This week, the spotlight is firmly on the unfolding legal conflicts in Utah, which have placed Kalshi's founders under felony charges, prompting swift actions from gaming operators. Significant developments from the prediction markets realm include the NBA's announcement of its inaugural partnerships in this space, New York's gambling regulator intensifying scrutiny on Kalshi, and Polymarket’s decision to scale back its sports operations in Michigan.
Amid these developments, Kalshi's valuation raises eyebrows as it purportedly reaches $40 billion. Despite ongoing legal battles with various states – primarily over sports betting, which accounts for over 90% of its operations – the company's worth has escalated dramatically. A recent funding round raised $1 billion through the efforts of Wellington Management and Sequoia Capital, nearly doubling a previous valuation of $22 million established in May. This latest figure is also a staggering eight times higher than the $5 billion valuation recorded just one year ago, in October 2022.
Kalshi is currently navigating challenges from multiple U.S. circuit courts while facing accusations of inflated trading volumes. This week, it also fortified bonds with the conventional financial sector by collaborating with S&P Dow Jones. It plans to use part of the latest funding to develop a diverse array of new financial products, with CEO Tarek Mansour hinting at a potential initial public offering (IPO) in 2027.
In a separate but related thread, Senators Elizabeth Warren (D-MA) and John Curtis (R-UT) sent a bipartisan letter to Mansour and Polymarket's CEO Shayne Coplan, seeking answers about their companies' political contracts on October 28. The letter raised critical questions about their measures to prevent insider trading and manipulation within election markets, especially in light of previous instances where candidates engaged in trading linked to their races. The Senators set a deadline for responses by Election Day, November 3.
Meanwhile, the NFL instructed Saquon Barkley, running back for the Philadelphia Eagles, to divest his equity stake in Polymarket, highlighting the league's policy that prohibits players from endorsing or investing in prediction market firms. Barkley confirmed his past association but clarified that current league policies barred his involvement. This move contrasts starkly with the NBA’s willingness to forge partnerships with prediction market companies, as several of its players have endorsed such ventures, including LeBron James and Atlanta Braves' Ronald Acuña Jr.
In judicial matters, the Seventh Circuit Court of Appeals has agreed to hear Kalshi's appeal of a Wisconsin court ruling regarding a lawsuit filed by the Ho-Chunk Nation. The tribe alleges violations of the Indian Gaming Regulatory Act relating to Kalshi's sports contracts. Initial rulings indicated that the lawsuit has a viable chance of success, allowing it to proceed despite Kalshi's objections.
Additionally, Kalshi announced it has enhanced its protections for traders aged 18 to 20, implementing a $2,500 monthly deposit limit and additional alerts for users trading significant amounts of their account balance. This initiative aims to support responsible trading habits for younger users.
In a broader market context, Robinhood reported a sixfold surge in its prediction market revenue, reaching $173 million in Q3. Event contract trading volume soared to a record 16.4 billion contracts. While non-sports contracts accounted for a growing share of trading activity, CEO Vlad Tenev expressed a strategic focus on financial event contracts rather than diverting attention to sports-related markets. As the firm refines its operations, it anticipates consolidating trading on its Rothera exchange while gradually stepping back from partnerships with other exchanges, including Kalshi.
