Kalshi Review
Kalshi is the first derivatives exchange that has registered with the Commodity Futures Trading Commission (CFTC) to offer event contracts. The company’s founding marks a crucial milestone in prediction markets’ journey into mainstream institutions.
As one of the largest mainstream prediction market companies, Kalshi is one of the best prediction markets available to US-based users. Here’s everything you need to know about this company.
What is Kalshi?
Kalshi is a financial firm that offers event contracts. Event contracts are futures on real-world events. If the events come to pass, you get paid for each of your contracts.
Kalshi was designed to help traders hedge against events that weren’t covered under traditional insurance plans. People can get life insurance, because life insurance is based on data that’s consistent across time and makes strong predictions about individual risk.
But there’s no actuarial table for the complicated supply chains of products like wheat or coal. A farmer can lose payments for his wheat harvest if one of the transportation, storage, or distribution steps goes wrong. There are too many factors for an insurance company to cover.
Futures contracts allow farmers and their investors to mitigate the risk of any step in the process going wrong. Wheat futures entitle the buyer to a certain amount of wheat at a specified price. This gives farmers a price guarantee before they have to harvest.
However, these futures also give farmers an insurance policy. If there’s a bad harvest, then the farmer will get some money back from the futures she owns. In a good year, the farmer will get the profit from her harvest, and the money she spent on wheat futures will be gone – like insurance.
Kalshi has created a platform where someone who faces the risk of heavy rainfall, disease outbreaks, or disruption from AI can hedge against these real-world risks.
How does Kalshi work?
Each of Kalshi’s event contracts is priced between $0.01 and $0.99. The likelihood of an event coming true is the same as its contract price. According to the market, a $0.50 contract has a 50% chance of occurring.
If a contract comes true, then traders get $1 for each contract they hold. Contracts on events that don’t happen get nothing. This creates demand for contracts on events that are likely, increasing their prices and reflecting accurate probabilities of their occurrences.
Buying and selling event contracts is similar to buying stocks. You can buy in contracts or in dollars to make the trades you want. Traders can also buy and sell event contracts in real time to take advantage of price movements from new information.
If you make any money, you’ll be able to withdraw it to your bank account. Transfers can take two to four business days.
What are some benefits of using Kalshi?
Kalshi is regulated by the CFTC, which brings important benefits that other prediction markets like Polymarket don’t have. CFTC regulations create guardrails that protect derivative exchanges from market manipulation and vet exchanges to ensure traders get their payouts.
One of Kalshi’s best features is its clear market resolution conditions. Each market has terms that will settle it at the bottom. They include the source of the settling data, so everyone in the market is clear on who has the last word.
Another benefit is Kalshi’s ease of use. Its clear interface makes crucial price and market information pop more prominently. The terms of your volatile event contracts are clear on a platform that’s easy to navigate. Hopping across markets is easy on Kalshi, so it’s a great platform for traders with broad knowledge and interests.
The final and most important benefit of trading on Kalshi is its liquidity, the most fundamental benefit an exchange can offer. Kalshi partnered with an institutional market maker to make it easier for traders to buy and sell. Market makers are large companies that process trades on exchanges. They move the money so traders can buy and sell their event contracts. Kalshi is optimized for real-time trading, so traders can act immediately on important information and price movements.
How to sign up and trade on Kalshi
Step 1
Kalshi has a straightforward signup process. First, you’ll enter your email address and create a password. Then you’ll choose the prediction market categories you’re most interested in. There are nine categories, each with several subcategories to refine your feed. The next page lets you either download the Kalshi app or continue to the website.
Step 2
Once you’ve created your account and selected your market preferences, then you’ll have to verify your identity by selecting the “+Funds” button at the top of the screen. First, you’ll get a verification code. Then you’ll enter your name, phone number, and address.
Kalshi is only available to American citizens, so this is their way of ensuring their customers are eligible to trade on their platform.
Step 3
Once your identity is verified, you can make your first deposit. First, you’ll have to link your bank account. You’ll enter your account and routing numbers as you would with any other bank transaction on any other site. Then click the “Cash” heading to bring up the deposit option. Click the amount you want to deposit, then the funds will be available for trading.
With money in your account, you can begin browsing the markets. The preferences you enter during registration will influence which markets you see on the main page. You can look through the categories and see which markets are available under each heading.
Once you’ve selected a market, you can place your order. Click on the market and choose whether you want to buy in dollars, number of contracts, or place a limit order. A limit order automatically executes a trade. Once you’re done setting up your trade in the information boxes, you can submit it.
Once you’ve executed your trade, it’ll be in your portfolio. There, you can monitor your event contracts. Whether you want to buy more contracts or sell yours off, the market will be available until the contracts settle.
How to stay safe while trading on Kalshi
Trading safely isn’t just about keeping your money. It’s also about guarding your information and keeping the rest of your data safe. Kalshi is a reputable platform, so trading on Kalshi is already safer than many platforms. But there are still things you can do to take care of yourself regardless of which prediction market you choose.
on’t share your login credentials with anyone else, and don’t share accounts. If you have multiple people in your account, then you have multiple people who can make deposits from your bank or make trades you didn’t want to make.
You should also have a trading strategy. High or low-risk trading is fine, but have a plan so you can manage your losses and give yourself a chance at making some gains.
Finally, you should have some knowledge about the contracts you’re trading. Whether you’re trading on a topic you know or doing new research, get informed about your market’s volatility and range of possibilities. You’ll create a better trading strategy and be less likely to be caught off guard by price movements or market outcomes.
Kalshi fees
There are only two fees on Kalshi: trading fees and withdrawal fees.
Kalshi’s trading fees are a percentage of a trade’s expected earnings. The price trading fees are calculated with this formula:
0.07 x Number of Contracts x Contract Price x (1 – Contract Price)
The trading fees are only charged on orders that are filled immediately on offer from the market. If you make an alternative offer and your order sits in the order book, then you don’t get charged a trading fee.
The withdrawal fee is a flat $2 fee on transfers from your Kalshi account to your bank. It’s a small fee that won’t be noticed from large returns.
Deposit and withdrawal options on Kalshi
Kalshi accepts deposits and withdrawals from traders’ bank accounts. You’ll link your bank account when you create your Kalshi account.
This bank account link is one of the safest withdrawal and deposit options. Bank accounts help Kalshi adhere to know-your-customer and anti-money laundering requirements. The anti-terrorism legislation passed after 9/11 requires financial institutions to know who they’re sending money to. It’s also why customers are asked for personal information to verify their identities when they register.
Is Kalshi a legit company?
Yes. Kalshi is a legitimate company that’s registered with the CFTC. It’s not only a registered business that American customers can access. Kalshi fulfills data security and market surveillance obligations that offshore companies are unbound by. Ensuring that the largest traders don’t have more positions than the available shares is a seemingly basic requirement, but neglecting it can implode a poorly managed exchange.
Aside from regulatory safety nets, Kalshi has competent leadership and sensible governance. Its CEO is well-versed in the history and function of futures contracts. He brought that expertise to a regulated market for futures on events, no longer limiting futures to commodities like soybeans or gold.
Kalshi rests on solid theoretical ground and a strong team to put it into practice. It’s one of the safest prediction market platforms on the market.
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