How a gambling startup is outsmarting the government (for now)

Kalshi operates as a federally regulated prediction market platform processing $1B monthly by exploiting a legal loophole that classifies event contracts as commodities rather than gambling. The platform charges transaction fees (1-3.5%) instead of taking house odds, enabling users to trade yes/no contracts on events. Technical arbitrage opportunities exist through automated scripts that exploit streaming delays. After securing CFTC approval in 2020 and winning a lawsuit to enable political betting, the platform expanded into sports markets, creating regulatory tensions with states losing tax revenue.