A comprehensive look at how Kalshi works, its explosive growth, the escalating state-vs-federal legal battle, and what every trader needs to know in 2026.
What Is Kalshi and Why Does It Matter?
Kalshi is a U.S.-based financial exchange where users trade event contracts—simple yes-or-no positions on real-world outcomes. Will inflation exceed a certain threshold? Who will win the Super Bowl? Will the government shut down? On Kalshi, every question becomes a tradeable market.
Founded in 2018 by Tarek Mansour and Luana Lopes Lara, both former financial analysts, Kalshi launched publicly in July 2021 out of New York City. What initially set Kalshi apart was its regulatory status: in November 2020, it became the first exchange dedicated exclusively to event contracts to receive approval from the U.S. Commodity Futures Trading Commission (CFTC) as a Designated Contract Market (DCM).
Since then, Kalshi has grown from a niche financial experiment into one of the fastest-scaling platforms in fintech. By the end of 2025, Kalshi had processed roughly $23.8 billion in annual trading volume—a staggering increase of over 1,100% year-over-year. In December 2025, the company closed a $1 billion Series E funding round led by Paradigm, with backing from Sequoia Capital, Andreessen Horowitz, ARK Invest, and others, pushing its valuation to $11 billion.
That explosive trajectory has also made Kalshi one of the most legally contested companies in the country, with more than 20 states challenging its right to operate.
How Kalshi’s Event Contracts Work
At its core, Kalshi offers binary event contracts. Every market on the platform is structured as a yes-or-no question tied to a verifiable real-world outcome.
Here’s how the mechanics break down:
Every market is phrased as a question, such as: “Will year-over-year CPI in March be above 3.0%?”
Users trade YES or NO contracts priced between $0.01 and $0.99, with each contract carrying a $1 notional value. When the event is resolved, the winning side pays $1 per contract and the losing side pays $0.
Because every YES contract is matched with a corresponding NO contract, the combined price of a YES-NO pair always equals $1. This means the contract price functions as a probability signal. A YES contract priced at $0.65 implies the market collectively believes there is a 65% chance the event will occur.
If you buy YES at $0.65 and the event happens, your profit is $0.35 per contract. If it doesn’t happen, you lose your $0.65 stake. The inverse applies to NO contracts.
Kalshi operates a central limit order book, similar to what you’d find on a stock or futures exchange. Buyers and sellers are matched at the price they’re willing to trade, and prices shift in real time as new orders flow in, reflecting the crowd’s evolving beliefs about an outcome.
Is Kalshi Legal? The Federal vs. State Battle Explained
This is the most important and rapidly evolving question surrounding Kalshi in 2026, and the answer is more complicated than it used to be.
At the federal level, Kalshi is fully regulated. The CFTC approved it as a Designated Contract Market, giving it authority to list event contracts under federal derivatives law. In 2024, after a lengthy legal fight with the CFTC itself over whether election-related contracts were permissible, a federal court sided with Kalshi and overturned the agency’s rejection. The CFTC formally dismissed its appeal in May 2025, cementing a legal precedent for election-based event trading.
At the state level, however, the fight has intensified dramatically. As of February 2026, gaming regulators in more than 20 states have filed legal challenges against Kalshi, alleging that its sports-focused event contracts amount to unlicensed gambling in violation of state gaming laws.
The most prominent battleground has been Nevada. The Nevada Gaming Control Board issued its first cease-and-desist order against Kalshi in March 2025. After a federal judge ordered Kalshi to stop offering sports contracts in the state, Kalshi appealed, but the 9th Circuit Court of Appeals upheld that ruling on February 17, 2026. Nevada immediately filed a civil enforcement action to block Kalshi from operating within its borders.
In January 2026, a Massachusetts Superior Court judge issued a preliminary injunction against Kalshi, requiring the platform to use geofencing technology to block Massachusetts residents from accessing sports-related markets. Tribal gaming groups in California and Wisconsin have also filed lawsuits.
The Trump administration has now entered the fray. On February 17, 2026, CFTC Chairman Michael Selig filed an amicus brief in federal court asserting the agency’s exclusive jurisdiction over prediction markets. In a Wall Street Journal opinion piece, Selig stated that the CFTC would no longer allow states to undermine its authority over these products. The CFTC has also formed a 35-member Innovation Advisory Committee that includes the CEOs of Kalshi, Polymarket, Coinbase, Robinhood, FanDuel, and DraftKings.
This federal intervention carries political dimensions as well: Donald Trump Jr. has invested in Polymarket through his venture capital firm and serves as a strategic advisor for Kalshi.
The bottom line for traders: Kalshi is CFTC-regulated and technically authorized to operate nationwide, but your actual ability to trade—especially on sports contracts—may depend on where you live and the ongoing outcome of these legal battles.
What Can You Trade on Kalshi?
Kalshi lists thousands of markets across a growing range of categories, though the composition of its trading activity has shifted dramatically.
Sports now dominate the platform, accounting for roughly 90% of Kalshi’s trading volume and 89% of its fee revenue in 2025 according to industry estimates. Football season (NFL and college) drives an outsized share of activity, and the platform has expanded into custom parlays—multi-event combination bets—using a Request for Quote (RFQ) system. Kalshi reported over $1 billion in volume traded on the Super Bowl alone.
Beyond sports, Kalshi continues to offer markets in:
Economics and financial markets — including inflation readings (CPI, PCE), Federal Reserve rate decisions, unemployment data, and GDP figures.
Politics and policy — such as which party controls Congress after the 2026 midterms, the passage or failure of major legislation, and government shutdown timelines. Kalshi has partnered with 270toWin to display live prediction odds for select 2026 Senate races.
Weather and climate — covering rainfall or snowfall thresholds, temperature records, and other measurable weather events.
Culture and entertainment — including award show outcomes, pop culture milestones, and other events where permitted by regulation.
Crypto markets — Kalshi has also moved into cryptocurrency-linked event contracts, settling against regulated benchmarks for price transparency.
This breadth makes Kalshi appealing both to speculators looking for action and to businesses or individuals hedging against real-world exposures—such as a company vulnerable to inflation hedging through CPI contracts.
Key Partnerships and Distribution
Kalshi’s growth has been heavily boosted by distribution partnerships, most notably with Robinhood.
Robinhood launched its Prediction Markets Hub in early 2025, initially routing all event contract trades through Kalshi’s exchange. By mid-2025, Robinhood was driving more than half of Kalshi’s total trading volume, and the two companies split a 2-cent-per-contract fee on taker orders. In August 2025, they expanded the partnership to include NFL and college football markets.
However, the relationship is evolving. In November 2025, Robinhood announced a joint venture with Susquehanna International Group to acquire MIAXdx, a CFTC-licensed exchange and clearinghouse. That acquisition closed in early 2026, giving Robinhood the infrastructure to eventually operate its own prediction market exchange. While Robinhood has said it will continue offering Kalshi contracts alongside its own products, analysts expect a gradual migration that could reduce Kalshi’s retail flow over time.
Other distribution partners include PrizePicks (which added Kalshi-powered sports and culture picks across 38 states in November 2025), Webull, and a reported upcoming integration with Coinbase. Susquehanna International Group also continues to serve as a major market maker on Kalshi’s exchange, providing order book depth and liquidity.
How to Trade on Kalshi: A Step-by-Step Overview
This is an overview, not legal or investment advice. Always check local laws and platform terms before trading.
Sign up and verify your identity. Create an account at Kalshi.com and complete the required KYC (Know Your Customer) process. As a regulated exchange, Kalshi is required to verify your identity before you can trade.
Deposit funds. Link a bank account or use a supported payment method to deposit U.S. dollars into your trading account.
Browse and select a market. Explore categories like economics, politics, sports, or weather. Read the full contract specifications carefully—this includes the event definition, the data source used for settlement (for example, the Bureau of Labor Statistics for CPI), the settlement date, and any edge-case rules.
Take a position. Decide whether you believe the event will happen (YES) or won’t happen (NO). Enter the number of contracts you want and choose between a market order (executed immediately at the best available price) or a limit order (executed only at your specified price or better).
Hold or exit. You don’t have to wait for settlement. Contracts can be sold before expiration to lock in profits or cut losses as market prices move. At settlement, the official outcome is determined according to the contract rules, and your position resolves at either $1 or $0.
Fees, Limits, and Liquidity
Trading fees on Kalshi follow a maker-taker model. Taker orders (those that immediately execute at the market price) are charged a fee that typically ranges from around 0.07% to 7%, depending on the contract’s probability. Lower-probability contracts (longshots) carry higher percentage fees. Maker orders (limit orders that add liquidity to the book) incur no fee. Fees are capped, and even on larger trades the effective cost remains relatively modest.
Through its Robinhood partnership, fees are split at roughly 2 cents per contract between the two platforms.
Position limits vary by market. Standard accounts can hold positions up to $25,000 per market, while approved institutional accounts and market makers may trade at higher thresholds.
Liquidity comes from a mix of individual retail traders, institutional market makers (most notably Susquehanna), and Robinhood’s user base. High-profile contracts—like major sports events, headline economic data releases, or election markets—tend to be highly liquid. Niche or lower-profile contracts may be thinly traded, making limit orders essential to avoid slippage.
The Competitive Landscape in 2026
Kalshi is no longer the only player in the U.S. prediction market space.
Polymarket, its primary rival, processed roughly $21.5 billion in trading volume in 2025 and has been valued between $8 and $15 billion following a major investment from Intercontinental Exchange (the parent company of the New York Stock Exchange). Polymarket operates on crypto rails and has historically been geofenced from U.S. users, though it is working toward an official U.S. return through the acquisition of a regulated derivatives exchange.
Robinhood is building its own exchange via MIAXdx, expected to begin operations later in 2026. FanDuel has partnered with CME Group to launch FanDuel Predicts. DraftKings acquired the Railbird exchange. And a sports-focused challenger called Novig just raised $75 million at a $500 million valuation, positioning itself as a commission-free alternative.
Industry analysts expect five or more fully operational CFTC-registered prediction market exchanges to be competing in the U.S. by mid-2026.
Key Risks Every Trader Should Understand
Even with federal regulation, trading on Kalshi carries real risk.
Market risk is the most straightforward: you can lose 100% of your stake on any given contract if the outcome goes against you. The all-or-nothing payout structure of binary contracts makes them inherently leveraged on your conviction.
Legal and access risk is the most dynamic concern in 2026. With more than 20 states challenging Kalshi’s operations—and court rulings going in different directions—there is real uncertainty about whether specific contract types (especially sports) will remain available in your state.
Regulatory uncertainty remains high. Courts are still sorting out how federal derivatives law interacts with state gambling statutes. The Trump administration’s intervention through the CFTC has raised the stakes, but a definitive Supreme Court ruling has not yet occurred.
Competitive and counterparty risk is growing as well. Robinhood’s move to build its own exchange could reduce Kalshi’s retail volume. And while Kalshi is fully regulated and cleared, no platform is immune to operational disruptions, data disputes, or legal setbacks.
A proposed class action lawsuit was filed against Kalshi in November 2025 in New York, alleging deceptive practices and claiming that some users were unknowingly betting against Kalshi or its partners rather than against other users. This case is ongoing.
Tips for New Kalshi Traders
Think in probabilities, not odds. Every contract price is a probability estimate. If YES is priced at $0.72, the market thinks there’s a 72% chance the event happens. Your job is to decide whether the true probability is higher or lower than what the market is pricing.
Trade what you know. Focus on areas where you have genuine informational edge—whether that’s macro data releases, a specific sport, political polling, or weather patterns. The broadest markets attract the most sophisticated participants.
Read the contract specifications, not just the headline. Settlement hinges on exact data sources and precise rules defined in the contract. Small wording details can determine the outcome.
Use limit orders in thin markets. Illiquid contracts can have wide bid-ask spreads. Placing limit orders rather than sweeping the order book helps you avoid overpaying.
Start small. Binary contracts are simple in structure but aggressive in payoff. The all-or-nothing nature means a string of losses can be punishing. Size positions modestly until you have a track record and understand how the platform behaves.
Stay current on the legal landscape. The regulatory environment is shifting week to week. Follow developments in your state to ensure you’re trading within legal boundaries.
The Bottom Line
Kalshi has grown from a first-of-its-kind regulatory experiment into an $11 billion exchange processing billions in weekly trading volume. It has turned predictions about inflation, elections, sports, weather, and more into a new asset class of tradeable event contracts.
But 2026 is a pivotal year. The clash between federal authority and state gambling regulators will determine whether prediction markets can operate freely nationwide or face a patchwork of restrictions. New competitors are entering the space at every level. And the platform’s reliance on sports volume—and on Robinhood’s distribution—introduces dependencies that are already being tested.
For traders who understand the mechanics, follow the regulations, and manage their risk, Kalshi offers a structured way to put conviction behind the biggest questions driving markets, politics, and culture today. Just make sure you know the rules before you place the trade.
