Kalshi Raises $1 Billion at $40 Billion Valuation Five Months After Previous Round
Key Facts
Kalshi closed a new $1 billion funding round at a valuation of $40 billion, Reuters reported on October 29, in a deal co-led by Sequoia and Wellington. Tiger Global Management and Dragoneer Investment Group also participated in the round, Reuters said. The funding comes just over five months after the company raised $1 billion in a previous round led by Coatue at a valuation of $22 billion. That puts the company’s stated valuation about 82% higher than in May. The acceleration reflects investors’ bet on the expansion of prediction-contract markets as the company seeks to extend its business into broader trading categories.
In its May round, Kalshi said it would use the capital to expand its presence among hedge funds, asset managers, proprietary trading firms and insurers. Its announced plans included developing large trades, risk-management products and integrations with brokerage firms. The company said at the time that institutional trading volume had increased 800% in the six months before the round was announced. It also said annualized trading volume rose from $52 billion to $178 billion over the same period. The company presented these figures as evidence of institutional demand and growth in platform activity.
Kalshi said in May that its platform accounted for more than 90% of prediction-market activity in the United States. Since then, the company has added products beyond the event contracts on which it built its business. In May, it announced the launch of perpetual cryptocurrency futures for U.S. investors, describing it as the biggest expansion of its products since the launch of event contracts. On May 29, the U.S. Commodity Futures Trading Commission approved the BTCPERP contract offered by KalshiEX, a perpetual contract linked to bitcoin’s spot price that was classified as a futures contract. The commission said the approval was based on the company’s submission and required it to list the contract and keep it compliant with applicable laws and regulations.
The expansion has extended to commodity markets. Kalshi said on September 8 that trading volume in its commodity-linked prediction markets reached $400 million in the seven months since their launch. The company added that this volume was more than four times what its cryptocurrency markets had recorded at the same point in their life cycle. Kalshi is using these new categories to expand the platform beyond sports and election markets. Reuters reported that the company is seeking to build a multi-asset trading platform and compete with traditional exchanges such as CME Group and Intercontinental Exchange. Expanding and distributing its products is part of the shift the company is betting on.
On distribution, Alpaca announced in August a partnership with Kalshi to offer event contracts through its brokerage infrastructure. Alpaca said its infrastructure would handle custody, money transfers, statements and account management, while Kalshi would provide the regulated market, event contracts and clearing services. Alpaca cited Kalshi data showing that trading on the platform exceeded $40 billion in July. The partnership enables contract trading through a broker’s infrastructure as Kalshi broadens the range of assets and products on offer. The company had outlined plans in its May funding announcement to integrate its services with brokers.
The commercial expansion coincides with a legal dispute over the scope of state and federal authority over prediction markets. Reuters reported that Utah’s attorney general filed criminal charges against Kalshi and two of its senior executives in the week beginning October 26, accusing the company of illegally promoting online gambling. On October 27, the Commodity Futures Trading Commission sued Utah to prevent it from using state laws to shut down markets registered with the commission. CFTC Chairman Michael Selig said Congress had given the agency “exclusive federal responsibility” to oversee these markets. Utah’s attorney general said Kalshi continued operating in the state despite a federal court ruling that its gambling laws applied to the company, while Kalshi said it would challenge the charges in court.
The dispute extends to about 20 states, according to The Associated Press, in a fractured legal landscape that could ultimately be resolved by the U.S. Supreme Court. A federal court had denied Kalshi’s request to block enforcement of Utah’s restrictions, and an appeals court also declined to halt the state’s actions while the company’s appeal was pending. These developments put Kalshi’s expansion to the test on regulatory grounds, alongside the challenge of competing with established exchanges. The company also ties its growth in activity to widening access through brokers and adding new markets. The course of the litigation, alongside the company’s bid to become a multi-asset platform, remains among the key developments to watch in coverage of Kalshi.