Kalshi’s $40 billion and the fight over sports

Kalshi is about to be valued at forty billion dollars. Bloomberg says it’s finalizing the round, and that it’s the last one before an IPO, which could come as soon as next year. Five days before that report, a federal appeals court ruled that Ohio and Tennessee can enforce their sports betting laws against it. And sports are most of what Kalshi does. In August the Ninth Circuit noted that more than ninety percent of its trades last year were on sports. So what exactly are investors paying forty billion for? This is Venture Place, I’m Kirill Parinov, and with me again is Kate. This week, prediction markets.

And you’ve started without me again. Kirill, the forty billion. How solid is it?

It’s a report. A detailed one, but nothing has closed. Reuters had it first, on the twenty-ninth: Kalshi in advanced talks to raise about a billion dollars at forty billion. Sequoia, which is already an investor, and Wellington were in talks to lead, and Tiger Global and Dragoneer might join. Bloomberg said the next day it was finalizing. Nobody has announced a close, and Kalshi hasn’t commented.

And the last price?

A billion at twenty-two in May. Before that, a billion at eleven in December. And in June last year the Series C valued it at two. So forty would be twenty times in about fifteen months.

Which sounds wild until you look at the revenue. The Information reported in August that Kalshi’s annualized revenue had passed four billion dollars in July. That was double the rate two months earlier. So forty billion is about ten times the run rate. For a business that doubled in two months, by this year’s standards, that’s almost cheap.

It would be, if July were a normal month. I mean, the same reporting says World Cup betting helped double it, and annualizing a World Cup month is generous. It also says Kalshi spent about three hundred million dollars in June, mostly on marketing. If we’re allowed to multiply July’s revenue by twelve, I’m allowed to multiply June’s spending by twelve.

Fine. That’s three point six billion a year. Still under the revenue.

A bit under. And it’s one month of costs, so I won’t push it too far. What actually worries me is what the revenue is made of.

Sports.

Sports. In the Nevada case, the Ninth Circuit put sports at ninety-five percent of Kalshi’s revenue in 2025, and it let Nevada enforce its gaming laws. Then on the twenty-fifth the Sixth Circuit went the same way for Ohio and Tennessee, unanimously. It said the sports contracts aren’t swaps under federal commodities law. And in between, the Ninth Circuit found two California tribes likely to win their claims over sports contracts placed from tribal land. That’s the question the whole business rests on, and the appeals courts keep answering it for the states.

Explain the swaps part for me. Why does it matter so much?

Because it’s Kalshi’s whole defense. Its argument is that its contracts fall under the CFTC alone, so state gambling laws don’t apply. The Sixth Circuit said a contract on a game only has downstream economic consequences, so it isn’t the kind of contract federal commodities law covers. Once that holds, the states’ betting laws apply to it.

Not every court agrees, though. The Third Circuit went the other way, in New Jersey, and New Jersey has asked the Supreme Court to look at it. And the federal regulator is on Kalshi’s side. After New York sued Kalshi in July, the CFTC used emergency powers in August to order it to keep serving customers there. The CFTC says it has sued nine states itself. So the courts aren’t—

Sorry, jumping in. But yes, if I were on Kalshi’s side, that’s where I’d start. A split like that is the kind of thing that tends to end up at the Supreme Court. If it does, and the Court sides with Kalshi and the CFTC, most of my worry goes away. But, um, the investors are pricing that outcome before it exists. And the states aren’t waiting. According to the CFTC, New York wants at least thirty-six billion dollars in damages. And in September a Michigan judge ordered Kalshi to stop sports contracts there, with a fine of five hundred thousand dollars for every day it fails to keep Michigan residents out.

I’d be surprised if anyone collects thirty-six billion. That’s an opening position.

Probably. The damages worry me less than the map. If sports contracts end up legal in some states and banned in others, the growth that forty billion assumes gets a lot harder to deliver.

They’re not standing still, though. In September Kalshi launched perpetual futures on gold and silver after the CFTC approved them. It also has a futures broker, Kalshi Prime, for the margin side of that. That’s the start of something outside sports.

It is, and it’s the right move. It’s also brand new. Nobody has published what it earns, so for now it’s a plan next to a business that’s ninety-odd percent sports.

And the friendly regulator has its limits too. Last month the CFTC told exchanges that contracts on what somebody will say carry a higher risk of manipulation. Kalshi had already pulled those from its sports offering in August.

Small product, but I like that example. Even the CFTC, which is fighting the states for Kalshi, still draws lines on what can be listed. So the federal route isn’t a blank check either.

Then explain Sequoia to me. It’s already in. It sees numbers we don’t. And it’s in talks to lead at almost twice the May price.

That one I take seriously. An insider adding at nearly double tells you more than any multiple I can work out from a headline. I’d only say that, according to Reuters, they’re in talks to lead. Until the round closes, it’s a conversation.

And Kalshi isn’t alone in this. At the end of August, Bloomberg and the Journal reported Polymarket raising a billion dollars at twenty-one billion post-money, led by 1789 Capital. Then on the twenty-fourth New York sued Polymarket’s US business over the same thing. Polymarket sued New York back in federal court a few hours later.

So the fight covers the whole category. The question in court is whether a contract on a game is a financial product or a bet. Both companies are priced as if the answer is a financial product.

Then why is the owner of the New York Stock Exchange in it? Intercontinental Exchange carried its Polymarket stake at about two billion dollars at the end of June, and in August it said it would look at the new round. That’s an exchange operator betting this turns into a real market.

For elections and economic data, I think they’re right. Those already look like markets to me. Sports is where the courts are pushing back, and sports is where the money is today.

So where do you land?

The business is real. Four billion of annualized revenue, even with a World Cup in it, is a lot of people trading. The forty billion I’m less sure of. Most of the value rests on sports, and of the three appeals courts that have ruled on the state cases, two went against Kalshi. I’d put it at better than even that the courts make this harder before they make it easier. So to me it’s a legal risk being priced like a growth story.

Or the investors think the Supreme Court fixes it, and they’d rather be in before it does.

Could be. Then it’s a bet on a court, and I’d just like it called that.

There’s the IPO, too. Dealroom, citing The Information, said Kalshi had already talked informally with bankers about listing as soon as next year.

Which I’d welcome. A prospectus would have to put the sports share and the court cases in writing, with numbers next to them.

So what would move you?

Two things. The Supreme Court taking the New Jersey case and siding with Kalshi. Or, when the IPO comes, a filing that shows a real business outside sports. If either happens, I’ll happily say forty was early, and not expensive.

We’ll be watching for both. If you trade on these markets, or you think we’ve got the law wrong, tell us. You can reach us on WhatsApp from this episode’s page.

Thanks, Kate. Until next week.