's alignment with traditional finance-through hedging, risk management, and institutional-grade liquidity-suggests that prediction markets are no longer on the fringes.

As the Coalition for Prediction Markets and platforms like Kalshi continue to advocate for federal oversight, the next phase of growth will likely see these markets integrated into mainstream portfolios. For investors, the lesson is clear: the ability to trade on events, not just assets, is reshaping the financial landscape-and those who adapt will find themselves at the forefront of a new era in market innovation.