Kalshi's eight-year entrepreneurial history: A boxer in a suit steps onto the stage

Original Author: Eric, Foresight News

Sixteen years ago, on an afternoon in the dance studio of the Brazilian National Ballet School, 14-year-old Luana Lopes Lara trained her flexibility by lifting her leg to her ear, while her dance teacher lit a cigarette beneath her raised thigh. If she couldn't hold on, the cigarette butt, with a center temperature exceeding 700 degrees, would instantly burn through her dance outfit, leaving a scar on her leg that would last a lifetime.

At the same time, Lebanon was experiencing the most severe border conflict since the 2006 Lebanon War. Tarek Mansour, who was about the same age as Lara, was attending high school in Lebanon. Years of war had not instilled fear of conflict in Tarek Mansour; instead, he had come to feel the unease brought about by "uncertainty."

Three years later, fate brought the two, originally separated by more than 10,000 kilometers, together at the Massachusetts Institute of Technology (MIT). After five years of study and practical work, one evening in 2018, the two, who were interning at Five Rings Capital, conceived the idea of starting a company that would offer "event contracts" on their way home from work.

Kalshi's two founders Luana Lopes Lara (left) and Tarek Mansour (right)

In late March of this year, the prediction market company named Kalshi completed a $1 billion financing round led by Coatue Management, achieving a valuation of $22 billion, making it the highest-valued prediction market company in the world (media reports at the same time indicated that Polymarket was raising funds at a valuation of around $20 billion, but there has been no official news yet).

As early as December 2025, when Kalshi completed a $1 billion financing round at a valuation of $11 billion, Lara surpassed Scale AI co-founder Lucy Guo and Taylor Swift to become the youngest self-made female billionaire in the world.

Before Kalshi was established, internet companies, including Uber, believed in expanding through aggressive growth and then using scale to negotiate with regulators. In 2017, at a dinner in Tokyo, SoftBank's Masayoshi Son pointed to Didi's founder Cheng Wei and told WeWork co-founder Adam Neumann that Didi won against Uber not because he was smarter, but because he was crazier.

When this "craziness" became the standard for internet entrepreneurs at the time, the two founders of Kalshi chose to go in another direction. In the two years following the company's establishment, Kalshi had no product, no users, and no revenue; they bet the life of this startup on one thing: getting a license.

"We saw a huge market gap"

A person's decisions often reflect their life experiences; what they see and what they think influence everyone's different perspectives on the same thing.

You might consider Kalshi's almost obsessive dedication to compliance as a form of paranoia, but looking back now, it seems more like the "strategic resolve" shaped by the past experiences of the two founders.

Mansour, seeking "certainty" in the shadow of war, and Lara, who worked hard after dance classes to win a gold medal at the Brazilian National Astronomy Olympiad, both coincidentally chose to major in computer science at MIT.

At MIT, Lara sat in the front row of every class, a detail that caught the attention of the introverted Mansour, who always sat in the back. He began to boldly sit next to Lara, and the two gradually became friends. This friendship was partly due to their similar experiences: both were international students, both majored in computer science and mathematics, and both were interested in quantitative finance. Lara interned at Bridgewater and Citadel during the summer, while Mansour went to Goldman Sachs and Citadel. In 2018, both received internship offers from Five Rings Capital and worked together in New York's financial district.

Two significant events occurred in 2016: Brexit and Donald Trump's election as President of the United States.

Mansour later stated that he saw institutional investors frantically adjusting their positions at that time, trying to hedge against the risks brought by these political events, but all hedging tools were indirect, such as shorting the pound, buying gold, or adjusting stock portfolios. No one could bet directly on "whether Brexit would happen" or "whether Trump would win." "We saw a fundamental problem," Mansour said, "what people want to hedge against is the event itself, not the event's impact on an asset's price."

Every day after work, the two would walk back to their intern apartment in the financial district together. On the way home, they repeatedly discussed a core question: why are all trades in the financial market indirect? If you believe Brexit will happen, you can only short the pound; if you believe Trump will win, you can only buy certain stocks or sell others. Why can't you trade directly on the event itself?

"We saw a huge gap," Lara said, "all trades in the financial market are essentially people's views on the future, but there is no market for directly trading the future." After countless discussions, the two decided to fill this long-standing gap.

Being the first to take the plunge

This insight itself is not new. The concept of prediction markets has existed in academia for decades, with attempts starting as early as the 1990s. However, these platforms were either too small or operated in gray areas, ultimately failing to become mainstream.

In 1988, a professor at the University of Iowa launched the Iowa Electronic Markets (IEM). As an academic research project, it allowed real-money trading on outcomes like U.S. presidential elections, demonstrating the effectiveness of "collective wisdom" in predictions (its accuracy often surpasses that of polls). IEM received a "no-action letter" exemption from the CFTC (indicating that if it only operated within a limited scope, the CFTC would not take enforcement action), laying the groundwork for an early legal framework.

The emergence of IEM marked a significant starting point for modern prediction markets. In the early 21st century, the U.S. Department of Defense's Defense Advanced Research Projects Agency (DARPA) proposed the Policy Analysis Market (PAM/FutureMAP) project, attempting to analyze geopolitical events (such as the situation in the Middle East) using prediction markets. The plan was quickly canceled due to public controversy (accused of being "terrorism futures"), but it sparked widespread discussion about the application of prediction markets in intelligence and decision-making.

The earliest commercial prediction markets, Tradesports and Intrade, were established around 2001, with the former focusing on sports-related event contract trading and the latter more concerned with economic and political events. In 2003, Tradesports acquired Intrade, and the following year restructured as Trade Exchange Network Limited (TEN). TEN gained attention during the 2008 and 2012 U.S. presidential elections but chose to shut down in 2013 due to CFTC accusations of "providing contract trading to U.S. users without approval."

In 2010, Cantor Exchange received full approval from the CFTC to launch a movie box office futures market, marking an early attempt at formal CFTC regulation of prediction contracts. In 2014, PredictIt, operated by Victoria University of Wellington in New Zealand, was launched, adopting the academic-oriented model of IEM and receiving a "no-action letter" exemption from the CFTC, with a trading limit of only $850 per person.

PredictIt’s prediction market for the 2020 U.S. presidential election

Four years later, Kalshi was officially established. Following in the footsteps of its predecessors, Kalshi faced only two paths: either challenge the CFTC to obtain the highest-level Designated Contract Market (DCM) license, equivalent to the Chicago Mercantile Exchange (CME), established in 1898; or, like Polymarket later, operate in gray areas with an offshore identity.

At that time, only 14 companies in the U.S. held DCM licenses, almost all of which were long-established commodity futures exchanges, including the CME, the Chicago Board of Trade (CBOT), founded in 1848, and ICE Futures U.S., a subsidiary of the New York Stock Exchange.

"When we were at Citadel, we saw how clients hedged risks," Lara recalled, "As the Brexit referendum approached, clients wanted to hedge this risk, but they could only do so indirectly through complex currency and stock combinations. We asked them: if there was a platform that allowed you to bet directly on 'whether Brexit will happen,' would you use it? The answer was yes, but only if the platform was compliant and regulated."

This feedback was crucial. It revealed a fact that many prediction market entrepreneurs overlooked: the true value of prediction markets lies not in retail speculative demand but in institutional risk management needs, and institutional funds will only flow to regulated platforms.

"Our goal has never been just to create a platform for consumers to 'bet,'" Mansour emphasized, "Our goal is to create a new asset class, making prediction markets mainstream financial tools like stocks, bonds, and futures. To achieve this goal, compliance is not optional; it is essential."

In the minds of the two founders, Kalshi is essentially the same as Nasdaq, the New York Stock Exchange, and CME; the absence of such a platform before was not because event contracts were illegal, but because no one was willing to attempt to persuade regulators to undertake this seemingly impossible task. Lara once stated in an interview, "When we decided to get the license before going live, many investors did not understand. They said: you could operate in overseas markets first, or you could bypass regulation with cryptocurrency. But we insisted that only growth based on compliance is sustainable."

Determined, patient, and disciplined, these distinctly different experiences forged the same qualities and a yearning for being "the first to take the plunge," leading the two young people to choose an untraveled path. This choice, which now seems absolutely correct, was not without its challenges.

Two years with no progress, "biting down" on the CME-level contract license

In 2019, Kalshi was selected for Y Combinator, and unlike other YC startups, their roadmap was not 'launch MVP within three months, acquire 1 million users within six months,' but 'obtain CFTC license within two years.' However, the two soon encountered their first challenge: they couldn't find a lawyer willing to take their case.

"We contacted over 40 law firms, all of which rejected us," Lara recalled, "The reasons were similar: the founders were too young, the company was too small, the legal status of prediction markets was unclear, and the risks were too high."

This predicament reflected the awkward situation of prediction markets at the time. Legally, prediction markets were neither clearly regulated by securities laws like stocks nor constrained by state gambling laws like traditional gambling. They walked a fine line between the two, with an ambiguous legal status. For conservative law firms, taking on such cases meant significant uncertainty and potential reputational risks.

A turning point came when they met former CFTC official Jeff Bandman. Bandman had worked at the CFTC for many years and had a deep understanding of the regulatory framework. He saw the potential in Kalshi and believed that prediction markets could operate within a compliant framework. More importantly, he was willing to bet on these two young people.

Jeff Bandman (second from left) with Luana Lopes Lara (second from right)

"People will eventually see how deeply they are invested in prediction markets and how committed they are to doing the right thing. They are leaders with unwavering moral principles..." Bandman said in a memoir published on LinkedIn this year, perhaps it was this rare persistence in young people that moved a veteran who had devoted half his life to regulation.

"Bandman was the first person we met who said 'yes,'" Mansour said, "He understood what we were doing and believed it was achievable. Without him, we might have given up long ago."

With Bandman's guidance, Kalshi began the long and complex application process. To obtain a DCM license, Kalshi had to prove it had all the capabilities required to operate a compliant financial exchange: trading matching systems, clearing and settlement systems, market surveillance systems, AML and KYC procedures, risk management frameworks, capital adequacy ratios...

"We had to build a complete financial exchange from scratch," Lara explained, "This included matching engines, clearing systems, monitoring tools, compliance processes... all of these had to be built before going live and meet CFTC standards."

This process took nearly two years. During this time, the two founders faced countless setbacks. CFTC officials remained cautious, as they had for decades: were event contracts a form of disguised gambling? Could prediction markets be used to manipulate political events? What if someone engaged in insider trading on the platform?

"Every meeting was a battle," Mansour recalled, "We had to explain over and over: event contracts are not gambling, but tools for risk management; prediction markets do not manipulate politics, but provide transparent information; insider trading is harder to conduct on our platform than in the stock market because we have real-time monitoring."

The biggest controversy centered around the CFTC's "public interest" clause. Under the Commodity Exchange Act, the CFTC has the authority to prohibit any contract it deems "contrary to the public interest." This clause gave the CFTC significant discretion and became the biggest obstacle in Kalshi's application process.

"CFTC officials were concerned that if we allowed betting on political events, it might affect the democratic process," Lara explained, "Our response was: prediction markets do not undermine democracy; they enhance it. When people have real money at stake in political outcomes, they take information more seriously and spread less misinformation. The market becomes an aggregator of truth."

This debate lasted for months. Ultimately, in November 2020, the CFTC approved Kalshi's DCM application with a 3-2 vote. This was a milestone in the history of prediction markets: for the first time, a regulatory agency officially recognized that event contracts are a legitimate financial derivative, not gambling. This also made Kalshi the first prediction market in the world to successfully obtain a formal financial market license.

Official document screenshot of Kalshi's DCM license approval

In an interview with Forbes, Lara stated that after the outbreak of the pandemic in 2020, she went to London to continue advancing the compliance process, while Mansour returned to his hometown. During the Beirut port explosion in August 2020, he helped with cleanup and rescue during the day and continued to work for Kalshi at night.

Kalshi successfully broke the regulatory bias through two years of persistence, but the struggle was far from over.

Crossing the final compliance threshold

When Kalshi officially launched in July 2021, the competitive landscape it faced was completely different from two years prior.

Polymarket rapidly rose in 2020, attracting a large number of users with the convenience of cryptocurrency and global coverage. However, in January 2022, the CFTC fined Polymarket $1.4 million for "operating an unregistered binary options trading platform." As a condition of settlement, Polymarket agreed to block all U.S. users, leaving a significant gap. At the same time, PredictIt, as another compliant prediction market, operated in the U.S., but the CFTC's "no-action letter" limited the number of participants and trading volume for each market, preventing it from scaling up.

Kalshi became the only prediction market platform in the U.S. that could operate legally and on a large scale. Kalshi's user funds are held in FDIC-insured bank accounts and are not directly managed by Kalshi, meaning that even if Kalshi goes bankrupt, users' funds are safe. Even when the option to use USDC was added in November 2025, it was still managed by Coinbase Custody.

"Many users do not understand what FDIC insurance means," Lara admitted, "but for those who do, it is a strong trust signal. It tells users: we are a real financial institution, not a cryptocurrency experiment."

Kalshi's compliant identity made it the only prediction market platform that institutional investors could legally use. Lara's former employer, Bridgewater, began using Kalshi's data as input for macroeconomic analysis; one of the world's largest institutional bond trading platforms, Tradeweb, partnered with Kalshi to provide prediction market data to its institutional clients. Additionally, in December 2025, both CNN and CNBC partnered with Kalshi to integrate Kalshi data for analysis and other commercial purposes.

"From day one, we wanted to serve institutional investors," Mansour said, "This is not because we dislike retail investors, but because institutional funds are the key to making this market truly liquid. And institutions will only come to compliant platforms." After launching in 2021, Kalshi's total trading volume was only about $10.4 million by the end of the year, growing to about $76.4 million the following year, and reaching $183 million in 2023.

Although the growth rate was not slow, it seemed there was no explosive growth as imagined. The reason for this was that although Kalshi obtained a fully compliant license, the types of contracts it was allowed to launch were still limited, primarily revolving around U.S. macroeconomic data, climate, entertainment, and other fields, mostly binary options that could only bet on yes or no. This was far from the initial goal of providing institutions with direct hedging against high-impact events.

The "bleak" situation arose because the CFTC did not allow politics to become a tradable event. In June 2023, Kalshi applied to the CFTC to launch a market predicting which party would control both houses, but after three months of review, the CFTC rejected the application on the grounds of "involving gambling" and "illegal activities under state law," and "contrary to public interest," clarifying the CFTC's stance on political events.

However, even we can see the significant impact of political events such as presidential elections, tariffs, and wars on capital markets. If Kalshi cannot break these constraints again, its market share will eventually be swallowed by offshore prediction markets. In November 2023, Kalshi officially sued the CFTC, demanding the lifting of restrictions on political prediction markets.

In September 2024, a historic ruling was made by the federal court in Washington, D.C.: the judge ruled that the CFTC had overstepped its statutory authority, and election contracts did not involve "illegal activities" or "gambling," thus lifting the CFTC's ban. This was another milestone in the history of prediction markets: for the first time in over a century, Americans could legally bet on election outcomes on a regulated platform.

Although the CFTC subsequently appealed, it did not change the outcome of political events being included in prediction markets. In May 2025, the CFTC withdrew its appeal, formally accepting this ruling.

Using "compliance power" to surpass Polymarket

With the political market opened, the 2024 U.S. presidential election became a highlight for prediction markets.

In 2024, Kalshi's trading volume reached $1.9 billion, more than ten times that of the previous year, with nearly half contributed by political events, including the election. However, at that time, the hottest prediction market was not Kalshi, but its neighbor Polymarket.

As an offshore platform on the blockchain, Polymarket became the "darling" of the prediction market field during the 2024 election and for a long time afterward. Without strict rules, its advantages of low fees, fast settlement, and global liquidity made Polymarket the first choice for users worldwide. For investors in the Web3 industry, due to the collective stagnation of altcoins and the growing impact of the macro environment on cryptocurrency prices, idle funds on the blockchain began to seek gold in this gray market.

In addition to basic betting, various arbitrage strategies sprang up, making this somewhat gray market a printing machine for many savvy speculators. In 2024, Polymarket's total trading volume reached nearly $9 billion, five times that of Kalshi, whereas before that, Polymarket's trading volume had been far less than Kalshi's.

In 2025, Polymarket soared, first securing a $2 billion investment commitment from the parent company of the New York Stock Exchange, then spending $112 million to acquire QCEX, an exchange that obtained CFTC compliance, to re-enter the U.S. market.

Faced with Polymarket's offensive, Kalshi did not lose its composure. "We never thought compliance was the only competitive advantage," Lara said, "It just qualifies us to participate in the competition. The real competition lies in who can provide better products, deeper liquidity, and more market choices." In 2025, when Polymarket dominated the headlines, Kalshi chose to continue deepening its compliance advantages and accelerate product innovation.

In terms of compliance, Kalshi further expanded its regulatory moat, partnering with mainstream brokerages like Robinhood, Coinbase, and Webull, allowing users on these platforms to trade Kalshi's event contracts directly on Robinhood. This means Kalshi can reach tens of millions of potential users without needing to acquire each customer individually.

"Our goal is to become the 'infrastructure' of the prediction market field," Mansour explained, "Just as Nasdaq provides infrastructure for stock trading, we want to provide infrastructure for event contract trading. Brokerages are our distribution channels, and compliance is our core advantage."

In terms of products, Kalshi significantly expanded its market categories. From the initial economic indicators (CPI, unemployment rate, GDP), it expanded into various fields such as sports, politics, weather, and entertainment. In 2025, Kalshi launched a "parlay" feature, allowing users to combine multiple events into one contract, greatly increasing the complexity and appeal of its products.

Additionally, Kalshi is exploring more application scenarios for prediction markets. In 2025, it launched an "enterprise hedging" product, allowing companies to hedge against risks such as weather, supply chain disruptions, and policy changes. For example, an agricultural company could purchase a "drought contract" on Kalshi, and if a drought occurs in a certain area, the contract's payout could compensate for crop losses.

"Our current goal is to launch 100 new markets each week," Lara said, "Ultimately, we hope that any event you can imagine, from the Oscar for Best Picture to tomorrow's weather, can be traded on Kalshi."

Strong strategic resolve and execution have quickly reflected in the data. In August 2025, due to the NFL season kickoff, Kalshi began to surpass Polymarket in weekly trading volume. In September, Kalshi's trading volume reached $1.3 billion, while Polymarket's was less than $1 billion during the same period. In October, the channel advantages brought by partnerships with platforms like Robinhood began to show their power, with Kalshi's monthly trading volume reaching a historic high of $4.4 billion, again surpassing Polymarket's approximately $4.1 billion.

From the end of 2025 to early 2026, Kalshi's market share remained between 55% and 60%. Notably, Kalshi's main users currently come from the U.S., while Polymarket targets the global market.

Two paths, one future

In 2025, the total trading volume of prediction markets exceeded $50 billion, with Kalshi and Polymarket occupying the vast majority of the market share. More importantly, prediction markets began to be taken seriously by mainstream media, academia, and policymakers.

"The 2024 election was a turning point," Lara stated, "When traditional polls repeatedly failed, while prediction markets accurately predicted the outcomes, people began to realize: the market might be more reliable than polls." It was also after that that Kalshi's data began to be cited by mainstream media such as The New York Times, CNN, and Bloomberg as important references for election analysis. Academic research shows that the accuracy of prediction markets often surpasses that of traditional polling methods because market participants have real money at stake and take information more seriously.

"We are transitioning from a 'gambling tool' to an 'information infrastructure,'" Mansour said, "This is the greatest value brought by compliance. When you operate on a regulated platform, people take you seriously."

"We are still in the early stages," Mansour stated, "The total trading volume of prediction markets is still a fraction compared to the stock market. But our vision is that one day, when people want to hedge against any event risk, whether it's an election, weather, or pop culture, they will first think of Kalshi."

Before this vision is realized, Kalshi has a long way to go. Recently, states such as Nevada, New Jersey, Illinois, Maryland, Ohio, Montana, and Washington have issued cease-and-desist orders to Kalshi, claiming that sports prediction contracts fall under state gambling laws and that Kalshi has not obtained the corresponding state licenses.

"The essence of this battle is a struggle for jurisdiction," Lara analyzed, "States do not want to lose control over the gambling industry because gambling taxes are an important source of revenue for them. But we believe prediction markets are not gambling; they are financial derivatives and should be federally regulated." Mansour jokingly remarked, "Sometimes I envy Polymarket's simplicity; they only have to worry about one regulatory agency, while we have to worry about 51, but that's the cost of choosing compliance and also its value."

Finding certainty in uncertainty and order in chaos is the essence of prediction markets, and Kalshi's compliance path is the best embodiment of this philosophy. Kalshi to Polymarket is like Coinbase to Binance. Each path has its beautiful scenery and thorny challenges, unrelated to right or wrong. As long as you know the destination, the whole world will make way for you.