Wall Street backs trading giant after valuation doubles

By TheStreet Roundtable

12 days ago

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Wall Street firms are pouring fresh capital into a trading category that barely existed in mainstream finance two years ago.

Some of the biggest names in venture capital and traditional finance, including Morgan Stanley, Sequoia Capital and Andreessen Horowitz, are now backing prediction markets as institutional trading activity surges.

What started as a niche corner of crypto and internet culture is increasingly being treated as a new financial layer for trading political, economic and real-world risk.

First $11 billion breakthrough

Kalshi’s rise accelerated rapidly during the 2024 U.S. election cycle after a federal court ruling allowed the platform to offer election contracts in the United States.

On Dec. 2, 2025, the federally regulated prediction market announced a $1 billion fundraising round at an $11 billion valuation, within weeks of raising $300 million at a $5 billion valuation in October.

The company expanded far beyond political betting as trading volumes surged across sports, macroeconomic events, Federal Reserve decisions and crypto-related contracts.

Kalshi, founded in 2018, operates as a Commodity Futures Trading Commission-regulated exchange where users trade “yes” or “no” contracts tied to future events ranging from inflation data to elections and Bitcoin price targets.

The company increasingly positioned prediction markets as financial infrastructure rather than internet betting.

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Institutional attention followed quickly

The Robinhood (Nasdaq: HOOD) platform, popular for crypto and stock offerings, integrated Kalshi-powered event contracts into its platform.

The Coinbase (Nasdaq: COIN) crypto exchange partnered with Kalshi to expand prediction market access for crypto-native users.

Susquehanna International Group joined as a lead market maker, helping provide liquidity across contracts.

Media firms including CNBC, CNN and Fox also began incorporating Kalshi probabilities into coverage of elections, macro events and markets.

Wall Street initially treated prediction markets as a niche curiosity, but six months later, that changed dramatically.

Six months later, $22 billion

On May 7, Kalshi announced another $1 billion fundraising round, this time at a $22 billion valuation led by Coatue, with participation from Morgan Stanley, Sequoia Capital, Andreessen Horowitz, and ARK Invest.

The new raise doubled the company’s valuation in just six months as institutional adoption accelerated sharply.

According to Kalshi, institutional trading volume surged 800% over the period, while annualized trading volume jumped from $52 billion to $178 billion.

The company now claims more than 90% of U.S. prediction market activity.

The shift reflects how hedge funds, trading firms and institutional investors are increasingly using event contracts to hedge geopolitical and macroeconomic risk.

Prediction markets are also evolving into real-time probability engines for investors seeking market-based signals around inflation, elections, commodities and economic policy.

“There are few categories in recent history that have scaled this quickly outside of AI,” Kalshi CEO Tarek Mansour said.

Part of that growth is also being driven by younger investors entering financial markets through prediction apps rather than traditional brokerages.

Gen Z, gambling concerns, and $1 trillion prediction market boom

Prediction markets are increasingly becoming a Gen Z entry point into trading.

A May 6 report from Finance Magnates found that younger users are gravitating toward prediction platforms as traditional wealth-building increasingly feels inaccessible amid rising debt burdens and housing costs.

The platforms blend elements of social media, sports betting, finance and real-time news trading into a mobile-first trading experience.

Bernstein estimates prediction market volumes could reach $1 trillion annually by 2030 as adoption spreads deeper into institutional finance. Robinhood, Coinbase and DraftKings are all expanding their exposure to the sector.

Institutions are also increasingly exploring prediction markets for political hedging, macroeconomic forecasting, insurance risk and commodities exposure.

Still, regulators continue scrutinizing the industry amid concerns that event contracts resemble gambling markets.

Legal disputes involving the Department of Justice, state regulators and the CFTC are intensifying, while insider trading concerns around politically sensitive contracts are also growing.

Despite the regulatory tension, capital continues flowing into the sector.