Prediction market platform Kalshi has filed with the Commodity Futures Trading Commission (CFTC) to seek approval for margin trading on its event contracts. The filing, submitted by Kalshi Klear, the company's internal clearing house, marks the latest step in Kalshi's efforts to attract institutional liquidity to event contract exchanges.
Kalshi already offers leverage on its perpetual futures contracts but has not yet received approval for margin trading on its prediction markets. Margin trading allows traders to borrow money to purchase more of an asset than the cash they put down, a practice prevalent in traditional equities and derivatives markets.
Currently, all event contracts on regulated U.S. exchanges are fully collateralized. Bloomberg News reported in July that Polymarket, a rival prediction market platform, is also making moves to obtain regulatory licenses to offer margin trading on its event contracts in the U.S.
Prediction market volume, including Kalshi's, has surged over the past year, primarily driven by retail trading on sports-related offerings. However, Kalshi has stated that it will avoid offering margin opportunities on its sports event contracts, as well as its culture and 'mention' markets.
In a memo provided to CNBC, Kalshi explained that the ability to offer leverage will make longer-dated prediction markets, those with expiration dates far in the future, more attractive to institutional traders. The company also plans to introduce a system where capital requirements to obtain leverage increase as event contracts near their expiry date.
If approved, marginable contracts will only be accessible to self-clearing members who have direct relationships with Kalshi Klear and meet certain capital requirements, according to a Kalshi spokesperson.
Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.
