The surge in interest in prediction markets helped Kalshi, one of the sector’s largest companies, raise money this fall at a valuation of $5 billion.
Less than two months later, the company returned to the market, raised more money and more than doubled its value.
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Kalshi announced this Tuesday (2) that it raised US$ 1 billion at a valuation of US$ 11 billion, in the third round of capital of the year. The operation was led by the manager Paradigm, already an investor in the company, and also included Sequoia Capital, Andreessen Horowitz, Meritech Capital, IVP, ARK Invest, Anthos Capital, CapitalG and Y Combinator.
“We are in a huge market, with a huge opportunity,” said Tarek Mansour, co-founder and CEO, in an interview. “We need to gain scale to achieve this opportunity.”
The movement reinforces that prediction markets — platforms that allow bets on elections, Oscars and other events — have become big business. The five largest platforms have billions of dollars in weekly trading volume, according to Dune.
The valuation of the new round transformed Mansour and co-founder Luana Lopes Lara into billionaires. At least on paper. Both hold between 20% and 25% of the company, according to a person familiar with the ownership structure who was not authorized to speak publicly.
Kalshi has grown rapidly in the last year, especially after starting to offer complex sports bets known as parlays. Today, much of the activity on the platform is focused on sports, said Rajiv Sethi, a professor at Barnard College who specializes in prediction markets.
The company turned over around US$5.8 billion in November, a record, an increase of 32% over October, according to The Block, which covers the digital assets industry.
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“It’s one of the fastest-growing companies we’ve ever seen,” said Matt Huang, co-founder and partner at Paradigm, in an interview.
Mansour stated that the new investment will allow us to expand our product offering and international operations. The company also seeks to sign distribution agreements with institutions such as brokers, which allow it to negotiate its contracts with the same ease as shares.
Kalshi is also advancing on other fronts. It should soon announce, for example, a partnership with CNNaccording to a person familiar with the negotiations who was not authorized to comment on the matter. The company did not comment. THE CNN also did not immediately respond to a request for comment.
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For Kalshi and its investors, there is room for further expansion. Huang suggested that some users may use bets on the platform as a way to hedge against risks like weather. They could also help offset losses in the event of a federal shutdown, said Ryan Frazier, CEO of Arrived, a real estate investment platform.
Others see this scenario as unlikely. Prediction markets are “not a serious environment for hedging,” with most users only focused on betting on different events, Sethi said.
Despite Kalshi’s progress, the company faces strong competition from rival Polymarket, which recently received authorization to operate in the USA. The two are engaged in a kind of arms race for capital. In the same week of October, Kalshi announced a US$300 million round and Polymarket revealed that it had secured a potentially billion-dollar investment from the controller of the New York Stock Exchange.
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The success of the two platforms — especially in the sports segment — has put pressure on the business model of traditional bookmakers like DraftKings and FanDuel. The two are now trying to enter the prediction market.
And prediction markets face increasing regulatory pressure from state authorities who claim they have jurisdiction over sports betting on these platforms and a right to some of that revenue. Kalshi suffered a legal setback last week when a federal judge ruled that the company is subject to Nevada gaming rules, a point the company disputes.
Mansour stated that the impacts of the decision — which the company intends to appeal — are not yet clear. “It’s early,” he said.
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