Kalshi, a prediction market platform, filed a request on Tuesday with the Commodity Futures Trading Commission (CFTC) to gain approval for offering leverage on event contracts. This practice is common in traditional markets for stocks and futures. The filing was made through Kalshi Klear, the company's internal clearing house, as part of its efforts to attract institutional liquidity to its event contract exchanges.
Currently, Kalshi provides leverage on its perpetual futures contracts but has not yet received approval for its prediction markets. Margin trading allows traders to borrow funds to purchase more assets than they can afford with their available cash, a practice that institutions view as essential for larger participation in prediction markets.
At present, all event contracts on regulated U.S. exchanges require full collateralization. Bloomberg News reported in July that Polymarket, a competitor in the prediction market space, is also seeking regulatory licenses to offer margin trading on its event contracts in the U.S.
Kalshi's prediction market volume has increased over the past year, largely due to retail trading in sports-related offerings. However, a spokesperson for Kalshi indicated that the company would not offer margin trading on its sports event contracts or its culture and 'mention' markets. The company stated that allowing leverage would enhance the appeal of longer-dated prediction markets to institutional traders.
Kalshi also plans to implement a system where capital requirements for obtaining leverage will increase as event contracts approach their expiration dates. If approved, marginable contracts will be available only to self-clearing members with direct relationships with Kalshi Klear who meet specific capital requirements.
Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.