Prediction market explodes! Kalshi's valuation skyrockets to 11 billion, Sequoia leads a new round of financing.

According to a TechCrunch report on Thursday, the prediction market platform Kalshi has raised $1 billion in its latest funding round led by Sequoia Capital and CapitalG, boosting its valuation to $11 billion. This marks Kalshi's second funding round completed within a month, having just finished a $300 million fundraising in October with a valuation of approximately $3 billion, a staggering 267% increase in valuation in just one month.

Details of the $1 billion financing and the lineup of investors

According to a report by TechCrunch on Thursday, Kalshi's latest funding round was led by Sequoia Capital and CapitalG. Sequoia Capital is one of the world's top venture capital firms, with a portfolio that includes tech giants such as Apple, Google, and Airbnb, and its significant investment in Kalshi demonstrates strong confidence in the prediction market space. CapitalG is a growth equity investment fund under Alphabet, Google's parent company, focusing on late-stage investments, and its participation this time signifies strategic recognition of Kalshi within the Google ecosystem.

It is worth noting that other Kalshi investors such as Andreessen Horowitz (a16z), Paradigm, Anthos Capital, and Neo did not participate in the recent round of $1 billion financing. These investors played a significant role in the $300 million financing in October, and their absence this time may indicate that they have already obtained sufficient holdings in the previous round or have different views on the current valuation. However, the involvement of Sequoia Capital and CapitalG brings new strategic resources and network effects.

About a month ago, Kalshi raised $300 million in October, expanding its business to 140 countries. Sequoia Capital, a16z, and Paradigm all participated in this deal. Completing two rounds of financing in just one month, totaling $1.3 billion, demonstrates the venture capital market's extreme optimism towards the prediction market sector. This pace of financing is extremely rare in the tech industry and usually only occurs during periods of explosive market growth.

Kalshi's financing strategy indicates that its management has a clear plan for future expansion. The first round of $300 million is intended for global expansion, covering 140 countries. The second round of $1 billion may be used for deeper product development, regulatory compliance investments, and integration with traditional financial platforms. This phased financing reduces dilution risk while ensuring sufficient capital reserves.

Valuation skyrocketed by 267% from 3 billion to 11 billion in one month

(Source: DefiLlama)

The valuation of Kalshi has skyrocketed astonishingly. When it raised $300 million in October, its valuation was approximately $3 billion (based on pre- and post-funding estimates). Just one month later, the valuation jumped directly to $11 billion, an increase of 267%. Such a surge in valuation is rare in venture capital history and typically only occurs when a company experiences explosive growth in its business or undergoes a fundamental change in its industry position.

This puts Kalshi's valuation at a similar level to its competitor prediction market Polymarket. Reports indicate that Polymarket is seeking a new round of funding, with a valuation between $12 billion and $15 billion. The two major prediction market platforms entering the billion-dollar valuation club marks a leap for prediction markets from a niche track to a mainstream financial innovation field.

Behind the soaring valuation is Kalshi's unique advantage in compliance. Unlike Polymarket, Kalshi is a compliant platform regulated by the Commodity Futures Trading Commission (CFTC), allowing it to legally provide services to U.S. residents. This regulatory advantage enables Kalshi to penetrate the core of the U.S. market, which is the largest financial market in the world. In contrast, Polymarket has been prohibited from serving U.S. residents since 2022 due to regulatory issues. Although it made a return in “beta” form earlier this month, a full recovery will still take time.

From a venture capital perspective, Kalshi's valuation leap reflects the overall valuation reassessment of the prediction market track. When top venture capital firms are willing to invest at a valuation of $11 billion, it signifies their expectation that Kalshi's future exit valuation could reach $30 billion to $50 billion or even higher. This expectation is based on the broad application potential of prediction markets in various fields such as finance, media, and decision-making tools.

Kalshi vs Polymarket prediction market showdown

Prediction markets allow users to buy and sell stocks that reflect “yes” or “no” outcomes, thereby betting on real-world events, including elections, sports events, corporate earnings results, or cultural event outcomes. This mechanism transforms collective intelligence into tradable market prices, often proving more accurate than traditional polls or expert predictions.

Kalshi and Polymarket continue to maintain their leading positions, but their competitive strategies are completely different. Kalshi chooses a compliant route, operating as a CFTC-regulated platform. Although it faces more restrictions in product innovation, it is able to legally enter the U.S. market and collaborate with traditional financial institutions. Polymarket, on the other hand, takes a more decentralized approach, operating on blockchain technology. While it faces regulatory challenges, it has greater advantages in product flexibility and global coverage.

The two platforms also have different focuses in their integration strategies. In recent months, Polymarket has achieved a large number of integrations (or plans to achieve integrations), including MetaMask, Google Finance, and Yahoo Finance. These integrations allow Polymarket's prediction data to be displayed on mainstream financial platforms, significantly increasing brand exposure.

Google Finance has also integrated with Kalshi, and in recent months, Robinhood, Elon Musk's xAI, Grok, and Pyth Network have also made integrations. The integration between Kalshi and Robinhood is particularly significant because Robinhood has tens of millions of retail investor users, and this collaboration will bring the prediction market directly into the mainstream investor community. The integration with xAI and Grok demonstrates Kalshi's ambition in the AI-driven information retrieval space.

Comparison of Kalshi and Polymarket

Regulatory Status: Kalshi is compliant (CFTC regulated), Polymarket faces regulatory restrictions in the United States.

Valuation Level: Kalshi $11 billion, Polymarket seeks $12-15 billion

Market Share: Kalshi 61.4%, Polymarket 38.6% (data since September)

Technical Architecture: Kalshi centralized platform, Polymarket blockchain decentralized

Integration Partners: Kalshi (Robinhood, xAI), Polymarket (MetaMask, Google Finance)

61.4% market share leads prediction market trading volume

DefiLlama's data shows that Kalshi and Polymarket are the two major prediction market platforms, with a combined trading volume of over $17.4 billion since September. Kalshi's trading volume during this period accounted for as much as 61.4%, giving it a slight edge. This market share data highlights Kalshi's dominance in the prediction market space.

A trading volume of 17.4 billion USD was achieved in just a few months, indicating that the prediction market is experiencing explosive growth. The driving forces behind this growth come from multiple aspects: first, the 2024 U.S. presidential election has attracted a large amount of prediction trading, making election-related markets the most active category. Second, the legalization of sports event prediction markets has brought new growth points to the platform. Third, an increasing number of institutions and media are beginning to reference prediction market data as a decision-making reference, enhancing the platform's recognition.

Kalshi's monthly trading volume changes since July 2021 show a continued growth trend. Particularly since the second half of 2024, the trading volume has exhibited exponential growth, which aligns with the U.S. election cycle and the platform's integration expansion. A market share of 61.4% signifies that Kalshi has established a significant competitive advantage in the prediction market space, a position that may further expand with the backing of network effects.

Due to regulatory issues, Polymarket has been banned from providing services to U.S. residents since 2022, but returned earlier this month in a “beta” form. The company plans to fully resume services later this month. This poses a potential challenge for Kalshi, as competition will become fiercer once Polymarket fully resumes its U.S. market operations. However, Kalshi has already used this time to establish a solid user base and brand recognition, and these first-mover advantages are difficult to reverse in the short term.