Online-Trading Platform Will Let Investors Bet on Yes-or-No Questions

The e-commerce startup, which aims to allow people to bet on future events ranging from the economy to the weather to health care, has raised $30 million from several high-profile investors, including venture capital firm Sequoia Capital and pioneering discount broker Charles R. Chuck Schwab.

Kalshi Inc. is expected to launch in March. The idea is that users can bet on yes or no answers to questions about future events. For example, if the platform had existed last year, it could have asked users whether the vaccine Covid-19 would be approved before the end of 2020.


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The San Francisco-based startup hopes to capitalize on individual investors’ growing interest in the company. Individuals have been diving into stocks and options over the past year using applications such as those from Robinhood Markets Inc. Mr. Kalshi also hopes that his market will be used by individuals and businesses who want to protect themselves against risks associated with future events.

Mr Kalshi’s fundraising comes after the Commodity Futures Trading Commission gave him permission to operate a derivatives exchange in November. Sequoia led the Series A, bringing the total funds raised by Kalshi since its inception in 2018 to approximately $36 million.

Other investors in this round include Henry R. Kravis, a billionaire co-founder of private equity giant KKR & Co. Inc. and SV Angel, a young venture capital firm that invests, among other things.

Airbnb Inc.

ABNB – 1.33%.


ByDash Inc.

DASH 4.53%.

Kalshi previously invested in Y Combinator, a startup accelerator in Silicon Valley, and

Justin Mateen,

Co-founder of the dating app Tinder.

Although Kalshi is one of the main sponsors, there is no guarantee that he will succeed. Many seedling fairs are not growing in popularity because it is difficult to attract participants in an emerging market. And event contracting, the kind of product Kalshi hopes to promote, has had little success in the United States.

Kalshi was founded by Tarek Mansour and Luana Lopez Lara, two former MIT researchers. Both 24 years old. Mr. Mansour was an intern at

The Goldman Sachs Group Inc..,

GS 1.84%.

while Ms. Lopez Lara did internships at e-commerce firm Citadel Securities and hedge fund Bridgewater Associates. The name Qalshi comes from the Arabic word all, which stands for the range of topics that can be covered in the questions.

Luana Lopez Lara, Co-Founder of Kalshi.


Roberta Janaina Ribeiro Cardoso/Calci

Mansour said Kalshi was partly inspired by his experience at Goldman in 2016, when some clients asked the bank to help them hedge against the risk of Britain voting to leave the European Union. Goldman has developed derivatives based on complex models of the reaction of different markets to Brexit. Would it not be simpler, said Mr Mansour, to pay the contracts in the event of a negative vote?

There is a lot of commercial activity today related to opinions about the future event, he said. You make a decision about some future event and then you find out: Now, how can I act on that opinion…. ? With Kalshi, you can get exactly the coverage or exposure an individual, company or institution wants since they can negotiate yes or no contracts.

Kalshi will host an exchange where users will price these contracts on a yes/no basis. Each contract is worth a dollar if the user is right, and nothing if the user is wrong.

Before the event occurs – which determines the final and correct answer to the question – the contract price can range from $0 to $1, depending on what users are willing to pay for a positive or negative outcome.

Users do not have to wait for the end result to complete their transactions. For example, a user may initially buy a cheap contract for, say, 20 cents. Then when the collective wisdom changes and people start waiting for a result, the user can sell it for, say, 60 cents. Or the opposite can happen and the user can leave the company at a loss.

Private investor growth

These contracts can be risky because users can lose all their money if they bet on a bad outcome. The CFTC has warned investors against binary options, a similar contract, in part because of scams involving unregulated online binary options platforms.

Mr. Kalshi says he has worked closely with the CFTC to create a regulated market and has taken precautions to ensure that users are not taking too much risk. For example, unlike futures or stock trading, Kalsha users cannot use leverage. In markets that allow leverage, investors can boost their profits with low initial costs, but with the risk that a bad bet can lead to big losses.

Federal law prohibits Kalshi from issuing orders in a number of areas, including war, terrorism, murder or gambling. It is the TCRC that determines what constitutes a game of chance – an area where the law leaves some ambiguity – and the regulator has the power to ban contracts for events it deems contrary to the public interest. Kalshi is unlikely to transfer contracts for election results, as the TCRC blocked an attempt to transfer contracts for political events in 2012 on the grounds that it involved gambling and was not in the public interest. Mansour states that Kalshi has no intention of offering sports contracts.

Alfred Lin,

a Sequoia partner and board member of Kalshi, said Kalshi’s adoption of the rules was one of the reasons his company invested in the startup.

They take the regulations very seriously, he said. Companies that act fast and break things will not be able to operate in this regulated environment.

The GameStop craze has caught the attention of a growing group of investors who seek out and share company information on social media platforms like YouTube and TikTok. Three investors explain how these online communities help them enter the market. Photographic illustration: Adam Falk/ Wall Street Journal

Write to Alexander Osipovich at [email protected].

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