Kalshi Seeks Approval to Allow Some Users to Borrow Funds to Place Bets

Kalshi, the popular prediction market platform, is seeking federal approval to allow some traders to use borrowed funds on event contracts.

Betting on current events, sports, and broader cultural issues through prediction markets has become popular among retail traders. But Kalshi could take the next step to attract institutional users.

In a Sept. 22 filing with the Commodity Futures Trading Commission (CFTC), Kalshi Klear, the company’s internal clearing house, proposes to offer margin trading for some users.

Margin trading is a common tool in the broader financial markets—stocks and bonds, for example—allowing traders to use borrowed funds to purchase more of an asset, often at a high interest rate.

The CFTC oversees federally registered platforms.

A memo shared with The Epoch Times stated that leverage will attract more institutional liquidity to the platform.

The company noted that introducing leverage is likely to boost institutional interest in longer‑dated prediction markets, especially those that settle far into the future.

“Klear is trying to move eligible event contracts from a blanket ‘fund the maximum possible loss’ model to a more traditional institutional derivatives framework: capital against measured risk, with full collateralization retained wherever that risk cannot be modeled prudently,” the memo said.

The website presently provides leverage for perpetual futures—also known as perps—which allows users to hold contracts with no expiration dates and generate profits or losses based on the underlying asset’s price.

While Kalshi will grant margin trading to users with certain requirements, the platform will not allow leverage on culture, sports, and mention markets.

Additionally, Kalshi plans to limit margin-eligible contracts nearing expiration to users with direct relationships with Kalshi Klear and to those who meet specific capital requirements.

Kalshi’s primary prediction market rival, Polymarket, has also sought to introduce leverage.

This past summer, Polymarket pursued regulatory licenses to offer margin trading on its event contracts in the United States.

Regulatory Pushback

International prediction markets have grown enormously popular in recent years.

Monthly global trading volumes have climbed to about $24 billion, from less than $5 billion last year, according to Pew Research Center data.

Experts forecast the industry could reach as much as $1 trillion by 2030.

Amid the industry’s substantial growth, the debate has centered on whether event contracts function more like traditional gambling products or regulated derivatives.

Federal and state regulators and lawmakers have also scrutinized the market’s advertising methods and consumer protections.

Sens. John Hickenlooper (D-Col.) and Jack Reed (D-R.I.) urged the CFTC in May to restrict prediction markets from offering margin trading, “particularly for retail lending.”

“The CFTC should prohibit prediction market platforms from providing margin loans to their users because it would undermine the credit limitations imposed by states, resulting in harm to consumers and the economy,” they said in a letter to regulators.

Margin debt has ballooned in recent years as investors take advantage of record highs logged in the U.S. stock market.

In August, margin debt totaled almost $1.45 trillion, just shy of the all-time high of $1.50 trillion posted in June, according to FINRA.

Research has shown that many prediction market users turn to debt to fund their bets.

A recent BadCredit.org study found that 51 percent of surveyed users said they have used credit cards, personal loans, or borrowed money to participate in prediction markets.

Almost 80 percent of users have lost money in the past year, and 88 percent of those who borrowed funds said they lost money.

“I would recommend that everybody keep this statistic in mind. Our study found that nearly four out of five prediction market users lose money, and more than a quarter experience losses of at least $500,” Erica Sandberg, consumer finance expert at BadCredit.org, said in a news release.

“If you’re like many Americans living within a tight budget, this kind of loss can make paying essential bills very difficult.”