Kalshi co-founder Luana Lopes Lara on the biggest prediction markets risks she has ever taken

Kalshi has scaled to roughly $2.0B in weekly transaction volume and recently raised $1.0B at an $11.0B valuation after winning a CFTC-related court case that cleared the way for election markets. The firm reported event peaks including ~$130M in election-week volume and ~$1.0B around the Super Bowl, highlighting product demand but also attracting Congressional backlash and state-level gambling litigation. Key risks remain regulatory and legal (Congress, state gaming challenges, insider-trading concerns) despite strong growth and funding.

Analysis

The CFTC precedent lowers the regulatory barrier to a new breed of event-linked derivatives; that creates a durable monetization vector for regulated exchanges and data vendors but also raises the marginal cost of compliance and litigation for smaller entrants. Expect incumbent exchanges (and their clearinghouses) to capture liquidity via tight custody/clearing integrations, pushing pure-play prediction platforms toward either scale or acquisition within 2–4 years.

Second-order flow: election and geo-political contracts will concentrate idiosyncratic orderflow into short, high-gamma windows (weeks around events), amplifying intraday volatility and hedging demand for market-makers and listed options desks. That creates predictable calendarized spikes in revenue for firms that sell clearing, surveillance, and pre-trade risk tools — not the consumer-facing app.

Regulatory counterforces are the main tail risk: state-level gambling statutes and targeted lobbying can fragment the market into compliant and non-compliant jurisdictions, producing a patchwork that raises customer acquisition costs and creates winner-take-most dynamics among operators who secure favorable state-level interpretations. Litigation and oversight will compress margins near-term but will also erect moat-like legal frictions that incumbents can monetize via licensing and cross-border product gating.

Key Decisions for Investors

• Long ICE (Intercontinental Exchange) 12–24 month call spread (buy 2027 10% OTM calls, sell 2027 25% OTM calls): if post-approval event-derivatives scale, ICE captures clearing/market fees; allocate 2–4% notional with asymmetric upside vs premium paid; hedge: sell portion into any near-term political headlines to lock-in gains.
• Long CME Group (CME) Jan-2027 5–10% OTM calls outright: target capture of futures/clearing flow and calendarized volatility; position size 1–3% equity, stop-loss at 50% of premium if regulatory setbacks occur within 6 months.
• Pair trade — long NDAQ (Nasdaq) or ICE / short regional gaming operators (PENN, MGM) 6–18 months: thesis is fee capture for regulated exchanges vs margin pressure and lobbying exposure for gambling companies; use 1:1 notional with puts on the short to limit tail risk from an unexpected gambling-liberalization outcome.
• Buy bespoke event-volatility exposure via option calendars around November 2026 (elections) on major exchanges or volatility ETPs: allocate a small tactical sleeve (0.5–1% AUM) to capture gamma from concentrated orderflow spikes; exit 2 weeks after event resolution to avoid time decay drag.