Kalshi seeks CFTC approval for use of borrowed funds on its platform
Prediction market Kalshi has this week (Tuesday, Sep. 22) sought approval from regulators to allow its users to offer margin trading and leverage (that is borrowing and loans) on contracts and predictions.
The practice of using borrowed funds to support trades is common in conventional stock trading but has not yet made its way into the prediction market space. Currently, it’s only possible too make trades and purchase contracts on a prediction market with collateral payments, that is, real cash and assets (including crypto currency).
If approved, the change could see users utilize leverage in their trades, bringing the potential for even larger gains (and losses) for both the user base and
Kalshi
itself.
Kalshi users could be allowed to use borrowing to support their trades
Leverage, simply, is the use of borrowed money in an investment versus wholesale purchase. It’s one of the most common uses of financing in the world, with mortgages and car financing loans being perhaps the most widely known and utilized example.For Kalshi, the use of leverage will mean that investors will be able to stake a much larger position in the market than before. But like financing examples above, will likely have to make an initial collateral purchase (similar deposit in cash) of a certain portion of the total trade.
Kalshi wants to allow users to use margin trading on its platform. Image credit: Kalshi
If approved, Kalshi will bring in a hugely increased amount of money into its ecosystem, in what observers have pointed to a massive additional amount of liquidity for the market.
At the moment, in theory, users could secure outside loans to finance their bids. But with the CFTC approval,
Kalshi itself could use official channels
to offer this borrowing.
Kalshi, and indeed the whole prediction market industry has vastly expanded over the past 18 months, with sports events predictions leading the way. However
according to CNBC, Kalshi will avoid offering margin trading and leverage on sports, culture and event trades.
In July, Bloomberg reported that Kalshi rival, Polymarket, had sought licences for margin trading. Polymarket, unlike Kalshi, utilizes only cryptocurrency, which could stifle its chances for official regulation. Whichever platform is able to offer this new standard could sweep its rivals.
Featured Image Credit: Kalshi
Michael Hassall
About Michael Hassall
Michael is a eight-year veteran of the games writing space, but has being playing them for as long as he can remember. With bylines across the internet, he’s used his expertise to cover esports, prediction markets, mainstream gaming, streamers, and more besides.
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