Kalshi, a leading platform for event-based trading, has secured $185 million in Series C funding, valuing the company at $2 billion. The round was led by crypto-focused venture capital firm Paradigm, with participation from Sequoia Capital, Multicoin, Bond Capital, Neo, and Peng Zhao, CEO of Citadel Securities.

The raise positions Kalshi at the forefront of the growing prediction market industry, which is rapidly attracting investor attention due to its potential to reshape how people engage with global events, from politics to economic trends and sports.

Strong Backing for a Regulated Future

Matt Huang, co-founder and managing partner at Paradigm, likened the current state of prediction markets to the early days of cryptocurrency. “Prediction markets remind me of crypto 15 years ago: a new asset class on a path to trillions,” he said, expressing confidence in Kalshi’s ability to scale the sector responsibly.

Kalshi’s regulatory approach is a key differentiator. After a lengthy legal battle, the platform reached an agreement with the U.S. Commodity Futures Trading Commission (CFTC), allowing it to operate under a regulated framework in the United States. This approval notably includes permission to list contracts tied to U.S. election outcomes, a significant win for the platform.

Kalshi’s regulated status has given it a reputational advantage over rivals, particularly Polymarket, which remains restricted in several jurisdictions, including the U.S., U.K., France, Singapore, and Ontario.

Polymarket in Talks for $200M Raise

The funding news for Kalshi comes just a day after reports emerged that Polymarket, Kalshi’s largest competitor, is seeking to raise $200 million in a round led by Peter Thiel’s Founders Fund. The pre-money valuation for the round is expected to exceed $1 billion, though the deal has not yet closed.

Polymarket operates on a cryptocurrency model and has seen increased trading activity around geopolitical and economic developments. Recent markets include predictions about the stability of the Middle East and the probability of a U.S. recession in 2025. Despite its growing traction, the platform remains off-limits to U.S. users due to regulatory restrictions imposed by the CFTC in 2022.

According to Polymarket’s terms of use, several regions have either banned or heavily restricted access to the platform. Regulatory authorities argue that these platforms resemble either betting markets requiring gambling licenses or securities markets that must comply with financial regulations.

Kalshi’s Legal Landscape Remains Complex

While Kalshi has successfully navigated federal regulatory hurdles, it continues to face legal challenges at the state level. In April, the platform filed for a restraining order against Maryland’s gaming regulator following a cease-and-desist order. Kalshi also opposed a recent amicus brief filed by tribal organisations, labelling the filing “untimely and unhelpful.”

Despite these hurdles, Kalshi’s contracts gained mainstream attention during the 2024 U.S. presidential race, where prediction markets often diverged from traditional polling methods. The company aims to position itself as a regulated alternative to the informal and often opaque world of betting platforms.

Investor Appetite Grows for Prediction Markets

Interest in prediction markets is surging across the financial and tech sectors. Retail trading platform Robinhood recently launched its own prediction hub, signalling broader market acceptance. Meanwhile, investors are increasingly viewing these platforms as viable tools for forecasting real-world outcomes and diversifying portfolios.

Paradigm’s investment in Kalshi, alongside major firms like Sequoia and Multicoin, underscores growing confidence in regulated platforms with long-term viability. At the same time, Polymarket’s upcoming raise suggests that the appetite for less traditional, crypto-native platforms remains strong, especially under the prospect of a more crypto-friendly U.S. administration in the near future.

What’s Next for the Sector?

As prediction markets continue to evolve, regulatory clarity remains a critical factor in determining platform success and investor interest. Kalshi’s path offers a model for operating within existing frameworks, while Polymarket’s defiant approach continues to attract attention, particularly from those sceptical of government oversight.

The recent partnership between Polymarket and Elon Musk’s X, which named the former as its “official” prediction market, indicates that the space may be on the cusp of broader consumer adoption, regardless of regulatory headwinds.

For now, Kalshi’s regulated stance and financial backing put it in a strong position to lead the sector, though its rivals are not far behind.