Prediction market platform Kalshi filed with federal regulators Tuesday to seek approval to offer leverage on event contracts — a practice already commonplace on Wall Street for stocks and futures.
The filing with the Commodity Futures Trading Commission, the federal regulator overseeing event contracts, was submitted through Kalshi Klear, the company’s internal clearinghouse. This marks the latest move as prediction markets increasingly seek to attract institutional liquidity to event contract exchanges.
Kalshi already provides leverage on its perpetual futures contracts but has yet to receive approval for the same on its prediction markets.
Margin trading, which allows traders to borrow funds to purchase more of an asset than their cash collateral would otherwise permit, is widely viewed by institutions eyeing the prediction market space as a critical step for drawing larger players accustomed to the practice in traditional equities and derivatives. Currently, all event contracts on regulated U.S. exchanges are fully collateralized.
Bloomberg News reported in July that Polymarket, a rival prediction market, had taken steps to obtain regulatory licenses that would eventually allow it to offer margin trading on event contracts in the U.S.
Prediction market volume, including Kalshi’s, has surged over the past year, driven largely by retail trading on sports-related offerings. However, a Kalshi spokesperson told CNBC the company would not offer margin opportunities on sports event contracts or its culture and “mention” markets.
In a memo provided to CNBC, Kalshi said the ability to offer leverage would make longer-dated prediction markets — those with expiration dates far in the future — more appealing to institutional traders.
The company also announced plans to introduce a tiered system in which capital requirements for leverage would increase as event contracts approach their expiry date. Marginable contracts, if approved, would only be accessible to self-clearing members with direct relationships with Kalshi Klear who meet specific capital requirements, according to a Kalshi spokesperson.
Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.
