Kalshi is asking the federal government to let it offer borrowed funds on prediction markets, a move that would let users buy contracts with money they do not actually have.
The company filed with federal regulators on Tuesday seeking approval to offer leverage on its event contracts through Kalshi Klear, its internal clearing house. Kalshi already provides leverage on its perpetual futures contracts, but it has not yet received approval for leverage on its prediction markets.
The filing was submitted to the Commodity Futures Trading Commission, the federal regulator for event contracts. Polymarket, a prediction market rival, is also seeking licenses to offer margin trading on its event contracts in the U.S., reported by Bloomberg News.
The Request at Its Core
Kalshi is seeking permission to let users borrow money to buy contracts, just as stock traders can borrow money to buy stock. The company says leverage will make longer-dated prediction markets with expiration dates far in the future more attractive to institutional traders.
Kalshi is also proposing a system where the amount of borrowed money required increases as the contracts near expiry. That means users would have to put up more money the closer the event gets, rather than borrowing freely at the start.
The company says all event contracts on regulated U.S. exchanges are entirely collateralized. That is a key point: the difference between a margin loan and a credit card is the collateral, and Kalshi is arguing that its contracts already sit on a regulated exchange.
What Kalshi Is Not Doing
Kalshi would avoid offering margin opportunities on its sports event contracts, culture markets, and “mention” markets, a spokesperson told CNBC.
That is a notable restriction. Sports contracts are some of the most popular on prediction markets, especially when you include cultural events and celebrity mentions that often piggyback on major sporting events. Kalshi’s decision to avoid them suggests it sees real risk in that space.
Kalshi is also only opening leverage to self-clearing members with direct relationships with Kalshi Klear that meet certain capital requirements. That is a tight group. The company is not opening borrowed money to the public or every registered user; it is offering it only to the customers who already have a direct relationship with the clearing house and meet its capital rules.
The filing does not say which markets will be eligible for leverage if approved. It only says that Kalshi would avoid the sports, culture and mention markets.
The Comparison With Polymarket
Polymarket is also seeking licenses to offer margin trading on its event contracts in the U.S. Bloomberg News reported the July moves.
Kalshi’s filing comes on the heels of that reporting, and the two companies are now both knocking at the same regulatory door. Both want to borrow Wall Street’s leverage model for prediction markets, which have historically operated outside the formal futures framework.
Kalshi’s approach is notable for its restrictions. Polymarket’s has not been described in the same detail, but the two are clearly competing for the same institutional audience.
The Mechanics of Leverage
Leverage works by letting a trader borrow money to purchase more of an asset than the cash they put down. If the contract moves in their favor, the borrowed money amplifies their profit. If it moves against them, the borrowed money amplifies their loss.
Kalshi’s proposed system, where the borrowed money requirement increases as the contract nears expiry, is designed to force traders to put up more money the closer the event gets. That is a risk management tool, not a customer-friendly one.
The collateral requirement is also worth noting. Kalshi says all event contracts on regulated U.S. exchanges are entirely collateralized. That means the borrowed money is backed by something, not just a promise to pay.
Kalshi is also limiting the leverage to self-clearing members with direct relationships with Kalshi Klear. That means the risk is contained to a smaller group than if it were open to everyone.
What Kalshi Is Asking For
Kalshi’s filing asks the CFTC to do two things:
- Approve leverage on Kalshi’s prediction markets through Kalshi Klear, its internal clearing house
- Allow self-clearing members with direct relationships and capital requirements to access marginable contracts
Kalshi’s filing also notes that all event contracts on regulated U.S. exchanges are entirely collateralized.
A Timeline of Events
| Event | Date | Detail |
|---|---|---|
| Kalshi filing | Tuesday | Kalshi Klear asks CFTC for leverage approval |
| Polymarket move | July | Polymarket seeks regulatory licenses for margin trading |
| Kalshi existing leverage | Ongoing | Already offered on perpetual futures contracts |
| Kalshi prediction leverage | Pending | Not yet approved on prediction markets |
Kalshi’s filing is part of an industry-wide push to get regulatory approval for prediction markets. The company is asking the CFTC to treat its prediction markets like traditional futures contracts, with all the collateral and risk management that entails.
The CFTC has not said when it will decide. Kalshi has not said when it will decide either, but the company is clearly moving forward.
Kalshi has already seen prediction market volume surge over the past year, and it wants to capture more of that institutional trade. Leverage would let it do that, at least for the markets it is willing to touch.
Kalshi’s plan is to offer borrowed money only to a specific group of customers, only on certain markets, and only through a regulated clearing house. Kalshi is trying to keep the risk manageable by limiting who can borrow money and which markets can carry leverage.
The Federal Regulator’s Role
The CFTC regulates event contracts, the category into which Kalshi’s prediction markets fall. Kalshi is asking the agency to approve its leverage proposal so it can offer borrowed money on its prediction markets through Kalshi Klear, its internal clearing house.
The CFTC has not said when it will decide on the request. Kalshi has not said when it will decide either.
What Is Not Yet Known
What is not yet known is whether the regulator will agree to the model at all.
Kalshi has a side in this story, and it is worth saying so plainly. Kalshi is asking the federal government to let it borrow Wall Street’s leverage model for prediction markets, and the CFTC’s job is to decide whether unregulated prediction markets are safe enough to borrow money on. Kalshi’s own willingness to avoid sports, culture and mention markets shows the risk it sees in those spaces.
Where the paper stands
The paper backs Kalshi’s broader rivals, small prediction-market traders, and the principle that borrowed funds should only be allowed where regulators can narrowly target the specific harm that might come from them, and is against Kalshi’s bid to have regulators approve borrowed funds on prediction markets through Kalshi Klear, a move that could raise the cost of entry for smaller rivals and shield the company from the consequences of its own contracts. The paper opposes rules that raise the cost of entry for small businesses and wants oversight narrow and aimed at the harm, not broad rulebooks or agencies widening their own reach.
Kalshi’s plan would let users borrow money to buy contracts with money they do not actually have, and the filing asks the CFTC to approve leverage through Kalshi Klear, an internal clearing house. That approval would make Kalshi the only prediction market firm allowed to borrow Wall Street’s leverage model, raising the cost of entry for rivals while shielding the company from the consequences of its own contracts.
Kalshi limits leverage to a tightly controlled group: self-clearing members with direct relationships and capital requirements. But the paper’s position is against even this narrow approval, because it would still raise the cost of entry for smaller rivals and let Kalshi avoid the consequences of its own contracts.
Source material: “Kalshi asks CFTC to allow margin trading on its platform, letting users buy with borrowed funds,” CNBC.
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