Kalshi's annual trading volume soared from 5.5 billion to 178 billion dollars, with revenue primarily coming from sports betting, and future strategic focus shifting towards financial institutions.

Written by: Dong Jing

Source: Wall Street Insight

Prediction market platform Kalshi has completed a new round of financing of 1 billion dollars, with its valuation skyrocketing to 22 billion dollars, an increase of over 400% in less than a year, reflecting strong investor bets on this emerging field.

On May 7, according to the Financial Times, Kalshi's latest round of financing was completed on Thursday, led by investment firm Coatue, owned by Philippe Laffont, with participation from firms like Sequoia Capital, Andreessen Horowitz, and Morgan Stanley. The latest valuation of 22 billion dollars has surpassed the market value of FanDuel's parent company Flutter, which is approximately 17 billion dollars, and is nearly double that of competitor DraftKings' market value.

Kalshi stated that the new funds will be used to expand its recently launched block trading feature and invest in "upcoming risk products" to enhance its appeal to financial institutions. Meanwhile, the platform's annual trading volume reached 178 billion dollars in April this year, compared to only 5.5 billion dollars in the same period last year.

Valuation quadrupled in one year, growth rate comparable to AI sector

Kalshi's valuation trajectory is quite unusual.

According to the Financial Times, the platform was valued at only 5 billion dollars in a funding round last October, which rose to 11 billion dollars by the financing in December, and this latest round of financing valuation has again doubled to 22 billion dollars—an accumulated increase of over 400% in less than a year.

Kalshi's CEO Tarek Mansour said:

"In recent years, there are very few sectors that can achieve such rapid scale expansion, aside from artificial intelligence."

This rapid growth is backed by the overall rise in popularity of prediction markets. The prediction market platform provides users with "shares" similar to bets, with underlying events being binary outcome events, such as whether a certain team wins or loses a game. Kalshi successfully predicted Trump’s victory in the 2024 U.S. presidential election, after which the platform saw a significant increase in traffic and trading volume.

From a revenue structure perspective, Kalshi's current revenue mainly comes from sports betting. According to analysis platform DeFi Rate data, last month, sports-related contracts and "exotic" contracts (including multi-leg sports betting similar to parlays) accounted for about 85% of Kalshi's trading volume.

However, the platform's strategic focus is shifting towards financial institutions. Kalshi stated that the new financing will focus on expanding its block trading capabilities and risk-related products to attract institutional clients' participation.

Bernstein analyst Gautam Chhugani predicted in April this year that the trading volume in prediction markets is expected to exceed 1 trillion dollars by 2030, noting that sports contracts are merely "the entry point rather than the endpoint" for platforms like Kalshi.

Regulatory controversies continue, multiple states suing the platform for illegal operations

While rapidly expanding, Kalshi also faces increasingly severe regulatory pressure.

The platform, along with competitor Polymarket, is being subjected to increasing scrutiny, with ongoing debates on whether it should be classified as a derivatives exchange or a betting operator.

Kalshi insists that its contracts should continue to be regulated as derivatives by the U.S. Commodity Futures Trading Commission (CFTC), which allows it to bypass state bans on sports betting and betting taxes.

However, several state gambling regulatory agencies have filed lawsuits against it, accusing it of operating as an illegal sports betting platform.

Earlier this week, a federal judge issued an injunction preventing Arizona Attorney General Kris Mayes from filing a criminal lawsuit against Kalshi, temporarily winning the platform some legal breathing space.

Analysis indicates that regulatory trends still represent the greatest uncertainty hanging over Kalshi, which will significantly determine whether it can convert its current rapid growth into a sustainable business model.