Kalshi Goes Suit-and-Tie With a Margin Push Aimed Squarely at Hedge Fund Money

Kalshi started out letting people bet on who would win Best Picture or the White House.

Now it wants permission to do something with way loftier ambitions... trade prediction markets on margin.

The U.S.-regulated prediction market is quietly pushing the Commodity Futures Trading Commission for approval to allow margin trading… a move that would reshape who shows up to trade, how much capital flows in, and how seriously regulators treat “event contracts.”

According to reports, Kalshi has spent months making the case that leveraged event betting isn’t some degenerate casino side quest, but the natural evolution of modern derivatives. Whether the CFTC agrees remains an open question.

But the direction is clear. Prediction markets are growing up. What started as novelty wagers on elections and awards shows has turned into a fast-growing market spanning politics, macro outcomes, geopolitics, sports, and financial indicators. Kalshi and rival Polymarket have seen volumes surge into the billions since the 2024 election.

The missing ingredient has been institutional money.

Hedge funds don’t trade without liquidity, scale, and leverage… and leverage starts with margin. Fully collateralized positions, where every dollar must be posted upfront, are a dealbreaker for firms managing hundreds of millions or more. That’s the wall Kalshi is trying to punch through.

If approved, margin trading would allow investors to post only a fraction of a contract’s value, similar to futures markets. Trades would still settle in full at expiration, but capital wouldn’t be tied up the entire time. Early access would likely be limited to institutional players, not retail traders.

Kalshi is already laying the groundwork. The company recently hired a risk manager from Velocity Clearing, signaling it’s building the controls regulators expect.

Competition isn’t waiting. Last week, Crypto.com launched its own prediction market platform, claiming it already offers margin trading… a development that pressures regulators to explain why one venue moves faster than another.

The regulatory backdrop has also shifted. Under Trump-appointed CFTC chair Michael Selig, the agency has taken a lighter-touch approach, recently scrapping Biden-era proposals that would have banned political and sports contracts. New rules are still coming, especially after suspiciously well-timed trades raised insider-information concerns.

As one former regulator put it: when triple-leveraged ETFs already exist for meme stocks, it’s hard to argue margin on event contracts is uniquely dangerous.

Kalshi is leaning into that logic (and distancing itself from offshore rivals) by launching an independent surveillance audit committee that will publish quarterly reports on suspicious activity.

If you recall, Kalshi was the first prediction market exchange approved in the U.S. back in 2020. It later won approval to operate its own clearinghouse… but only for fully collateralized trades.

Margin is the next, and biggest, step.

If Kalshi gets the green light, prediction markets will start to look like a real asset class… one where Wall Street finally feels comfortable showing up with size. And at that point, the line between trading and gambling gets even fuzzier than it already is.

At the time of publishing this article, Stocks.News holds positions in Bitcoin and Ethereum as mentioned in the article.