Prediction market operator Kalshi is seeking US regulatory approval to allow margin trading on its platform, as it seeks to lure institutional investors with more 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 let large investors bet on certain contracts without putting up the full amount of funds, something many hedge funds consider a prerequisite before committing substantial capital. If Kalshi gets approval, the platform would initially likely offer margin contracts only to institutional investors, not retail traders, according to one of the people.
Margin on an event contract is expected to be structured like a traditional futures contract, in which investors put down a small fraction of the contract’s face value and settle in full when the contract closes, the person said. Kalshi declined to comment, and 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 greater liquidity and financial flexibility — such as the ability to use margin — to make trading or hedging worthwhile.
This month, Kalshi hired a risk manager who previously worked at broker-dealer Velocity Clearing. On LinkedIn, he said his prior role 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, which it said was the first to “offer margin trading”.
In an apparent effort to differentiate itself from 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 Trump-appointed chair Michael Selig. Last week, the agency officially withdrew Biden-era proposals to ban political and sports-related event contracts from registered exchanges.
At the same time, Selig has said the commission will write new rules to govern prediction markets, following a series of bets in which traders appeared to profit from inside information. He said last month that the regulator would “continue to support the responsible development of event contract markets,” adding 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 CFTC approval to operate its own clearinghouse — though only for “fully collateralised” positions, meaning investors were required to fully fund their trades.
Introducing margin would be a pivotal moment for Kalshi in its effort 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.”
