Kalshi vs. Everyone: Co-Founder Luana Lopes Lara on the lawsuits and the long game

Kalshi’s central legal fight is whether its event contracts are derivatives traded on a regulated exchange or sportsbook bets subject to state gambling laws. Bob Safian said a federal appeals court had ruled that Ohio and Tennessee could regulate Kalshi under those laws, while New York was suing the company for $36 billion. Co-founder Luana Lopes Lara said the state cases make different arguments, expressed confidence in Kalshi’s position and cited a win in the Third Circuit. She argues that Kalshi differs from a sportsbook because traders buy and sell against one another, see competing prices and an order book, and do not bet against a house that sets odds and keeps a margin.

The stakes are significant because sports account for about 75% of Kalshi’s business, according to Safian, and Lara says restricting access state by state would reduce national liquidity and worsen prices. Founded in 2018, Kalshi spent four years working with the federal government before launching in 2021, Lara said. Safian said the company was valued at $5 billion about a year before the interview and reached $22 billion by early that year. Lara said Kalshi made far less than $10 million annually before the election, but now transacts in one day more than it did in a year two years earlier. She attributed the acceleration to years of preparation, a product ready to scale and the ability to offer more markets after winning its CFTC lawsuit.

Lara’s long-term ambition is to build the world’s largest derivatives exchange, with new financial innovations or structures appearing on Kalshi first or close to first. She says that requires expanding market structure, margin, topics and liquidity, and ultimately out-executing competitors. One underused application she sees is hedging: small businesses may not have access to futures markets commonly used by large institutions, but can use Kalshi to manage exposure to gas and diesel prices, weather, sports or politics. Lara cited a California goat farmer who hedged a proposed law she said could have raised his labor costs fourfold.

Lara argues that trading competition can turn research into continuously updated forecasts: participants seek better prices, and markets aggregate information as conditions change. She said Kalshi’s calibration study found that prediction markets perform well, with calibration and accuracy rising into the high 90s near resolution; a 70% probability means the event should happen roughly seven times out of ten, not that it is certain. She contrasts this bottom-up aggregation with polls and editorial forecasts, which she characterizes as top-down, and cautions that polling margins and market probabilities measure different things. A 10-point polling lead, she said, could correspond to a market probability above 90%. Lara estimates that perhaps 78% of visitors use Kalshi to consume data rather than trade; Safian cited a report estimating 70%.

Kalshi reimbursed users more than $2 million after confusion about a market on whether Iran’s Supreme Leader would die or be removed from power. Lara said the rules voided trades if assassination or terrorism occurred, preventing users from profiting from those events. She attributed the reimbursement to inadequate explanations of the voiding process, not to a belief that the market was improper, and said Kalshi became more selective about listings afterward. The company prohibits insider trading and manipulation, using identity and employment checks, proactive restrictions, and a surveillance team that combines AI and machine-learning anomaly detection with investigations, social-media review and interviews. Lara said politicians cannot trade on their own elections and athletes cannot trade on their sports; she cited a White House teleprompter case and George Santos’s purported attempt to trade on his State of the Union attendance as enforcement examples.

Kalshi bans suspected wrongdoers, imposes fines and refers cases to regulators, potentially including the Department of Justice, Lara said. She argues that verified identities and narrower event topics make surveillance easier than on offshore platforms such as Polymarket, where traders’ identities are unknown. Kalshi permits API-based trading by agents, but agents and their operators remain subject to the same rules as human traders; Lara welcomes them if competition improves prices and forecasts. The company has also introduced margin trading after more than two years of development. Users must apply and provide information including trading experience and net worth, and Lara says margin is not available to everyone. She said Kalshi worked with regulators on margin models and clearinghouse safety, while leverage can make large, long-dated hedges more capital-efficient and support institutional adoption.