A new trillion-dollar playing field where billionaires are betting on our future.

On a cold winter morning in 2023, Charles Schwab, a billionaire from a discount brokerage firm, showed up at the SoHo office of prediction market startup Kalshi, carrying several bulging binders under his arm.

Tarek Mansour and Luana Lopes Lara, the 27-year-old co-founders of Kalshi at the time, were extremely surprised that this Wall Street legend would take the time to delve into their small company.

In 2021, Schwab and another Wall Street icon, Henry Kravis, participated in Mansour's company's financing as angel investors. In that $30 million financing round, Kalshi was valued at $120 million.

"I had only talked to Chuck (Charles Schwab's nickname) for a few minutes on our first call when he said, 'I'm going to invest,'" recalled Mansour, now 29. "He said our company reminded him of when he founded Charles Schwab, and that after waiting so long, he finally saw a company that could fundamentally change the financial market."

Today, aside from Charles Schwab, which has a market value of $176 billion, Kalshi has become one of Schwab's largest investment projects. In June, this startup's valuation rose to $2 billion in a financing round, attracting another Wall Street billionaire, Peng Zhao, the senior CEO of Citadel Securities, to participate in the investment.

01

There are many who share the same vision as Schwab, Kravis, and Zhao. Prediction markets have become a hot area for the smartest billionaires in the financial world to invest in.

Thomas Peterffy (worth $72 billion), the founder of Interactive Brokers, revealed to Forbes that shortly after Kalshi completed its angel round financing in 2021, he tried to acquire the company. Although the acquisition didn't succeed, Peterffy wasn't discouraged. A year ago, his Interactive Brokers founded a subsidiary, ForecastEx, which has now become Kalshi's competitor, with prediction targets covering various future events such as the New York mayoral election and the price of Bitcoin by the end of 2025.

In April 2024, Susquehanna International Group, a quantitative trading hedge fund owned by Jeff Yass (worth $65 billion), reached a cooperation with Kalshi, providing liquidity support as the main market maker. Not long ago, Kalshi also cooperated with Robinhood, a platform owned by Vlad Tenev (worth $64 billion), adding event contract trading to the latter's increasingly diverse retail investment product lineup.

Kalshi's local competitor, Polymarket, is also not far behind. This blockchain-based prediction market platform has also attracted many billionaire investors, including Peter Thiel (worth $25.3 billion), co-founder of Palantir, Vitalik Buterin, founder of Ethereum, and Joe Gebbia (worth $7.7 billion), co-founder of Airbnb.

According to Pitchbook data, in August, after a $135 million financing led by Thiel's Founders Fund, Polymarket's valuation reached $1 billion. In addition, Brian Armstrong (worth $13.7 billion), founder of Coinbase, also announced in July that he was about to launch an "all-in-one exchange" to provide prediction market services for its hundreds of millions of users.

According to The Information, both Kalshi and Polymarket are currently preparing for a new round of financing, and their valuations are expected to rise to $5 billion and $9 billion respectively.

02

Betting on elections and sports events is not new. In the United States, such activities have existed since the 19th century. The modern prediction market (where users can bet on the results of future events by buying and selling "yes" or "no" contracts) can be traced back to 1988, when it was designed and launched by the University of Iowa.

In the 2010s, early platforms such as Intrade and PredictIt were open to the public, but due to regulatory issues, they basically didn't achieve much. Although Kalshi is not the first in the industry, it made history in October 2024 when the federal court ruled that it could launch presidential election contracts, which had been illegal for more than a century.

The presidential election became a turning point for the industry: After obtaining regulatory approval for election betting, Kalshi's user base increased tenfold in less than a month. By the night before the election, 2 million users had placed bets of over $1 billion. On the Polymarket platform, the betting amount on whether Trump or Harris would win reached as high as $3.6 billion. The popularity brought by the election made the prediction market a cultural focus, creating seemingly endless betting opportunities - from next year's Oscar nomination list to the probability that the marriage of the CEO of Astronomer would end after a picture of him hugging a female colleague on the big screen at a Coldplay concert.

03

If you ask why these billionaire traders are getting involved in the prediction market industry, you might hear such a high - level view:

"Throughout my career, one thing that has always bothered me is that people don't think about the future in terms of probability," said Peterffy. "In my opinion, prediction markets can teach the public to think about the results of future events in terms of probability." He founded Interactive Brokers in 1977, which now has a market value of $100 billion. The original intention was to allow more people to trade options (i.e., bet on stock price fluctuations).

Jeff Yass replied to Forbes like this: "Prediction markets allow all parties to share risks more efficiently in a parameterized way.

Take homeowners in Florida as an example. They face the risk of hurricanes. Instead of buying annual insurance, they can, when a hurricane is approaching, refer to the latest weather data and buy a 'yes' contract stating that 'the wind speed in this town will exceed a specific value' to hedge against potential property loss risks." (By the way, at Yass's Susquehanna International Group, poker skills are actually a prerequisite for employment.)

In March 2025, Tenev posted on social platform X about Robinhood's cooperation with Kalshi: "In essence, (prediction markets) apply the logic of capitalism to the pursuit of truth. Market incentive mechanisms and collective wisdom will filter all available information to find answers to specific questions and make judgments on the results of important events." A month before that, Armstrong of Coinbase said in an interview with CNBC that in the future, prediction markets might even become an alternative to traditional media like The New York Times.

Mansour put it more straightforwardly: "If you're a Wall Street trader, you know that prediction markets have long been the 'Holy Grail' that everyone pursues - because there are countless tradable products in this field. Our goal is to build the world's largest commercial trading market." Mansour is an engineer by training, graduated from MIT, and has worked in stock option trading at Goldman Sachs and Citadel Securities.

04

Today, Kalshi, headquartered in New York, has 75 employees, almost twice as many as before the November 2024 election, and there are about 2,000 active prediction market targets at any time.

In terms of the financial service model, Kalshi's profit - making method is very traditional: it charges a commission or handling fee for each contract bought and sold. The contract price is linked to the market's expectation of the probability of an event occurring, ranging from 1 cent to 99 cents.

For example, if you buy a contract stating that "Secretary of Defense Pete Hegseth will be the first to leave Trump's cabinet" at a price of 10 cents, you need to pay a 1 - cent handling fee (i.e., a 10% rate). If you spend $50 to buy 100 "yes" contracts stating that "the US government will shut down in 2026", Kalshi will charge a $1.75 handling fee (i.e., a 3.5% rate) according to its floating rate. In addition, Kalshi charges a 2% fee for all debit card deposits, and users need to pay a fixed $2 fee when withdrawing money from their accounts.

But it's not just the floating rate that attracts billionaire investors.

Unlike stocks, which are interchangeable and can be traded and settled at multiple brokerage firms, contracts in the prediction market are proprietary - this actually forms a "moat" that locks users into the platform that created the contract.

Currently, Kalshi's monthly trading volume is about $1 billion, and the total trading volume since its establishment has reached $6.9 billion, of which $6.4 billion occurred after October 2024. This startup not only directly attracts speculators through its own website and mobile app but also licenses its prediction market targets in a "white - label" form to brokerage platforms such as Robinhood and Webull, further enhancing liquidity and business scale. Mansour said that the company will cooperate with more than a dozen brokers in the coming year.

"We found that the prediction market is a very good tool for improving user stickiness," said JB Mackenzie, head of Robinhood's futures business. "It can drive traffic to the company's other businesses and promote their development." Robinhood has 27 million users and is committed to becoming a one - stop financial service platform for the younger generation.

Matt Huang, the founding partner of cryptocurrency venture capital firm Paradigm, who led Kalshi's $185 million financing in June, believes that low operating costs may help the prediction market capture other mature markets. He said, "The prediction market is a'superset' of all other markets: sports betting, the stock market, almost all types of markets can be included in the prediction market. In a sense, the scale of the prediction market is expected to be comparable to that of the largest financial markets, or even larger. I firmly believe that the growth potential of this field is infinite." In Mansour's view, the potential scale of this market is as high as "hundreds of trillions of dollars".

05

If there is any party that can add more fuel to the fire of the prediction market, it might be the Trump camp.

In January, Donald Trump Jr., the eldest son of Trump, joined Kalshi as a strategic advisor, while Eliezer Mishory, who had served as Kalshi's chief regulatory officer for four years, left to join the "Department of Government Efficiency" of the Trump administration as its head. Earlier this year, Brian Quintenz, a member of Kalshi's board of directors and a former commissioner of the US Commodity Futures Trading Commission (CFTC) during Trump's first term, was appointed by Trump as the chairman of the CFTC.

In 2022, when Mansour applied for the Forbes 30 Under 30 list nomination, he only listed one professional recommender - Emil Michael, an angel investor in Kalshi, and Michael is the candidate for the chief technology officer of the US Department of Defense nominated by Trump. There are more similar connections: LinkedIn profiles show that Samantha Schwab, the granddaughter of Charles Schwab, previously only worked in the Trump administration. After working in Kalshi's business development team for a year, she joined the US Treasury Department in January as the deputy chief of staff.

Although Kalshi is in the leading position among prediction market platforms, the competition is far from over. At the end of August, Donald Trump Jr. invested in Polymarket, Kalshi's competitor, and joined its advisory board. A few days later, Polymarket obtained CFTC approval to conduct business in the United States, putting it on the same starting line as Kalshi in penetrating the Wall Street market. The largest sports betting platforms in the United States, FanDuel and DraftKings, are also developing their own prediction market businesses. Meanwhile, state regulatory agencies are still suing over the legality of Kalshi's sports event contracts, which are definitely the company's largest business segment. The subsequent development is worth paying attention to.

This article is from the WeChat official account "Forbes". Author: Forbes. Republished by 36Kr with permission.