Retail traders were the driving force behind Kalsi’s rise. Now it’s heading to Wall Street

Prediction market platform Kalsi processed more than $17 billion in various trading contracts in May. This is a record amount, an increase of over 2500% from the previous year.

But while individuals have driven Kalsi’s astronomical growth over the past year, the company has been focused on a new push for 2026: institutional adoption.

Less than a year after trading volumes began to consistently increase in September, Karsi, the largest prediction market platform in the U.S., has made a series of moves to increase its appeal to Wall Street in 2026. These include changing rhetoric, partnering with securities platforms, and working with companies to develop the necessary infrastructure.

And what is driving institutional interest? Hedging. Rather than having to take advantage of financial market reactions to reduce risk to various events such as elections or economic data reports, companies can put money into binary contracts related to those events.

“These have become tradable assets that people can trade directly, rather than trading in derivatives,” said Andy Ross, head of institutions at Calsi. “So you can hedge better.”

Retailers’ use of the platform has led to sports-related event contracts accounting for the majority of volume, but people told CNBC agencies they are more interested in contracts related to elections, weather events, macroeconomics and merchandise.

When Kalsi announced its $22 billion valuation on May 7, the company emphasized its growth as an institutional investor rather than retail profits. The company says that in the past six months, institutional trading volume has increased by more than 800%. But Kalsi has not yet disclosed how much dollar trading volume there is among subgroups of traders, and it is unclear how much money that spike means.

The prospect of institutional adoption is a bullish driver for the industry, according to Pierre Lind. The founder of Next.io, an in-person and online events company focused on the gaming industry and now the prediction markets industry, said expectations that institutions will start trading in these markets en masse are behind the rise in valuations for private companies.

Kalsi’s previous valuation was $11 billion in December, meaning the company’s valuation has doubled in five months.

institutional strategy

Kalsi’s coup for entering institutional trading came in April, when it completed its first block trade on the prediction market platform. The transaction was between a Texas environmental hedge fund and a market maker under a contract related to California’s carbon allowances.

Greenlight Commodities director John Conlon said there had been increased interest from other financial institutions since the deal. Greenlight was the first block trading broker.

“There was a lot of other excitement, like people who three to six months ago didn’t even want to have a conversation with are now saying, ‘Okay, send me the material,'” he says. “People say, ‘Okay, now we have a proof of concept.'”

But before that, Kalsi began laying the groundwork for institutional adoption.

In February, Kalsi strengthened its internal oversight and enforcement operations through a partnership with risk monitoring technology company Solidus Labs. Prediction market observers broadly agree that insider trading concerns on the platform need to be quelled to attract institutional attention.

In the same month, the company partnered with: trade web market Expand access to Karshi’s data and make it easier for businesses to view information related to their event contracts. Ross said data is a key entry point to garnering interest from institutions by demonstrating the value of the calci market on a platform they are familiar with.

And in March, Kalsi announced that it had partnered with the following companies: Fidelity National Information Service — Financial technology company — develops programs to clear trades in prediction markets. Tito Shirley, head of middle office solutions at FIS, said the program was partially born out of customer interest.

“We are starting to see more demand from both new entrants and existing customers who are looking to expand their derivatives clearing capabilities to include prediction markets, particularly Calci,” he said.

Karshi can now be traded on more securities platforms as well. Clear Street, a broker for institutional traders; interactive brokerThe companies, which serve both individual and institutional investors, announced in May that they would integrate some Calci contracts into their platforms.

Was the little guy squeezed out?

Some people are skeptical about institutional investors’ participation in prediction market trading.

charles schwabserves both retail and institutional investors, but CEO Rick Wurster said on an April earnings call that he hasn’t seen high demand for prediction markets from traders.

“When we ask our clients what they want, prediction markets are very low on the list,” he said. However, he added that he still expects to integrate the marketplace into its platform at some point.

Brian Jacobs, portfolio manager at Aptus Capital Advisors, warned that fees charged by prediction market platforms on trades could limit profits for large investors. Ross noted that Calsi has waived fees on block trade transactions for more than 100,000 contracts executed, and regulatory filings show the company will offer that rebate through Sept. 1.

Additionally, there is the fact that institutions have access to a wide range of information that individual retail traders do not have access to. Jacobs believes financial institutions will have a temporary advantage until other big players start entering the market.

“You’re competing with other institutions,” he said. “Even if we have more information than retailers today, are we going to continue to have more information than other institutions in this industry?”

But does that mean that the group of individuals who propelled Carsi’s rise will be squeezed out by the organization that won thanks to their extensive knowledge?

Ross doesn’t think so. In fact, he believes that institutional trading will benefit individual traders even more due to increased liquidity in the market.

“If you’re a smart predictor and you keep getting it right and more people predict… you’ll keep getting more and more right and you’ll make more money,” he said.

Disclosure: CNBC and Kalsi have a commercial relationship that includes customer acquisition and minority ownership.