Since the 2024 presidential election, Kalshi has helped take prediction markets mainstream, as individual users have flocked to its platform to bet on sports, politics and more.
Now the company has raised more money as it seeks to make inroads with major financial institutions.
Kalshi plans to announce on Thursday that it has raised $1 billion in a new round of funding, led by the investment firm Coatue Management, that values the start-up at $22 billion. The round is the company’s third in seven months — each of which roughly doubled the company’s valuation. (The December round made Kalshi’s founders, Tarek Mansour and Luana Lopes Lara, billionaires on paper.)
The new fund-raising round is the latest sign of fervid investor interest in prediction markets, despite a fusillade of lawsuits from state regulators over their sports betting on the platforms and concern about insider trading.
Prediction markets like Kalshi and Polymarket have become big business, as users have flocked to bet on sports, the winner of the latest season of “Survivor,” the high temperature in New York City and more. Kalshi claims about two million users monthly.
That’s reflected in vertiginous growth for Kalshi’s business: The company said its annualized trading volume had hit $178 billion, more than tripling over the past six months. And the company’s annualized revenue, an extrapolation of its current top-line numbers, is more than $1.5 billion.
“Literally, outside of A.I., you don’t see anything growing like that,” Lucas Swisher, Coatue’s co-lead of growth investing, said in an interview.
Yet while Kalshi’s supercharged growth has come primarily from individual users, the company is betting that use by institutional investors — including financial firms like hedge funds and brokerages — will be another avenue of growth.
Last week, Kalshi executed its first custom block trade, a large transaction negotiated off a public market between institutions. And the company said trading volume on its platform from institutional investors had grown 800 percent over the past six months.
Not only would getting those bigger users bring in another potentially significant source of revenue, but also that added volume could help make the prices of contracts on its platform more accurate, Mr. Mansour, who is also Kalshi’s chief executive, said in an interview.
“From a business perspective, the current business is working great,” he said, adding, “As we think about the vision of what we’ve always wanted to build, the next step is going to institutionals, because that’s how you get a deeper layer of liquidity.”
Kalshi’s chief rival, Polymarket, also has its eyes on big financial firms: It raised a round of capital from the Intercontinental Exchange, the parent of the New York Stock Exchange, in October.
That growing focus on institutional users helped drive the latest fund-raising round. Coatue approached Kalshi about an investment in late February, and the firm’s origins as a hedge fund and familiarity with trading markets made it a compelling new partner, according to Mr. Mansour.
“Institutions want to work with a regulated entity that follows the rules and cares about insider trading,” Mr. Swisher said. He added that institutional trading “has the chance to be the vast, vast, vast majority of the business in several years.”
Other investors include Sequoia Capital, Andreessen Horowitz, IVP, Paradigm, Morgan Stanley and ARK Invest.
Kalshi plans to use the funds to further expand its services for corporate users, including more data integrations for trading firms and more block trading.
But the company still faces challenges on several fronts.
State regulators have sued the company over the legality of its sports betting. (Skeptics of the lawsuits say such moves are driven partly by the potential loss of gaming-related tax revenue as gamblers move away from casinos and online sports books.)
Kalshi has scored some victories on that front, including on Tuesday when a federal judge permanently blocked Arizona from prosecuting the company for what state officials said were violations of state gambling laws.
There is also the negative publicity that prediction markets have faced in recent months. The platforms have faced outrage over instances when bettors appeared to profit by wagering on events in which they had prior knowledge, particularly those involving military operations.
In one high-profile case involving Polymarket, federal prosecutors charged an Army Special Forces soldier with using classified information to make money on the American operation to oust Nicolás Maduro, the former Venezuelan president. (He has pleaded not guilty.)
Then there is the prospect of deepening competition. Beyond Polymarket, which is opening access to a new U.S.-regulated platform — its core market is restricted to overseas bettors — firms that have moved into the business include Interactive Brokers and even online sports books like DraftKings.
Mr. Mansour said he wasn’t worried. “Competition is a very, very good thing,” he said. “It enables growth for everybody.”
