Credit...Karsten Moran for The New York Times
Kalshi, a Prediction Market, Raises Funds and Expands Overseas
The fund-raising round comes as online prediction marketplaces gain mainstream prominence.
by https://www.nytimes.com/by/michael-j-de-la-merced · NY TimesOnline prediction markets have jumped into the mainstream, as users flock to sites to bet on politics, sports, the next pope and more. That growth has drawn interest from investors.
Kalshi, one of the most prominent prediction markets, plans to announce on Friday that it has raised more than $300 million in a new round of financing at a valuation of $5 billion. The company also plans to disclose that it will start letting customers in more than 140 countries place bets on its website.
The fund-raising announcement, in the same week that Polymarket, Kalshi’s chief rival, said the parent of the New York Stock Exchange would invest up to $2 billion, underscores how big a business prediction markets have become.
Kalshi is on track for $50 billion in trading volume on an annualized basis, a big jump from the roughly $300 million it recorded last year.
Last month, Kalshi overtook Polymarket to become the biggest player in the prediction-market industry, with a global market share of prediction-market activity of more than 60 percent, according to the data provider Dune.
“We have not expected this level of growth,” Tarek Mansour, a Kalshi co-founder and its chief executive, said in an interview.
That rapid expansion drew the attention of venture capital firms, including Sequoia Capital — which first backed the company in 2020 — and Andreessen Horowitz, a new investor. Despite closing its previous investment round in June, Kalshi negotiated the new fund-raising effort, which more than doubled its valuation, in August.
Other investors in the round include Paradigm, CapitalG and Coinbase Ventures.
Kalshi’s recent growth has been powered by sports, especially after it began offering the kind of complex wagers known as parlays. Its push into sports has rattled the traditional sportsbooks, with the shares of DraftKings and the parent of FanDuel falling by double-digit percentages over the past month.
Kalshi has also benefited from a series of deals that allow customers of brokerages like Robinhood and Webull to bet on contracts directly from those sites, as easily as they can buy stocks.
Until now, Kalshi operated only in the United States. Polymarket, on the other hand, was barred from letting Americans participate on its platform in 2022 and only recently resumed doing business in the country. Donald Trump Jr., President Trump’s eldest son, is an adviser to both companies, joining Kalshi in January and Polymarket in August.
In May, the U.S. Commodity Futures Trading Commission dropped a legal challenge to Kalshi’s election-related betting business.
But the company is now facing pushback from U.S. state regulators over sports betting. Several states have sued the company, arguing that it is essentially skirting their rules around online sports gambling, which remains illegal in 20 states, by offering financial products tied to the outcome of sporting events.
“Every time there’s a new type of financial innovation, there’s always a series of questions around regulation,” Mr. Mansour said. If there weren’t questions, he added, then “what you’re doing is probably not meaningful or innovative enough.”