Kalshi: The CFTC-Regulated Prediction Market Reshaping Finance

Kalshi isn't just another prediction market. It's the first company in U.S. history to receive approval as a CFTC-regulated Designated Contract Market (DCM) for event contracts. That regulatory status has made it the dominant force in American prediction markets.

The Regulatory Breakthrough

When Kalshi received its DCM designation in 2020, it opened a door that had been closed for decades. Event contracts—binary yes/no bets on real-world outcomes—could now trade on a federally supervised exchange with the same regulatory framework that governs futures and options markets.

This wasn't easy. The CFTC initially tried to block Kalshi's political event contracts, arguing they were too close to gambling. Kalshi sued and won. In May 2025, the CFTC dropped its appeal, clearing the path for expansion into sports and other event categories.

The regulatory structure matters. Unlike offshore prediction markets that operate in legal gray zones, Kalshi users have federally-mandated protections: auditable settlement sources, manipulation surveillance, trade reporting, and segregated customer funds.

2025: The Breakout Year

Kalshi's numbers in 2025 have been staggering. The platform recorded approximately $4.5 billion in monthly trading activity by late 2025, up from around $1 billion per month earlier in the year. User growth expanded 50x year-over-year, with trading volume increasing 100x over the same period.

In the final weeks of 2025, Kalshi posted all-time high weekly volumes, driven primarily by NFL playoff markets. The platform now offers over 3,500 active markets across sports, politics, economics, and culture.

The Robinhood partnership proved transformative. When Kalshi's event contracts became available inside Robinhood's app in August 2025, it gave the platform access to 27.4 million funded brokerage accounts. Trading volume exploded almost immediately.

The Sports Controversy

Kalshi's move into sports contracts has generated significant pushback. State gaming regulators argue that sports event contracts are just gambling by another name, and that Kalshi is operating an unlicensed sportsbook under federal preemption.

The legal battles are ongoing. Nevada, New Jersey, Maryland, and other states have sent cease-and-desist letters. Federal courts have split on whether CFTC oversight preempts state gambling laws. The issue may ultimately reach the Supreme Court.

Kalshi's position is clear: event contracts are derivatives, not bets. They're regulated by the CFTC, traded on an exchange, and subject to the same rules as any other listed derivative. Whether that argument holds will shape the future of the entire industry.

What Makes Kalshi Different

For traders, several things distinguish Kalshi from alternatives:

Regulatory clarity. Funds are held in segregated accounts. Settlement is based on auditable sources. There's no counterparty risk from the platform itself.

Tax treatment. Event contracts on a regulated DCM may receive more favorable tax treatment than offshore gambling, though traders should consult tax professionals.

USD settlement. Unlike crypto-native platforms, Kalshi trades in dollars. You can fund accounts via bank transfer and withdraw to your bank account directly.

Sports focus. While Kalshi offers contracts across many categories, sports represents 92.5% of volume. The platform has become the de facto destination for regulated sports prediction trading in the U.S.

The Funding and Future

Kalshi raised $185 million in June 2025 at a $2 billion valuation, with reports suggesting a subsequent round could value the company at nearly $5 billion. The capital is being deployed to expand market coverage, improve liquidity, and fight the ongoing state-level legal challenges.

The competitive landscape is intensifying. DraftKings, FanDuel, and Crypto.com have all launched prediction platforms. But Kalshi's first-mover advantage in regulation—combined with its integration into mainstream brokerages—gives it a structural moat that will be difficult to replicate.

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All trading involves risk. This is a research tool, not financial advice.