In October 2024, a federal appeals court delivered a ruling that Wall Street and Silicon Valley had watched with intense interest. Kalshi, a New York-based prediction market platform, won the right to offer contracts on political elections, defeating the Commodity Futures Trading Commission’s attempt to block such trading. The CFTC dropped its appeal entirely in May 2025. Election betting is now legal. And that’s just the beginning.

Founded in 2018 by Tarek Mansour and Luana Lopes Lara, Kalshi has evolved from a niche derivatives exchange into what may become the most significant financial innovation since the options market. The platform now processes over $1 billion in weekly trading volume, a 1,000% increase from 2024. You can bet on who wins the presidency, whether Jerome Powell will say certain words at his next press conference, or if Trump will add himself to Mount Rushmore. The line between financial instrument and wager has officially blurred.

How Prediction Markets Actually Work

At its core, Kalshi operates like a stock exchange for future events. Users buy binary “yes” or “no” contracts priced between 1 cent and 99 cents. A “yes” share trading at 70 cents reflects a 70% probability of that outcome occurring. If correct, the share pays out $1, yielding a 30-cent profit. If wrong, you lose your investment.

The platform gained CFTC registration as a designated contract market in November 2020, making it federally regulated rather than operating in legal gray zones like offshore betting sites. In April 2024, Susquehanna International Group became Kalshi’s first dedicated institutional market maker, adding liquidity and legitimacy that attracted serious capital.

The financial incentives create what proponents argue is a more accurate forecasting mechanism than traditional polling. When people have money at stake, they become more honest about their actual beliefs. During the 2024 election cycle, prediction markets consistently outperformed polls in accuracy, generating intense interest from media outlets seeking real-time public sentiment indicators.

The Legal Battle That Changed Everything

The CFTC’s fight against Kalshi centered on whether political event contracts constituted “gaming” prohibited under derivatives regulations. The commission argued such contracts could undermine public trust in elections and violated rules against gaming-related derivatives.

In September 2024, DC District Court Judge Jia Cobb rejected the CFTC’s position, ruling that the agency had exceeded its authority. The judge found that election outcomes do not constitute “gaming” as defined by law. Kalshi’s offerings, she determined, were legitimate derivatives rather than illegal gambling.

The appeals court upheld the ruling in October 2024. Judge Patricia Millett acknowledged the case was “close and difficult” but found the CFTC failed to demonstrate how election contracts would harm public interest, a fatal flaw in the commission’s stay request. The American public subsequently poured over $1 billion into Kalshi’s political markets.

Sports: The Next Frontier and Biggest Fight

Kalshi didn’t stop at politics. In late December 2024, the platform began offering contracts on the Super Bowl and College Football Playoff National Championship. During March Madness 2025, Americans wagered over $500 million on college basketball through Kalshi. The company now covers all major American professional sports, college sports, European soccer, golf, tennis, and even chess.

This expansion triggered fierce opposition from state gaming commissions. Nevada, New Jersey, Maryland, Ohio, Montana, and Illinois have issued cease-and-desist orders, arguing Kalshi operates unlicensed sports gambling in violation of state law. Tribal gaming interests have filed suit in California, seeking to protect exclusive sports betting rights.

Kalshi’s defense relies on federal preemption. Because the CFTC has exclusive jurisdiction over derivatives traded on approved exchanges, state gambling regulations cannot apply. Federal courts in Nevada and New Jersey have sided with Kalshi on this argument. Maryland courts have been less receptive. The Third Circuit Court of Appeals will likely provide definitive guidance on whether Congress intended CFTC preemption to encompass state gambling laws.

Who Backs This Operation

Kalshi’s political connections run deep. In February 2025, President Trump nominated Brian Quintenz, a Kalshi board member and former CFTC commissioner, to lead the agency. Donald Trump Jr. serves as an adviser to both Kalshi and competitor Polymarket. The platform has positioned itself within Republican financial innovation circles while building Democratic support around prediction market accuracy for campaign strategists.

CNN and CNBC entered partnerships with Kalshi in 2025, using prediction market data as real-time sentiment indicators for news coverage. Robinhood launched prediction markets in March 2025, bringing the concept to mainstream retail investors. Polymarket acquired CFTC-licensed exchange QCEX for $112 million in July 2025 to expand US operations.

For Hamptons residents with financial market sophistication, Kalshi represents both investment opportunity and information source. The platform allows hedging against political outcomes that affect portfolios. A fund manager concerned about regulatory changes under specific administrations can position accordingly based on market-indicated probabilities.

The Criticism and Concerns

Better Markets’ Stephen Hall called the CFTC’s retreat “a sad and ominous day for election integrity.” Critics argue prediction markets incentivize manipulation, create gambling addiction risks without traditional consumer protections, and blur distinctions between informed speculation and harmful wagering.

Massachusetts Attorney General Andrea Campbell filed suit in September 2025 accusing Kalshi of “promoting and accepting sports wagers” without following state gambling laws. A November 2025 class action lawsuit alleges Kalshi “engaged in illegal deceptive activity, and unjustly enriched itself” by operating unlicensed sports betting while leading users to unknowingly bet against Kalshi or its affiliates.

The NCAA has long petitioned to eliminate player props on college athletes, arguing smaller programs become targets for bet fixing when players have limited professional aspirations. After federal indictments related to pitcher prop bets, MLB and partner sportsbooks established $200 limits on individual pitch wagers.

What This Means for Sophisticated Investors

Prediction markets offer an uncorrelated asset class for portfolio diversification. Political outcomes, sporting events, and cultural phenomena move independently of equity markets. For family offices seeking alternative investments beyond traditional stocks, bonds, and real estate, Kalshi provides accessible exposure to event-driven opportunities.

The platform’s current offerings extend beyond politics and sports to crypto events, climate outcomes, economic indicators, Fed policy decisions, Supreme Court rulings, and entertainment industry metrics like Spotify rankings and Rotten Tomatoes scores. In July 2025, Kalshi launched prediction markets on tech company IPO probabilities.

Institutional investors have begun using Kalshi for hedging and information gathering. The market-indicated probabilities often prove more accurate than analyst consensus, providing valuable signals for positioning across traditional portfolios.

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