Kalshi Raises $185 Million, Becomes Unicorn With $2 Billion Valuation

Kalshi, a startup that specializes in event-based trading, has recently closed an $185 million funding round led by Paradigm. Notable investors include Sequoia Capital, Multicoin, and Citadel Securities CEO Peng Zhao. This funding round has propelled Kalshi into unicorn status, with a valuation of $2 billion. The company's platform allows users to bet on a wide range of events, from presidential elections and hurricane landfalls to inflation odds and sports outcomes. Unlike traditional prediction markets, Kalshi asks users what they are willing to bet on, rather than just their opinions.

With the new funds, Kalshi plans to enhance its technology and expand its broker integrations. The platform already has connections with Robinhood and Webull, and aims to integrate with over a dozen more brokers. The goal is to make prediction contracts easily accessible to average investors, placing them alongside traditional investments like stocks and cryptocurrencies. Kalshi's market offerings range from economic indicators like CPI data to specific events like the outcome of sports finals, positioning itself as a hybrid of Bloomberg Terminal and DraftKings.

Kalshi is not the only player in the prediction market space. Polymarket, its main competitor, recently raised $200 million at a $1 billion valuation, with backing from Peter Thiel’s Founders Fund. Polymarket saw a surge in volume during the 2024 election, despite blocking U.S. users and lacking CFTC approval. However, Kalshi differentiates itself by adhering to regulatory requirements. It won a key court battle with the CFTC last year, allowing it to list election-based contracts. This regulatory compliance has given Kalshi a competitive edge, as it can tap into high-interest events like political elections and provide insights that outperform expert forecasts.

Kalshi's regulatory compliance is a significant advantage. Unlike Polymarket, which operates in regulatory gray zones, Kalshi is fully licensed. This has attracted investors who are willing to pay a premium for a compliant platform. However, state gambling commissions in regions like New Jersey and Nevada have challenged Kalshi's ability to offer sports-related contracts, arguing they fall under state-level gambling laws. Kalshi's response is that it operates as a federally licensed exchange, a distinction supported by the CFTC.

Prediction markets have long been recognized for their potential to forecast political and economic events, but actual platforms have struggled. Kalshi is breaking new ground by combining a crypto-native user experience with traditional financial compliance. This approach has attracted major players in venture capital, finance, and crypto, who see prediction markets as a fundamental component of the digital economy. Kalshi's success could pave the way for new types of contracts, such as those related to climate risk, supply chain disruption, and AI regulation, becoming real trading vehicles.