The Kalshi Public Beta is Live

Kalshi, the first federally regulated exchange dedicated to trading directly on the outcome of events, is now in public Beta. You can now buy “Yes” or “No” positions on whether an event will happen, from “Will the Tokyo Olympics be canceled”, to “Will more Americans get vaccinated this week than last week?”.

The idea of trading on event outcomes is simple. A lot of people have thought about it before and many businesses have tried and failed in this space. Why hasn't it been done already? Why is there no NYSE for events? The answer: regulation. And this is what is different about Kalshi.

Luana, my co-founder, and I spent 2.5 years engaging with the CFTC to get approved as the first regulated exchange dedicated to event contracts. Our journey to accomplish this regulatory feat is an adventure that would take a small novel to recount (I’ll leave that for another time). What I’ll say now is that 2.5 years ago, we were told that the journey and our goal were impossible, the obstacles were insurmountable, and the decision to pursue it was not a rational one. We did it anyway. We are obsessed with creating a world where event contracts are so ingrained in our financial system that they become a boring utility.

I’m a financial history fanatic, and Kalshi fits into a broad and colorful history of how futures and commodities became regulated over time. A century ago, it was unclear if it was even legal to trade grain futures. The question went all the way up the legal system to the Supreme Court, where ultimately it was decided: Yes, you can trade them, they are legal. This approval triggered the expansion of CBOT and the grain futures market which have done so much to strengthen America’s economy. Decades later, futures trading expanded into other tangible commodities such as oil and metals. Next came more complex instruments, like interest rate swaps. Today, Kalshi has unlocked the natural next step: general event contracts.

At the dinner table, most people discuss topics like pop culture, economics, geopolitics, COVID, or climate change. We debate, and try to predict events and anticipate their potential impact. We're less likely to launch into a discussion about mundane and obscure details such as Cisco's quarterly financials or the expected underlying supply and demand dynamics of the grain market.

Yet, until now, we haven’t had an outlet to trade directly on our beliefs and predictions. Instead, we trade stocks, commodities, and other traditional financial assets to express our predictions on events. We often trade when we have an opinion about the future.

You think there will be a recession, so you short the S&P; you think a vaccine will be distributed, so you buy travel-related stocks. You develop an opinion about a future event, then use indirect proxies that are subject to a lot of noise to execute on your prediction. Most financial instruments also expose you to other factors such as underlying financials, quarterly earnings, executive leadership, market dynamics, supply and demand, etc, even when your trades are based purely on an opinion about future events.

Enter Kalshi and event contracts: instead of trying to express your opinion with some imperfect security, event contracts let you invest in your beliefs directly. You buy “Yes” and “No” positions with respect to whether an event will happen or not. I find this elegant and beautiful.

Kalshi has developed an asset class that is more natural, more human, and more accessible than all of the ones that preceded it. All you need to trade event contracts is an opinion about the future — which everyone has.

We envision people, funds, businesses, and institutions trading event contracts whenever they have an opinion about the future or need to hedge exposure to a future event. The utility of hedging risk and accurate predictions should become commonplace. In order for this to happen, Kalshi is focused on building an exchange that makes it easy and accessible for anyone to trade event contracts.

We built the foundation that allows Kalshi to operate a heavily regulated financial exchange, all from scratch. We decided to do the full-stack infra build-out, which helped us avoid dependency on traditional and relatively slow financial institutions. All these pieces are finally coming together to power each trade you make.

We’ve spent two years building and testing our system. Our first priority has been robustness and security, and we’ve been building steadily and carefully towards this Beta launch. We’re confident in the correctness of our trading infrastructure, clearing and reporting integrations, and trade surveillance. The Kalshi exchange is now ready to go.

So why is this only a Beta and not a full launch? We are obsessively focused on building a product and an interface tailored to what you want. The Beta will allow us to test, iterate, and refine the product, and your feedback will be crucial to this process. At the end of the day, a marketplace is made for its participants, and the Beta is a crucial step for us to learn and build an interface that fits your needs. We’re defining an entirely new category and there’s a lot for us to learn. Your feedback and engagement will have a disproportionate impact on how the marketplace shapes up in the years to come.

The Beta launch is a momentous event, one that marks a new horizon for the derivatives market. I’m thrilled about this next phase. Now it’s time to execute and build deliberately and with velocity. I feel ever more positive about the future and with your feedback and support, I’m eager to keep pushing towards making events contract trading a commonplace reality.

From the Kalshi family, may your day be eventful.

TM