What Is Kalshi? A Beginner's Guide

Within the last few years, prediction markets have gone from a niche financial instrument to a mainstream phenomenon. At the forefront of this transformation is Kalshi, a platform that allows traders to buy and sell contracts on the outcomes of real-world events. Whether you're interested in forecasting economic indicators, political outcomes, sports results, or cultural milestones, Kalshi is a regulated venue where you can put your predictions - and your money - where your mouth is.

Kalshi is the first federally regulated exchange in the United States dedicated exclusively to trading on the outcomes of future events. Founded in 2018 by Tarek Mansour and Luana Lopes Lara (two MIT graduates who met while working at major financial institutions), Kalshi was built to address a gap they observed in traditional markets: there was no straightforward way for people to trade directly on event outcomes.

The platform operates as a Designated Contract Market (DCM) under the Commodity Futures Trading Commission (CFTC), placing it in the same regulatory category as established exchanges like the Chicago Mercantile Exchange (CME) and Intercontinental Exchange (ICE). This federal oversight ensures that Kalshi adheres to strict compliance standards designed to protect traders and maintain market integrity.

Kalshi's mission centers on allowing people to capitalize on their opinions, trade on everyday events, and hedge against risks that affect their lives. Not only is a completely novel form of participating in markets, but the aggregation oftrades from hundreds of thousands of users around the world can allow us, more often than not, to predict the future.

Unlike traditional investments tied to company performance or commodity prices, Kalshi's event contracts let you trade directly on yes-or-no questions like "Will the Federal Reserve raise interest rates this month?" or "Will the Seahawks win the Super Bowl?". Kalshi simply facilitates these transactions and generates revenue through small transaction fees on each trade.

These event contracts work through a straightforward pricing system. Each contract is priced between one cent and 99 cents, with the price reflecting the market's collective assessment of the probability that an event will occur. For example, if a contract asking "Will the government shut down by February 31?" is trading at 30 cents for "Yes," the market believes there's roughly a 30% chance of that outcome.

When you purchase a contract, you're essentially buying a position on a specific outcome. If your prediction proves correct when the event resolves, each contract pays out one dollar. If you bought a 'Yes' contract at 30 cents and the event occurs, you profit 70 cents per contract. Conversely, if the event doesn't happen, you lose your initial stake. You can also sell your position at any time before the event resolves, allowing you to lock in profits or cut losses based on how contract prices move.

Kalshi offers an extensive catalog of tradeable events spanning multiple categories. In economics and finance, you can trade on Federal Reserve interest rate decisions, monthly inflation data, unemployment figures, GDP growth, recession probability, and movements in indices like the S&P 500 and NASDAQ 100.

The platform's political markets gained significant attention in 2024 when a federal appeals court upheld Kalshi's right to offer election-related contracts, making it the first fully regulated platform in over a century to provide legal election trading in the United States. These markets cover presidential races, congressional control, and various political outcomes. Subsequently, traders on Kalshi correctly called the outcome of the 2024 election.

Sports markets have become one of Kalshi's fastest-growing segments, offering contracts on game outcomes across football, basketball, baseball, golf, MMA, tennis, and more. Cultural events round out the offerings with markets on topics like Billboard chart positions, Oscar winners, Grammy awards, and streaming viewership numbers. Climate and weather contracts let traders take positions on hurricane intensity, temperature records, and other meteorological events.

While prediction markets and sportsbooks might appear similar on the surface, they are fundamentally different in many ways.

Regulatory Structure From a regulatory standpoint, traditional sportsbooks operate under state gambling commissions with licensing requirements that vary by jurisdiction. Kalshi, by contrast, is federally regulated by the CFTC as a derivatives market, which allows it to operate nationwide under a single regulatory framework. This distinction has significant implications: federal rules preempt state laws in many cases, enabling Kalshi to offer its services in states where traditional sports betting remains prohibited. While sportsbooks aren't legal in all 50 states, Kalshi is.

Market Mechanics The market mechanics differ substantially as well. At a traditional sportsbook, you're betting against the house: the bookmaker sets odds designed to ensure their own profit regardless of outcomes, incorporating a margin known as the 'vig' into every line. Kalshi operates on a peer-to-peer exchange model where users trade directly with each other. The platform takes no position on event outcomes and has no financial interest in which side wins. Instead, prices emerge from the collective buying and selling activity of traders, with Kalshi earning revenue through explicit transaction fees that are often lower than the implicit costs built into sportsbook odds.

Event-Driven vs. Outcome-Driven Traditional sportsbooks are fundamentally outcome-driven: you're betting on who wins, by how much, or whether a total goes over or under. In contrast, Kalshi's prediction markets are primarily event-driven: you're taking a position on whether a specific, verifiable event will occur. This distinction matters because event-driven markets capture nuance that outcome-driven bets miss. A sportsbook asks "Who wins the election?" while Kalshi might offer dozens of related markets - Will candidate X win Iowa? Will turnout exceed 150 million? - each resolving independently. This structure lets traders express more precise views and extract signal from specific developments rather than just final outcomes.

Incentives and Strategy The incentive differences shape how participants approach each platform. Sportsbooks want balanced action to lock in profit from the vig, so their goal is risk mitigation, not price accuracy. On Kalshi, prices reflect the aggregated beliefs of traders with skin in the game, attracting people with genuine domain expertise: economists trading Fed markets, meteorologists trading weather events, political analysts trading elections. This structural difference also affects how winners are treated. Sportsbooks often limit or ban successful bettors who consistently beat the house. But since Kalshi doesn't take positions against its users, traders can focus purely on being right, because the platform benefits from volume regardless of who wins.

Kalshi is fully legal and operates as a regulated financial exchange in the United States. In November 2020, the company achieved a historic milestone by becoming the first exchange to receive CFTC designation specifically for event contracts. As a Designated Contract Market, Kalshi must adhere to comprehensive regulatory requirements covering market transparency, customer protection, and operational standards.

The platform's regulatory journey has involved significant legal milestones. Most notably, in October 2024, a federal appeals court ruled in Kalshi's favor regarding election-related contracts, determining that the CFTC had not provided sufficient evidence to justify banning such markets. This ruling established important precedent for the legal status of political prediction markets in the United States.

While Kalshi's federal regulation provides a strong legal foundation, the platform has faced challenges from state regulators, particularly regarding sports-related contracts. These disputes remain ongoing, with courts generally acknowledging Kalshi's federal regulatory status. Currently, Kalshi's prediction markets are available to users across all 50 states.

Getting started on Kalshi begins with creating an account through the platform's website or mobile app. You'll need to provide basic personal information and complete identity verification - a standard requirement for regulated financial platforms. This process typically involves submitting identification documents and may take a short time for approval.

Once verified, you can deposit funds using several methods including bank transfers, debit cards, or cryptocurrency. There's no minimum deposit requirement to start trading. With your account funded, take time to explore the various market categories - from economics and politics to sports and culture - to understand the range of events available for trading.

Before placing any trades, familiarize yourself with how contract pricing works. Remember that prices between one and 99 cents correspond roughly to probability percentages. A contract priced at 65 cents reflects the market's belief that there's approximately a 65% chance the event will occur. Decide whether you want to buy 'Yes' (trading on the belief the event will happen) or 'No' (trading that it won't), considering both the potential payout and your own assessment of the probability.

Execute your trade by selecting the number of contracts and confirming your order. After purchasing, you can monitor your position as prices fluctuate based on new information and market sentiment. You have the flexibility to sell your contracts at any time before the event resolves, or you can hold until settlement when contracts pay out one dollar if correct and zero if incorrect.

Kalshi represents a significant evolution in how people can engage with financial markets. By enabling direct trading on event outcomes through a regulated exchange, the platform offers opportunities that simply didn't exist before. Whether you're looking to profit from accurate predictions, hedge against risks that affect your daily life, or simply participate in markets that reflect collective expectations about the future, Kalshi is the platform for you.

As with any financial activity, trading on Kalshi involves risk. Contract prices can move against you, and you can lose your entire stake if your prediction proves wrong. Approach the platform with the same discipline you'd bring to any investment: understand the markets you're trading, manage your position sizes responsibly, and never risk more than you can afford to lose. For those interested in exploring this new frontier of event-driven trading, Kalshi provides a legitimate, regulated venue to turn your insights into opportunity.

^{The views expressed are those of the author and are for informational purposes only. This is not financial advice. Trading involves risk, and you may lose your entire investment. Kalshi is regulated by the CFTC.}