What is Kalshi? The first federally regulated US event-contract exchange

The thirty-second summary

Kalshi is a US-regulated exchange where you can buy and sell contracts that pay $1 if an event happens and $0 if it doesn't. The price of the contract is the market's probability that the event happens. You fund your account with USD from a bank transfer or debit card, you trade on the web or mobile app, and you withdraw USD back to your bank.

In other words: it's Polymarket, but legal in the US, USD-denominated, centralized, and regulated by the same federal agency that supervises CME futures.

The regulatory backstory

Founded in 2018 by Tarek Mansour and Luana Lopes Lara, both MIT graduates who met at Goldman Sachs, Kalshi spent two years negotiating with the CFTC (Commodity Futures Trading Commission) to become the first designated contract market specifically for event contracts. The CFTC granted DCM status in 2020.

DCM status is the same regulatory category that CME (Chicago Mercantile Exchange) and ICE (Intercontinental Exchange) hold. It means Kalshi is a federally-regulated derivatives exchange, subject to the same oversight as those century-old institutions, but offering contracts on events rather than on commodities or currencies.

The CFTC imposes three key things on a DCM:

Clearing and margin. Every contract has to be fully collateralized at trade time — Kalshi holds 100% of the contingent payout.
Market surveillance. Kalshi has to monitor for manipulation, wash trading, and insider trading.
Reporting. Trades are reported to the CFTC. Users get 1099 tax forms.

These constraints make Kalshi slower-moving than Polymarket. New market categories take CFTC review. But they also make Kalshi the only US-legal option for US residents who want event contracts.

The political markets saga

Kalshi's biggest legal battle was over political event contracts. In 2023 the CFTC refused to approve Kalshi's proposed "Will Democrats control the Senate after 2024?" contracts, citing the Commodity Exchange Act's prohibition on contracts involving "gaming".

Kalshi sued, arguing political contracts serve a legitimate economic purpose (hedging for firms exposed to regulatory change). In September 2024, the D.C. District Court ruled for Kalshi. The Fifth Circuit affirmed in October 2024. Kalshi immediately listed political contracts and saw massive volume around the November 2024 election.

This was the most important US prediction market court case in a decade. It established that:

Political outcomes can be traded as event contracts under CFTC authority
States cannot preempt CFTC-approved contracts
"Gaming" prohibitions don't automatically extend to economic-purpose contracts

After the ruling, Kalshi expanded into sports contracts. By early 2026 it offers political, economic, weather, sports, and crypto markets across a large contract universe.

How Kalshi works mechanically

Account and funding

You sign up with an email, phone number, and KYC (name, address, date of birth, SSN last four). Once verified, you fund with:

ACH bank transfer — free, 1–3 business days
Wire — faster, small fee
Debit card — instant, 1–2% fee

No crypto. Everything is USD.

Markets and contracts

Kalshi markets look like this:

Will the Fed cut rates at the March 2026 FOMC meeting? YES: 42¢ · NO: 58¢ Volume: $1.2M · Open interest: $800k

You buy YES if you think the probability is above 42%. You buy NO if you think it's below 42%. At resolution, winning shares pay $1, losing shares pay $0.

Markets are organized into categories — Economics, Politics, Weather, Sports, Climate, Science, Entertainment. Within each, Kalshi lists tens to hundreds of individual contracts.

Order types

Market order — match best available price, fills immediately
Limit order — post your own price, wait for fill
All-or-none, fill-or-kill — advanced order types for large positions

The spread between best bid and best ask is typically 1–3 cents on liquid markets (Fed decisions, major sports, presidential elections). Obscure markets can have 5–15 cent spreads.

Resolution

Each Kalshi market has its resolution source named in the contract spec — typically a specific government release (BLS jobs report, NBER recession declaration), an official scoreboard (NFL playoff results), or a primary source (Federal Reserve press release).

Kalshi's internal resolution team reads the source at the specified time and resolves the contract. There's a dispute period (typically 48 hours) during which users can flag issues.

Unlike Polymarket's optimistic oracle, Kalshi's resolution is centralized — it's decided by Kalshi staff, not by a token-holder vote. The advantage is speed and clarity. The disadvantage is that users have to trust Kalshi's judgment. In practice, Kalshi has resolved tens of thousands of contracts without significant controversy; its centralized model works because it's CFTC-supervised.

Fees and cost structure

Kalshi's fee model is transparent and visible on every trade.

Trading fees: Per-contract fee, shown on-screen before you commit. Typically a few cents per contract on liquid markets, scaled to contract size. Exact fee depends on the market category and contract.
Deposit fees: Free for ACH and wire; 1–2% for debit card.
Withdrawal fees: Free for ACH; wire fee for wires.
No inactivity fees, no maintenance fees.

For a specific example: on a major sports contract, you might pay $0.02 on each side of a trade. On a $100 position that's $2 total — far less than the 4–5% vig you'd pay at a traditional sportsbook.

What Kalshi is good for

Hedging economic exposure. Kalshi's macroeconomic contracts (Fed rates, CPI, unemployment) are the cleanest way to hedge specific policy scenarios. If you're short duration and worried about a dovish surprise, a Kalshi Fed-cut contract is a cheap hedge.

Getting a probability number. Kalshi's contract prices are directly quoted probabilities. You don't have to decode American odds or back out vig. This makes Kalshi valuable even to non-traders who just want to know "what's the market probability that X happens".

Sports betting alternative. If you live in a state without legal sportsbooks (Texas, California, Utah, Hawaii, Alabama), Kalshi's sports markets are your legal option. Even in states with sportsbooks, Kalshi's lower fees can produce better effective odds.

Political engagement. Primary calendars, election cycles, confirmation fights. Kalshi markets let you put money behind your political read.

Weather risk. Farmers, event organizers, construction firms, and utilities use Kalshi weather contracts (temperature thresholds, hurricane paths, snowfall) as cheap, direct hedges.

What Kalshi is not good for

Global market coverage. Kalshi is US-focused. If you want markets on Indian elections, European economic data, or South American politics, Polymarket has deeper coverage.

Entertainment markets. Kalshi has selective entertainment contracts but Polymarket is still the deeper market for Oscars, awards shows, and reality TV.

Decentralized ownership. Kalshi holds your USD in an FDIC-insured account via its bank partner. That's safer than most crypto custody arrangements, but it's not self-custody. If Kalshi's banking partner collapses, your funds are FDIC-insured up to $250k, not instantly accessible.

Exposure to protocol-level crypto markets. Kalshi's crypto contracts are on BTC/ETH price milestones, not on protocol governance or exchange-health.

Who uses Kalshi

Three overlapping user groups:

Retail speculators. Most of Kalshi's user base. Trading amounts from $50 to $5,000 on markets that interest them.

Sophisticated individual traders. Arbitraging Kalshi vs Polymarket vs traditional sportsbooks. Running statistical models. Market-making thin contracts.

Institutional hedgers. Corporates and funds using Kalshi for genuine economic-risk hedging. Kalshi has explicitly marketed to this audience as the legitimate use case that distinguishes Kalshi from gambling.

Safety and custody

Kalshi is a CFTC-regulated entity. This means:

Customer funds are held in segregated accounts at FDIC-insured banks, separate from Kalshi's operating capital
The CFTC inspects and audits Kalshi regularly
Kalshi publishes quarterly financial reports
If Kalshi were to fail, customer funds would be returned (subject to normal bankruptcy proceedings for any uncleared positions)

This is a very different risk profile from Polymarket. Polymarket's smart contracts hold USDC in a decentralized architecture that's safe from Polymarket Inc. going bankrupt but vulnerable to smart contract bugs or oracle disputes. Kalshi's traditional custody is safe from smart contract bugs but relies on the FDIC, the CFTC, and Kalshi itself not failing.

For most US users, Kalshi's traditional-finance safety profile is the more comprehensible and reassuring of the two.

Mobile, API, and power-user tools

Web app — full-featured trading, identical to desktop
iOS and Android apps — trading, portfolio, notifications
REST API — free tier for fetching market data and placing trades
WebSocket API — live market data streams
Python SDK — unofficial but widely used
Candlesticks endpoint — historical OHLCV for modeling

Kalshi's API documentation is at trading-api.readme.io. Rate limits are generous for retail-level usage. For algorithmic trading, you can run live strategies — many traders do.

Kalshi vs Polymarket in one paragraph

Kalshi is the US-legal choice: regulated, USD-native, centralized, trusted by institutions, limited to CFTC-approved contract categories. Polymarket is the global choice: decentralized, crypto-settled, wider market universe, blocked for US users. If you're in the US, use Kalshi. If you're outside the US and comfortable with crypto, use Polymarket. See Polymarket vs Kalshi for a deeper comparison.

FAQ

Frequently asked questions

Is Kalshi legal in every US state?+

Yes. Kalshi's CFTC designation preempts state gambling law for federally-designated event contracts. All 50 states plus DC have access.

Does Kalshi issue 1099 tax forms?+

Yes. Users with reportable gains receive IRS Form 1099. See our tax coverage for details.

How does Kalshi make money?+

Primarily from trading fees (a few cents per contract). They also earn interest on the customer-fund float held at their banking partner.

Is my money safe on Kalshi?+

Customer funds are held in segregated FDIC-insured accounts. Kalshi is CFTC-regulated and audited. See our is Kalshi safe article for a full review.

What markets can I trade on Kalshi?+

Economic data (Fed, CPI, jobs), elections (presidential, congressional, primaries), sports (NFL, NBA, MLB, NHL), weather (temperature, hurricanes, snow), crypto (BTC/ETH milestones), science, and selected entertainment events.

How do I deposit?+

ACH bank transfer (free, 1–3 days), wire (fast, small fee), or debit card (instant, 1–2% fee). No crypto required.

Does Kalshi have a mobile app?+

Yes, iOS and Android, full-featured for trading and portfolio management.

Can I run an algorithmic trading strategy on Kalshi?+

Yes, Kalshi has a public REST and WebSocket API. Many retail traders run automated strategies via the Python SDK or custom clients.