Kalshi's Regulated Rise Sparks Prediction Market Boom, Regulatory Pushback

Kalshi has surged to dominance in the global prediction market, capturing 62.2% of trading volume in September 2025, up from just 3.1% a year earlier, according to The BlockThe Block, ^[1]. The platform recorded $1.3 billion in monthly trading volume, significantly outpacing rival Polymarket, which reported $773 million during the same periodCovers, ^[2]. This marks Kalshi’s first return above the $1 billion monthly threshold since November 2024, when U.S. election-related contracts drove record volumesPhemex, ^[3]. The platform’s growth is attributed to its CFTC-regulated status, which has bolstered institutional and retail participation in the U.S. marketFinance Feeds, ^[4].

Kalshi’s rise reflects broader trends in prediction markets, where platforms are increasingly serving as “new interfaces for information,” blending crypto, artificial intelligence, and real-time news analysisBernstein, ^[5]. Unlike Polymarket, a decentralized, crypto-native platform, Kalshi operates as a regulated U.S. exchange, aligning with traditional derivatives frameworks. Polymarket, however, is preparing for a U.S. relaunch after acquiring QCEX, a CFTC-licensed derivatives exchange, and securing a no-action letter from the regulatorDZilla, ^[6]. This move aims to position Polymarket as a hybrid platform, balancing decentralized access with regulatory compliance in the U.S.

Regulatory scrutiny remains a key challenge. Massachusetts recently sued Kalshi, alleging it operates as an unlicensed sportsbook by offering contracts on events like NFL gamesCovers, ^[7]. The state’s attorneys general argue that Kalshi’s parlay product and marketing strategies mimic casino-style mechanics, raising concerns about consumer protection and gambling oversightThe Block, ^[8]. Meanwhile, Polymarket’s re-entry into the U.S. market is expected to face similar regulatory hurdles, though its acquisition of QCEX provides a legal pathway to complianceDZilla, ^[9].

Investor interest in prediction markets has spiked, with valuations surging for both platforms. Polymarket is reportedly seeking a $9–10 billion valuation, up from around $1 billion earlier in 2025DZilla, ^[10], while Kalshi is nearing a $5 billion valuation after securing $185 million in funding earlier this yearFinance Feeds, ^[11]. Analysts attribute this optimism to the platforms’ ability to aggregate real-time data on macroeconomic, political, and corporate events. For example, traders wagered over $200 million on Polymarket and $85 million on Kalshi around the Federal Reserve’s 25-basis-point rate cut decisionThe Block, ^[12].

Looking ahead, prediction markets are poised to evolve into a critical layer of financial infrastructure, bridging retail speculation with institutional risk management toolsDZilla, ^[13]. Kalshi’s focus on expanding event categories and leveraging partnerships with blockchains like Solana and Base could further solidify its lead. Polymarket, meanwhile, aims to differentiate itself through its decentralized model and global user base. However, both platforms must navigate regulatory uncertainties and competition from emerging players like Coinbase and Robinhood, which are exploring similar market offeringsFinance Feeds, ^[14].