Key Highlights
- Kalshi brings prediction markets to crypto with Solana-based tokenized contracts, merging on-chain trading with off-chain liquidity.
- Tokenized contracts give traders more privacy while tapping into crypto liquidity to support faster, larger markets amid growing competition.
- Legal risks rise as Kalshi faces a sports betting lawsuit, but liquidity remains crucial for accurate pricing and smooth market activity.
Predication market firm Kalshi is moving into crypto with tokenized event contracts on the Solana blockchain. The new system allows users to trade predictions directly on-chain. It also links traditional off-chain trading with Solana’s decentralized network, pooling liquidity into a single, larger market.
John Wang, Kalshi’s Head of Crypto, emphasized the significance: “The ultimate moat for any exchange is liquidity. Kalshi is the only prediction market in the world that aggregates onchain and offchain, US and international into one giant liquidity pool.”
As confirmed by CNBC, the tokenized contracts replicate Kalshi’s standard offerings but add more privacy for traders. Instead of trading the actual contracts, users trade tokens representing those contracts. This works similarly to Polymarket, letting users trade directly on-chain. Decentralized finance (DeFi) platforms DFlow and Jupiter help institutions connect Kalshi’s off-chain trades to Solana’s network.
Expanding market reach
Kalshi’s expansion taps into the surging demand for event contracts. Prediction markets reported nearly $28 billion in trading volume through October, with weekly peaks hitting $2.3 billion in late October, according to Crypto.com research.
By accessing the $3 trillion digital asset market, Kalshi gains the liquidity needed to scale rapidly. “There’s a lot of power users in crypto,” Wang told CNBC. “This is about tapping into the billions of dollars of liquidity that crypto has, and then also enabling developers to build third party front ends that utilize Kalshi’s liquidity.”
Founded in 2018, Kalshi made history as the first exchange to launch federally regulated event contracts on U.S. congressional races in late 2024. The platform now runs approximately 3,500 markets globally. It raised over $300 million last fall at a $5 billion valuation, backed by Andreessen Horowitz and Sequoia Capital. Despite this growth, competition is rising.
Polymarket’s U.S. relaunch and Coinbase’s upcoming prediction markets, revealed through tech researcher Jane Manchun Wong, will pressure Kalshi to maintain liquidity and innovative offerings.
How tokenized contracts work
Each contract on Kalshi is binary: it pays $1 if the event happens, $0 if it doesn’t. Users can purchase or sell “yes” or “no” positions at any point in time before the resolution of the event. Payouts are then distributed once finalized according to the predefined source of truth, which is generally official data or trusted news outlets.
Similarly, Coinbase says it will offer a similar model under U.S. Commodity Futures Trading Commission (CFTC) oversight through its derivatives arm in cooperation with Kalshi. To make a trade, users must first fund a USD or USDC wallet, and the platform has guides for users about various risks and how the mechanics work.
Legal challenges and market risks
Kalshi faces a nationwide class action lawsuit in New York, accusing it of illegal online sports betting. Plaintiffs claim that the event contracts for athletic outcomes effectively bypass state gambling laws. The suit escalates Kalshi’s regulatory challenges from disputes with the CFTC to private legal liability.
Wang insists liquidity remains Kalshi’s priority, “If you have a market with no liquidity, then you don’t really have a market. People can’t really trade size or get the prices that they want.”
Kalshi’s tokenized contracts combine traditional prediction markets with crypto trading. By linking on-chain and off-chain funds, the platform could handle more activity, despite rising competition and legal challenges.
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