Prediction market operator Kalshi has raised $1 billion in a fresh funding round, boosting its valuation to $40 billion. The round, co-led by Sequoia Capital and Wellington Management, also saw participation from Tiger Global Management and Dragoneer Investment Group. This latest investment brings Kalshi’s total funding to around $3.6 billion, according to reports.
Rapid Growth and Market Expansion
The New York-based company’s valuation has surged by nearly 82% since May, when it was valued at $22 billion after a Coatue-led funding round. Kalshi has been expanding into traditional financial trading, having entered perpetual futures trading in 2026 with CFTC approval. The company initially offered cryptocurrency contracts and later expanded into equity indexes and metals, aiming to compete with established exchange operators such as CME Group and Intercontinental Exchange.
Legal and Regulatory Headwinds
Kalshi’s expansion comes amid growing regulatory uncertainty. Two federal appeals court rulings since August have affirmed that states can regulate sports-related event contracts, challenging Kalshi’s claim that these products fall solely under federal jurisdiction. The company faces criminal charges in Utah, where the attorney general has accused Kalshi and its executives of illegally promoting online gambling, including allegations of allowing an undercover agent to place sports wagers. The Commodity Futures Trading Commission (CFTC) has responded by suing to prevent Utah from enforcing its gambling restrictions against Kalshi.
Additional legal challenges have emerged in New York and Nevada, where authorities have sought to restrict Kalshi’s operations. Three lawsuits from Native American tribes allege violations of tribal sovereignty related to sports betting on reservations, and a recent Ninth Circuit Court of Appeals decision went against Kalshi in one such case. The company has indicated it may pursue these jurisdictional disputes to the Supreme Court.
Implications for the Industry
Kalshi’s situation highlights the complex regulatory environment facing operators offering sports-related event contracts in the U.S. The company’s argument that its contracts are financial swaps regulated by the CFTC faces increasing scrutiny from both state and federal authorities. For operators and affiliates, the outcome of these legal battles could shape the future of prediction markets and sports-related trading. Suppliers and partners should closely monitor regulatory developments, as further restrictions or clarifications could impact market access and business models.
Market Position and Competition
Despite regulatory pressures, Kalshi has seen significant trading activity, especially around major sports events like the FIFA World Cup and NFL games, as well as election markets. Sports-related trading reportedly accounts for about 70% of Kalshi’s estimated $4 billion in annualized revenue. The company has overtaken rival Polymarket in market share over the past year, according to Dune Analytics data. Meanwhile, Polymarket has faced its own challenges, including delays launching a U.S. platform and a CFTC investigation.
Key takeaways
- Kalshi’s valuation has surged to $40 billion following a $1 billion funding round.
- The company faces mounting legal and regulatory challenges in several U.S. states.
- Sports-related trading remains central to Kalshi’s business model and revenue.
- Regulatory outcomes could have broad implications for operators and affiliates in the prediction market and sports trading sectors.