Kalshi's Valuation Surges Amid Intensifying Funding Race

Kalshi has seen its private valuation more than double in recent weeks as investors committed over $1.3 billion in new capital this quarter. The company closed a $1 billion round at an $11 billion valuation, led by Sequoia and CapitalG, shortly after securing $300 million in Series D funding at a $5 billion valuation in October. 

The influx of capital placed Kalshi in what appears to be a rapid funding competition with Polymarket. The rival platform is reportedly considering new financing at a valuation of $12 billion to $15 billion.

Several factors have contributed to the sharp rise in valuations. Investors point to a clearer regulatory footing, with Kalshi operating as an exchange regulated by the Commodity Futures Trading Commission (CFTC) and Polymarket preparing a US return.

The prediction market apps have reported sustained growth in volume and open interest. 

Polymarket's anticipated POLY token and planned airdrop have added a speculative element, drawing further investor interest. Current market-share estimates place Kalshi at roughly 60% of volume and Polymarket at about 40%, with open interest at $320 million and $300 million, respectively. 

November is expected to be the highest-volume month on record for both operators, approaching levels seen during the previous US election cycle.

Kalshi confronts class action

The rise in funding comes at a time when Kalshi is facing more legal trouble, including a new class action lawsuit that questions the legality of its sports-related contracts. 

The lawsuit, filed in a federal court in New York, alleges that the company operates an illegal sports betting site and deceives thousands of users about how its markets function. Seven named plaintiffs seek to recover lost funds and request a jury trial, with potential damages that could be tripled.

The complaint centers on Kalshi's sports contracts, where users can speculate on outcomes such as NFL game winners or player performance totals. Kalshi has maintained that its platform differs from traditional sportsbooks because trades occur between users rather than against the operator.

However, the filing alleges that consumers were unknowingly matched against Kalshi-affiliated market-making entities or hedge fund partners, such as Susquehanna International Group. According to the suit, these entities intervened when trading strayed from Kalshi's internal pricing, effectively placing the company on the opposite side of customer positions.

Kalshi has repeatedly asserted that its contracts are governed by federal CFTC rules instead of state gambling laws, but that argument has yet to be upheld. The suit seeks to certify a nationwide class and state-specific subclasses, alleging that the company violates state laws in New York, California, and Florida. 

This action follows a setback for Kalshi in Nevada earlier in the week, when a federal judge allowed the state's gaming regulator to pursue efforts to halt the company's sports event contracts while litigation continues. The regulator has warned it may take enforcement steps against any operator offering what it considers unlawful sports betting in the state, and has already seen Robinhood cease operations.