Prediction market Kalshi seeks US approval to offer margin trades

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Prediction market operator Kalshi is seeking US regulatory approval to allow margin trading on its platform, as it seeks to lure institutional investors with sophisticated financial contracts.

Kalshi has held meetings with the Commodity Futures Trading Commission over several months in its effort to win approval, according to people familiar with the matter. It was not clear whether the CFTC would approve the request or where the matter stood.

The initiative highlights the rapid evolution of prediction markets from their quaint origins offering wagers on Oscar winners and presidential elections into gambling behemoths spanning sports, global affairs and financial markets. Allowing margin trading could pave the way for Kalshi to allow big investors to bet on certain contracts without putting up the full amount of funds, something many hedge funds consider a prerequisite before they will invest substantial capital on trades.

If Kalshi gets approval, the platform would initially likely only offer margin contracts to institutional investors and not retail traders, according to one of the people.

Kalshi declined to comment. The CFTC did not respond to a request for comment.

“What we’re seeing in 2026 is the CFTC and [Securities and Exchange Commission] saying there’s not much of a difference between trading and gambling anymore,” said Bill Singer, a former regulatory defence lawyer. “When you have [exchange traded funds] offering triple leverage on all sorts of odd things, how do you justify extending margin to trade on a meme stock but not on a prediction market?”

Kalshi and its main rival Polymarket have surged in popularity since the US presidential election in 2024, with monthly trading volumes reaching billions of dollars.

Yet hedge funds and other large investors have largely stayed on the sidelines. Traders at these firms often oversee hundreds of millions of dollars, which requires asset classes with more liquidity and financial flexibility, like the ability to use margin, to make it worth their while to trade or hedge their positions.

This month, Kalshi hired a risk manager who previously worked at broker-dealer Velocity Clearing. On LinkedIn, he said his previous job had helped him “build a strong foundation in margin and risk”.

CFTC-regulated crypto exchange Crypto.com last week launched its own prediction market platform that it said was the first to “offer margin trading”.

In an apparent push to differentiate itself from rival prediction market Polymarket — which is based offshore and built on blockchain technology — Kalshi on Thursday said it had formed a new “independent surveillance audit committee” that would publish quarterly public reports on suspicious trades and details of its own investigations into potential market manipulation.

The CFTC has adopted a light-touch regulatory approach to prediction markets under its new Trump-appointed chair, Michael Selig. Last week it officially withdrew Biden-era proposals to ban political and sports-related event contracts from registered exchanges.

At the same time, he has said the commission will write new rules to govern prediction markets, coming after a series of bets in which traders appear to have profited from inside information. Selig said last month that the regulator would “continue to support the responsible development of event contract markets.” He added that it was “time for clear rules and a clear understanding that the CFTC supports lawful innovation in these markets”.

In 2020, Kalshi became the first prediction markets exchange to gain regulatory approval to operate in the US. Four years later, the company received the greenlight from the CFTC to operate its own clearinghouse, although only for “fully collateralised” positions, meaning that investors were required to fully fund their trades.

Introducing margin would be a pivotal moment for Kalshi in its endeavour to attract more traditional Wall Street firms, said Jake Preiserowicz, a partner at the law firm McDermott Will & Schulte who advises hedge funds and previously worked at the CFTC.

“Margin is a central part of what hedge funds do right now,” he said. “It’s basically impossible to trade derivatives any other way when you’re an institutional investor.”