How Kalshi Turned a Regulatory Battle Into a $40 Billion Business

Tarek Mansour and Luana Lopes Lara founded Kalshi in 2018. The CFTC approved it as a designated contract market in November 2020, and its first contract launched in July 2021. That approval made Kalshi a federally regulated exchange rather than an offshore betting site.

The founders’ pitch rested on a gap in hedging: traders could protect themselves against moves in currencies and commodities, but not against events such as elections or policy decisions.

The limits appeared in September 2023, when the CFTC disapproved Kalshi’s contracts on which party would control Congress. Kalshi sued. On September 6, 2024, Judge Jia Cobb ruled that the agency had exceeded its authority and that the election contracts did not involve unlawful activity or gaming under the relevant statute. The CFTC appealed, but on October 2 the D.C. Circuit refused to pause the ruling, and election trading went ahead.

The timing mattered. Political contracts made up about 90% of Kalshi’s volume in October and November 2024. Even so, Kalshi was the smaller venue: in October 2024 its offshore rival Polymarket traded about $2.96 billion, against Kalshi’s $264 million.

After the election, the business that grew was sports. Kalshi’s monthly sports volume rose from $7.7 million in January 2025 to $406 million in March, $2.6 billion in September, and $31.4 billion in July 2026. From July 2024 through April 2026, sports made up about 80% of Kalshi’s volume. In July 2026, political contracts were about 0.4%.

The exact sports share is disputed. Kalshi’s general counsel has said 70%. A trade newsletter that counted parlays, which are mostly sports, found 84% to 87%.

Robinhood supplied the early reach

Distribution multiplied the effect. Robinhood launched prediction markets in March 2025 on Kalshi’s exchange, and the two split a 2-cent fee per contract. Estimates of Robinhood’s share of Kalshi volume range from one-third to 60% in September 2025, and 21% by April 2026. The estimates conflict, but the direction is clear: Robinhood supplied early retail reach, and Kalshi kept growing as Robinhood’s share fell.

Incentives built the order book

Kalshi also used incentives to build liquidity. It charges fees on takers, who match existing orders. Makers, who post orders, pay none, and market makers can earn rebates of up to 1%. It accepts deposits as small as $1 and pays interest of up to 4.05% a year on idle balances. Deeper order books make it easier for new traders to get stable prices, which fits with volume and market share rising together.

The World Cup, and the rise of combination contracts

The World Cup lifted the curve again. Volume rose 82% in June 2026 to $32.7 billion, then reached $41.1 billion in July. October hit $97.8 billion, including a record $5.1 billion day on October 24. But much of that growth came from combination contracts. One analysis of prediction-market trading volumes found that these contracts accounted for about 68% of Kalshi’s October volume and 84% of its increase from September.

Kalshi’s headline numbers measure different things, and company announcements mix them.

Volume is not revenue. Kalshi earns fees on trades, which Sacra says run from 0.07% to 7% depending on contract price. Sacra estimates annualized revenue of about $25 million in December 2024, $735 million in December 2025, and $4 billion in July 2026. These are run rates taken in peak months, not booked annual revenue. Kalshi does not publish audited financials. Its claim of more than $1 trillion in annualized volume is roughly October’s volume multiplied by twelve.

Valuation moves faster than any of these. Kalshi went from $2 billion (June 2025) to $5 billion, $11 billion, $22 billion (May 2026) and $40 billion. Against Sacra’s estimated $4 billion annualized revenue pace in July 2026, the $40 billion valuation is roughly 10 times annualized revenue. That comparison is indicative rather than a conventional revenue multiple, since the estimate is based on a monthly run rate rather than a full year of reported revenue.

We have seen this gap between headline and business before, at a much smaller scale. LLM Gateway’s $1 million milestone counted payments flowing through its Stripe account, not revenue it kept, and Comp AI’s $8 million ARR claim sat beside payment data that measured something else. Kalshi’s numbers are thousands of times larger, but the question is the same: which figure describes the business, and which describes the activity passing through it.

Against Polymarket, Kalshi’s share of tracked prediction-market volume rose from about 55% in March 2026 to 76% in October. Pew Research Center put the two platforms near 50/50 in March. Polymarket is more diversified: sports are 39% of its volume, politics 32% and crypto 20%, against 80% sports for Kalshi.

Regulated status helped Kalshi win the U.S. market, but that advantage is shrinking. Polymarket’s CFTC-regulated U.S. arm launched in late 2025, and its share of Polymarket’s volume rose from 4% in January 2026 to 39% in July. Later reports put Polymarket’s valuation above the ICE round and its revenue near $1.1 billion annualized, but those are reports, not confirmed figures.

Robinhood is a partner and a risk

The partnership gave Kalshi retail reach, and it is also a risk. A Robinhood and Susquehanna joint venture bought the exchange MIAXdx in January 2026, giving Robinhood an exchange of its own. Trade press reports that Robinhood still routes most contracts to Kalshi.

A broader exchange?

Kalshi says yes. It launched perpetual futures in late May 2026 and said that by September, 500 institutional entities were trading on it and, excluding market makers, made up 25% of volume. Crypto reached about $6.1 billion, 15% of July volume. Still, politics was about 0.4% of volume, and the $1 billion non-sports revenue figure is a fraction of the $4 billion estimated total, though the two come from different months and sources.

The product that generates most of Kalshi’s volume is the one states are fighting. States argue that sports contracts are sports betting and need a state license. Kalshi argues that they are swaps on a federally regulated exchange, which only the CFTC oversees.

Courts have split. In April 2026, the Third Circuit ruled 2-1, at the preliminary-injunction stage, that sports event contracts are swaps and that federal law preempts New Jersey’s gambling rules. In late August, the Ninth Circuit unanimously went the other way on Nevada, saying Kalshi’s contracts have “the hallmarks of sports betting.” New Jersey asked the Supreme Court to resolve the conflict on September 2. The Court has not agreed to hear the case, and Kalshi’s response is due November 9.

Utah escalated on October 28, the day before the funding announcement. It filed 14 criminal counts, 13 of them felonies, against Kalshi and its co-founders Mansour and Lopes Lara, after a federal judge and the Tenth Circuit declined to block its enforcement. Kalshi called the charges a “crazy overreach.” Arizona’s earlier misdemeanor charges were put on hold. The CFTC, which backs Kalshi’s position, has sued at least 10 states, and litigation spans roughly 20.

Regulation was the opening, not the engine. It allowed Kalshi to list election contracts in 2024 and helped establish its credibility with brokers. Sports trading and Robinhood’s distribution then became the major growth drivers, while Kalshi’s rising market share suggests it has built meaningful liquidity.

What remains unproven is whether the business can justify its valuation. Revenue figures are largely estimated, profitability is undisclosed, and sports trading accounts for most of the volume. That same business faces legal challenges in courts that have reached conflicting conclusions.

A favorable Supreme Court ruling could strengthen Kalshi’s regulatory position. An unfavorable one could force significant changes to how it operates in some states. Most of the companies in our Deep Dives had to prove that customers wanted what they built. Kalshi has proved that many times over. Whether that growth becomes a durable $40 billion business now depends less on its customers than on the courts.