Detailed Breakdown of Kalshi—When "Everything Can Be Traded"

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Prediction markets are becoming a new species in the United States: using "yes/no" contracts to turn elections, sports, interest rates, weather, crypto assets, and even popular culture into tradable prices. BofA Securities made a clear assessment in a report on the private company Kalshi—that this company has pushed "prediction markets" to the center of the public's attention with a federal regulatory license, explosive trading volume, and extremely fast product iteration.

According to On the Move Trading Desk, Bank of America Securities analyst Julie Hoover summed up Kalshi's presence in one sentence in her latest report: "Kalshi is the fastest-growing non-AI company," and linked its transformation to two figures—weekly trading volume from around $100 million to over $3 billion, U.S. market share 90%+. This is not a company supported by "concepts" for valuation; its trading volume has grown almost every week.

Growth broke through the political event boundary, but what really pushed trading volume to its current level was sports. By March 2026, sports accounted for about 79%-80% of the platform's trading. At the same time, Kalshi is moving away from early reliance on distribution channels—Robinhood contributed about 60% of trading in 2Q25 but fell to about 23% by March 2026, while Kalshi’s self-operated direct-to-consumer (B2C) platform has quickly become stronger.

But Kalshi’s story isn’t just about “traffic” and “sports.” It simultaneously runs B2C applications and B2B exchange distribution, even trying to internalize clearing and market-making capabilities as much as possible. Its business model is driven by fees and, theoretically, has high profit margins. The greater imagination comes from institutional uses: using binary contracts to directly hedge discrete events such as geopolitics, weather, interest rates, macro data, rather than guessing from asset price correlations. The real pricing difficulty is regulation— is it financial trading or gambling? Lawsuits in 14 states, multiple bills in Congress, and regulatory turf battles between federal and state levels make "possible Supreme Court intervention" the biggest variable in this trajectory.

Weekly trading volume grew from $100M to $3B: elections provided entry; sports provided compound returns

Kalshi’s national breakout came with the 2024 U.S. Presidential Election: Kalshi won a lawsuit against the CFTC in September 2024, gaining the room to launch federally regulated election contracts, and subsequently rolled products out to the public during the election cycle.

After the election, sports became the real "engine of trading volume." From the chart nodes, sports events like the Super Bowl and March Madness corresponded to rapid spikes in volume; by March 2026, sports trading accounted for about 79%. This also explains how Kalshi was able to achieve mass market growth curves in a "prediction market," a category that sounds quite niche.

Sports’ contribution also comes with an institutional variable: Kalshi, as a federally regulated platform, can offer sports event contracts to all 50 states, while traditional online sports betting (OSB) is only legal in 38 states in the U.S. Kalshi is also open to users 18 and older, while the minimum age in most states for sports betting is 21. In addition, Kalshi does not pay state betting taxes (the report notes OSB operators’ betting taxes take about 33% of revenue), so both user base and cost structure are differentiated.

“Exchange + B2C application” at the same time: Kalshi makes financial infrastructure into a consumer product

Kalshi’s positioning in the report is clear: it is a CFTC-regulated financial exchange using continuous double auction to match buyers and sellers, with "event contracts" as the underlying (usually a "yes/no" question, contract face value $1, pays $1 if the event happens, otherwise zero, price trades between 0 and 1).

Its uniqueness lies in its two-pronged approach:

B2C: self-developed app and website reaching users directly. During the Super Bowl, Kalshi’s app once hit #2 overall in the Apple App Store; UI/UX has iterated from percentage odds to more sports-betting-like "American odds," dark mode, "six-grid" layout, and quickly launched customizable parlays.
B2B: as an exchange, it provides products and liquidity to third-party brokers/platforms, with partners including Robinhood, Webull, Coinbase, DriveWealth, PrizePicks, etc.

Early liquidity mainly relied on B2B distribution, but data shows it is "de-channeling": Robinhood’s share of Kalshi trading dropped from a peak of about 60% in 2Q25 to about 23% in March 2026. Kalshi thus seems to be replicating a known path: first using big channels to solve cold-start problems, then pulling users and the brand back into its own front-end.

Fees are the core of everything: high profit margins depend on not being undercut on pricing

BofA details Kalshi’s revenue: trading fees are the main engine. If trades occur on Kalshi’s own platform, the average fee rate is about 1.5% of trading volume (on a 50/50 contract, market taker pays 1.75%, market maker about 44bps; fee rate at extreme probabilities is even lower to encourage liquidity). B2B trades are shared with partners. For example: Robinhood charges users a 2% fee and splits it about 50/50 with Kalshi (1 cent per contract each, total 2 cents).

Key cost buckets are payment processing, marketing, personnel, and product tech. Pure exchange model operating margin is around 65%, for online brokers about 50%-55%. Which Kalshi will ultimately resemble depends on whether it trends towards retail or institutional: retail means higher marketing and potentially higher fees; institutional means lower customer acquisition cost and higher operating leverage, but fees may be compressed.

In terms of valuation, Kalshi’s annualized run-rate revenue is about $1.5 billion; its $22 billion valuation equates to about 15x revenue, higher than the roughly 11x revenue multiples of public exchanges. This bet hinges on: continued growth, while fee rates and regulatory dividends are not quickly eroded.

Sports contribute about 80% of volume, but also bring concentration risk. The "non-sports" segment resembles a nascent second growth curve for Kalshi: non-sports now accounts for about 20%, with crypto being the most important driver—about 67% of non-sports volume, and in March became the first non-sports category to exceed $1 billion in monthly trading. Politics (including elections) is about 15% of non-sports, culture around 6%; there are also small categories like weather, interest rates, finance, etc.

The report specifically mentions "mention markets" (contracts on whether a word will appear in a live broadcast or speech), which account for about 3%-5% of total trading. They may not contribute the most revenue, but are easier to spread on social media, serving as brand exposure and user acquisition tools—aligning with Kalshi’s aim to package financial matchmaking mechanisms into a “constantly viewable odds information stream.”

Institutionalization is not just talk: margin, clearing, and liquidity will determine how far it can go

Kalshi emphasizes the possibility of institutional adoption at research meetings. Prediction markets allow institutions to directly hedge, price, and monitor "discrete events" (geopolitics, macro data, weather, interest rates, etc.), rather than inferring from asset price correlations.

There are three hard thresholds for institutions, as BofA points out:

1) Margin trading: Kalshi obtained approval to operate as a swap dealer, allowing it to offer margin trading; previously, fully collateralized per-trade was too capital-inefficient for institutions.

2) Clearer regulatory and clearing frameworks.

3) Higher liquidity (otherwise institutions cannot use it as a hedging tool).

External institutional signals are also emerging. Kalshi is partnering with Tradeweb and FIS to expand institutional access; also citing Goldman Sachs CEO David Solomon on an earnings call: “Especially when you look at some CFTC-regulated platforms, they look like derivatives contract businesses… I can certainly see opportunities for intersection with our businesses...”

In addition, Kalshi is laying the groundwork for "information products": its research team assesses market prediction accuracy; citing a Fed study—it found Kalshi’s median and mode forecasts’ mean absolute error was significantly lower than Bloomberg consensus estimates when predicting CPI and other indicators, and there was no significantly worse performance. CNN and CNBC have begun incorporating its "official odds" into content.

By 2026, competitors will look more like a “platform legion”: licenses are a threshold, but liquidity is life or death

Prediction markets lie at the intersection of finance, crypto, and sports, and competition is obviously heating up by 2026. New entrants or intensifying players include: Robinhood and Susquehanna’s vertically integrated attempts, DraftKings, Underdog, and Polymarket’s anticipated expansion in the U.S.; potential or related players also include FanDuel, Coinbase, Crypto.com, etc.

Regulatory licenses are among the hardest barriers, especially as exchange licenses (DCM) can take years to approve, but recently some “dormant/underutilized” existing DCM licenses have been quickly acquired, meaning supply is not absolutely limited. The real battleground for Kalshi is liquidity and fees: the report already frames “fee compression” as a risk, especially as the market expands and more strong B2C brands join, and it’s uncertain whether pricing power can be maintained at current levels.

Amid intensifying competition, Kalshi still holds about 91% U.S. market share; download share is close to half. But its active user base is not the largest (Sensor Tower data cited, Kalshi active users about 5 million, lower than Robinhood, DraftKings, etc.). This means its moat derives more from early liquidity and regulatory pathways, rather than being a “naturally dominant super channel.”

The biggest variable is still regulation: is this trading or gambling?

Regulatory risk is also clear: state governments and gambling regulators are pressing for intervention, with debate centering on whether sports event contracts should be considered state-level sports betting. Current legal actions against Kalshi involve 14 states; Congress also has several pending bills, focused on insider trading, manipulation prevention, and restricting some types of event contracts (including sports, war, etc.). As federal court rulings conflict, the Supreme Court may eventually have to intervene, and "complete clarity" may not arrive until late 2027 or early 2028.

Under the Commodity Exchange Act framework, there are three ways to restrict sports event contracts: state court-by-court restrictions, Supreme Court ruling, or CFTC changing its stance on sports event contracts. The more realistic risk is regulatory sentiment: currently the CFTC is supportive of prediction markets under the current administration, but under different administrations and CFTC leadership sports and other markets may be ruled “against the public interest.”

Insider trading is also a policy pressure point. Kalshi's strategies include: restricting certain markets to exclude politicians and athletes, setting up a monitoring advisory committee and enforcement lead, and partnering with Solidus Labs and Wharton Forensic Analytics Lab.

Kalshi's current situation is like a "binary gamble": on one side is trading volume, product iteration, channel independence, and increased financial attributes from institutionalization; on the other side is whether sports contracts will be reclassified, how long the federal-state regulatory struggle will last, and whether fees will get flattened out in competition.

Risk Disclosure and DisclaimerThe market has risks, investment requires caution. This article does not constitute individual investment advice, nor does it consider the unique investment objectives, financial situation, or needs of any individual user. Users should determine whether any opinions, viewpoints, or conclusions here fit their specific circumstances. Invest accordingly, and at your own risk. ```