Kalshi's funding valuation has doubled in two weeks! Investment skyrocketed from 5 billion to 12 billion dollars, causing a rush.

According to Bloomberg, the US-regulated prediction market platform Kalshi is receiving investment proposals from venture capital firms, with a valuation of up to $12 billion. Less than two weeks ago, Kalshi raised over $300 million at a valuation of $5 billion. Competitor Polymarket received up to $2 billion investment from Intercontinental Exchange at a valuation of $9 billion.

Kalshi financing doubles valuation in two weeks crazily

According to a report by Bloomberg on October 22, citing anonymous sources, the US-regulated prediction market platform Kalshi is receiving investment proposals from venture capital investors, which could value the company at as much as $12 billion. Less than two weeks ago, this startup raised over $300 million at a valuation of $5 billion. From $5 billion to $12 billion, this represents a 140% increase in valuation achieved in less than two weeks, which is extremely rare in venture capital history.

According to sources, Bloomberg stated: “Investors have been eager to support this rapidly growing startup and have discussed providing funding for the company at a valuation of $10 billion to $12 billion or higher.” This investment enthusiasm shows that the prediction market sector is becoming the new darling in the venture capital world. In the context of increasing volatility in traditional financial markets and rising political uncertainty, prediction markets offer a unique tool for risk hedging and information discovery.

Kalshi's rapid valuation growth reflects several factors. First, the business is growing rapidly, with a surge in trading volume on the platform during the 2024 U.S. presidential election, demonstrating the viability of its business model. Second, regulatory compliance plays a key role; Kalshi is a legal prediction market platform under the regulation of the U.S. Commodity Futures Trading Commission (CFTC), and this compliant status is highly valuable in the U.S. market. Third, the potential of the sector is significant; prediction markets are seen as the next billion-dollar level Fintech sector, with early entrants enjoying first-mover advantages.

The doubling of valuation within two weeks also reveals the FOMO (fear of missing out) sentiment in the venture capital market. When a company demonstrates explosive growth and a clear business model, investors rush to get in, driving up valuations. This phenomenon has repeatedly occurred in the history of tech venture capital, from social media to the sharing economy to cryptocurrency, with each hot sector experiencing similar valuation frenzies.

Kalshi Financing Timeline and Valuation Surge:

Two weeks ago: Raised over $300 million at a valuation of $5 billion.

This week: Received investment proposals with valuations of 10-12 billion USD or higher.

Valuation Growth: Increased by 140% within two weeks, indicating extreme market optimism.

Polymarket's $9 billion valuation benchmark competition

The competitor platform Polymarket recently announced that the Intercontinental Exchange will invest up to $2 billion in its platform at a valuation of $9 billion. Previously, Polymarket's CEO Shayne Coplan stated that his platform “has been approved to launch in the United States,” after the platform ceased operations in the U.S. in 2022. Polymarket's return to the U.S. market brings direct competitive pressure to Kalshi.

Kalshi's $12 billion valuation presents an interesting contrast to Polymarket's $9 billion. The higher valuation of Kalshi may be based on several factors. First is the regulatory advantage; Kalshi has operated in compliance from the beginning, while Polymarket exited the U.S. market due to regulatory issues, and this compliance history provides a more solid foundation for Kalshi. Secondly, there is market positioning; Kalshi focuses on regulated prediction market contracts, while Polymarket leans more towards crypto-native users. Kalshi's positioning may make it easier to gain recognition from mainstream institutional investors.

However, Polymarket also has its own advantages. Its platform demonstrated remarkable prediction accuracy during the 2024 U.S. election, with trading volume reaching new highs, proving the market acceptance of its products. The investment from Intercontinental Exchange (ICE) is particularly significant, as ICE is the parent company of the New York Stock Exchange, and its endorsement brings traditional financial recognition to Polymarket. This institutional-level investment may help Polymarket quickly expand its market share.

The competition between the two companies will drive the rapid development of the entire prediction market sector. In terms of business models, both adopt a market model that matches buyers and sellers, extracting transaction fees from trades. Technically, both are exploring ways to enhance liquidity, reduce spreads, and improve user experience. In terms of regulation, both are striving to obtain or maintain compliance status, which is key to long-term operation in the U.S. market.

From the perspective of market size, the global sports betting market is valued at over $200 billion, and emerging markets such as political prediction markets, economic indicator predictions, and entertainment event predictions are also growing rapidly. Kalshi and Polymarket are both vying for a share of this vast market, and although valuations of $12 billion and $9 billion may seem high, if they can capture 5% of the market share, these valuations can logically hold.

Dual Engine Strategy for Integrating Sports Betting and Cryptocurrency

(Source: The Block)

The sports betting industry has become a multi-billion dollar industry, and it may serve as a common growth point for Kalshi and Polymarket. In August of this year, Robinhood announced the launch of a professional and college football prediction market, allowing users to bet on game outcomes through a partnership with Kalshi. This integration with mainstream fintech platforms brings a huge potential user base to Kalshi.

On Wednesday, Polymarket stated that if this sports betting giant launches a prediction market after acquiring Railbird, it will serve as the designated clearinghouse for DraftKings. DraftKings is one of the largest sports betting platforms in the United States, and its choice of Polymarket as the clearinghouse demonstrates the traditional betting industry's recognition of crypto-native prediction market technology.

According to The Wall Street Journal, the National Hockey League (NHL) has reached a multi-year licensing agreement with Kalshi and Polymarket. This collaboration with mainstream sports leagues provides an official data source and brand endorsement for the prediction market platform. Sports betting is one of the most natural application scenarios for prediction markets, as the outcomes of sporting events are clear, data is public, and there is a large user base.

Another strategic direction for Kalshi's financing is cryptocurrency integration. Kalshi's cryptocurrency head, John Wang, recently told The Block that the company's prediction market should appear on “every major cryptocurrency application and exchange” within the next 12 months. This ambitious goal shows that Kalshi sees cryptocurrency as an important distribution channel and source of users.

Kalshi Post-Funding Dual Engine Growth Strategy:

Sports Betting Engine: Partnering with Robinhood and NHL to tap into the billion-dollar sports betting market.

Crypto Integration Engine: Enter all major crypto applications and exchanges within 12 months, capturing crypto-native users.

Cryptocurrency users are the ideal audience for prediction markets. First, they have a high acceptance of risk and speculation. Second, they are familiar with decentralized and peer-to-peer trading models. Third, they are already accustomed to using digital assets for value transfer. If Kalshi can successfully integrate into mainstream crypto exchanges, allowing users to participate in prediction markets directly with stablecoins like USDT and USDC, it will significantly lower the barriers to entry and increase trading volume.

From a product strategy perspective, Kalshi may launch cryptocurrency-related prediction contracts, such as “Will Bitcoin break 150,000 USD by the end of the year?”, “Will the Ethereum 2.0 upgrade be completed on schedule?”, and “Will the SEC approve the Solana ETF?” These contracts are directly related to the interests of cryptocurrency users and will attract a large number of participants. In addition, Kalshi may also explore tokenizing the prediction market, issuing its own governance tokens or points system, further integrating with the cryptocurrency ecosystem.

In the long term, although Kalshi's financing at a valuation of $12 billion is aggressive, if it can successfully execute a dual-engine strategy of integrating sports betting and cryptocurrency, capturing market share in two rapidly growing markets, this valuation may prove to be reasonable in the future. The key lies in execution and timing; against the backdrop of competitors quickly following suit and a constantly changing regulatory environment, Kalshi needs to expand quickly and establish a moat.