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Prediction markets 101

What Is Kalshi? A Trader's Guide to CFTC-Regulated Prediction Markets

Kalshi is a US prediction market exchange where you trade event contracts: yes-or-no positions tied to real-world outcomes. I think of it less like a polling site and more like a small derivatives exchange where the hard part is reading the rules before the price seduces you.

By Jake Morrison · Updated May 20, 2026

Regulator

KalshiEX LLC is a CFTC-regulated designated contract market.

Contract

Most contracts settle to $1 if your side is right and $0 if it is wrong.

Risk

You can lose the full amount you pay for a contract, plus friction from spreads and fees.

Best use

Treat it as a market to research, size, and journal, not as a casual trivia app.

The short answer

Kalshi lets eligible traders buy and sell contracts on whether a defined event will happen. Examples can include economic releases, Fed decisions, weather outcomes, politics, cultural events, and sports-adjacent event markets when listed. The useful mental model is simple: each contract has a rule, a price, a deadline, and a settlement source.

A 63 cent YES contract is not just a "63 percent chance" sticker. It is a tradable position with bid-ask spread, fees, liquidity limits, and settlement language that can matter more than the headline. If I cannot explain the event, side, official source, close time, and reason the market is mispriced in one sentence, I do not want the trade.

Start here: after this overview, use the Kalshi markets guide for market structure, the ticker and news guide for contract names, and the Kalshi payout calculator before sizing a position.

What CFTC regulation actually means

KalshiEX LLC received an order of designation from the Commodity Futures Trading Commission in 2020, giving it status as a designated contract market. The CFTC's public filing page is also the place to check designation status and later order updates.

That regulatory wrapper matters. A designated contract market has exchange rules, oversight, reporting obligations, and a formal framework for listed contracts. This is a different setup from an offshore prediction site, a play-money forecasting community, or a state sportsbook.

Regulation does not make the trade good. It does not guarantee liquidity, protect you from a bad forecast, or make every listed contract easy to interpret. It means the venue operates inside a US derivatives framework. You still have to read the contract terms and manage your own risk.

Reference points: the CFTC designation announcement and the CFTC Kalshi DCM filing page.

How event contracts work

Most beginner-facing Kalshi markets are binary. You buy YES if you think the event will happen, or NO if you think it will not. If your side wins, each contract pays $1. If your side loses, it pays $0. You can also close before settlement if there is enough liquidity and the price is acceptable.

1. The market title is not enough

The headline tells you the general topic. The rulebook text tells you the trade. Read the resolution source, deadline, and any edge cases before looking at size.

2. The price is a probability with baggage

A 40 cent contract roughly implies a 40 percent outcome price before you account for fees and spread. Thin books can make that number noisy.

3. Settlement beats narrative

A news headline only matters if it changes the probability of the exact settlement condition. For more on that, read how Kalshi settles its markets.

4. Liquidity changes everything

Wide spreads can turn a smart thesis into a bad execution. The order book guide is worth reading before your first active trade.

Fees, spreads, and payout math

Kalshi fees can vary by market and order type, and the fee schedule should be checked before trading. I do not rely on memory here. I model the trade with a manual fee estimate, then ask whether the edge survives the spread, expected fees, and any exit slippage.

The cleanest beginner mistake is buying a contract because the idea feels right, then ignoring that the market is 54 bid at 61 ask. If you pay 61 cents and later need to exit into a 54 cent bid, you are down before the event even changes. Read Kalshi fees explained, then run the numbers in the payout calculator.

Risk: what can go wrong

Prediction markets are speculative. I trade them because I like the structure and the research problem, not because they are easy money. The main risks are boring and repeatable:

  • Being wrong: if the event resolves against you, the contract can settle at $0.
  • Bad wording: the market can settle on a technical condition that is not what the headline made you think.
  • Thin liquidity: you may not be able to enter or exit at the price shown in your head.
  • Fee drag: small positions and frequent trading can lose edge to friction.
  • Overconfidence: political, macro, and sports-adjacent markets punish anyone who treats an opinion like a model.
My rule: size every Kalshi trade as if the market can make you look foolish in public. If the loss would bother you, the position is too big.

Taxes and records

US traders should assume realized Kalshi gains and losses need records. That means contract ticker, side, quantity, entry price, exit or settlement price, fees, and dates. Deposits and withdrawals are useful for reconciliation, but the taxable story usually lives in realized trading activity and annual forms.

I am not a CPA, and this page is not tax advice. The practical move is to keep cleaner records than you think you need and use the Kalshi taxes hub before filing season. For the broader walkthrough, read the Kalshi tax guide.

A sensible first workflow

  1. Start with a liquid market listed in the markets hub, not an obscure contract with no depth.
  2. Read the full market rules and settlement source.
  3. Look at bid, ask, depth, volume, and recent fills.
  4. Translate the price into implied probability and compare it with your own estimate.
  5. Use the calculator for payout, max loss, and break-even checks.
  6. Write down why the price is wrong before you place the order.
  7. Review the result after settlement, especially if you were right for the wrong reason.

Where to go next

Kalshi markets guide

Start here for market categories, tickers, settlement, liquidity, and workflow.

 Ticker and news guide

How to read contract codes and decide whether a headline matters.

 Payout calculator

Estimate payout, max risk, implied probability, and break-even.

 Is Kalshi legit?

A deeper review of regulation, fund safety, and practical tradeoffs.

 Start trading guide

A step-by-step beginner walkthrough after you understand the risks.

 Can you make money?

A realistic look at edge, fees, and why most casual users struggle.

 Kalshi taxes hub

Records, 1099 forms, Section 1256 questions, winnings, and losses.

 Kalshi FAQ

Short answers to the questions readers ask most often.

FAQ

What is Kalshi?

Kalshi is a US prediction market exchange where traders buy and sell event contracts that settle to $1 if an outcome happens and $0 if it does not.

Is Kalshi regulated by the CFTC?

Yes. KalshiEX LLC received CFTC designation as a designated contract market in 2020. Regulation helps with exchange oversight and market rules, but it does not make trades risk-free.

How do Kalshi event contracts work?

Most beginner-facing Kalshi contracts are binary yes-or-no markets. A contract price can be read as a rough implied probability, and each winning contract pays $1 at settlement.

Can you lose money on Kalshi?

Yes. If your side resolves wrong, the contract can settle at $0. You can also lose money through bad pricing, wide spreads, fees, thin liquidity, and poor position sizing.

Do Kalshi traders need to think about taxes?

US traders should assume realized Kalshi gains and losses need records and tax review. The exact treatment can depend on the contract and the trader's situation, so this guide is educational only.

Educational only. Not financial, tax, or legal advice. Kalshi View is independent and is not affiliated with Kalshi Inc. For corrections or source questions, use the contact page.