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During March, sports bettors may be focused on March Madness. They may miss another platform set to launch at the same time: Kalshi. Kalshi is a platform that will let its customers put money on yes or no questions. If customers are right, they get $1. If they’re wrong, they get nothing. Trades are priced between $0 and $1, and customers can trade their holdings like any other financial security.

However, sports bettors are already grumbling about what the difference could be between a prop bet and an event contract. In fairness, trading with no experience in derivatives trading may as well be gambling. Even for someone experienced in sports betting and derivatives trading, the lines between sports betting and investing in certain securities can blur. But the lines aren’t blurred enough to transfer sports betting experience to Kalshi’s platform.

How Can Kalshi Even Exist?

Cynics may wonder how Kalshi could be legal when betting exchanges can’t make it in the United States. However, Kalshi operates in a highly regulated–and most importantly, federally regulated–market. The Commodity Futures Trading Commission (CFTC) gave Kalshi approval to run a derivatives exchange before Kalshi could launch. Understanding what that means is critical to understanding the guardrails that separate Kalshi’s short-term investments from sports wagers.

What Are Derivatives, Anyway?

Investopedia gives one of the clearest definitions of derivatives:

“A derivative is a financial security with a value that is reliant upon or derived from, an underlying asset or group of assets—a benchmark. The derivative itself is a contract between two or more parties, and the derivative derives its price from fluctuations in the underlying asset.”

Investopedia offers the example of an investor buying an oil futures contract. The value of the contract depends on the price of oil. The futures contract’s value would change less dramatically than the oil prices it depends on. So, instead of investing directly in an oil asset, investors can invest in an oil derivative to reduce some of their risk.

(Leverage makes amplifies existing volatility, but that’s getting into the weeds. But no financial wizard, business school professor, or amateur trader will let me off the hook for not mentioning it.)

Event Contracts–Kalshi’s Bread And Butter

Kalshi fits into the derivatives market because it offers an exchange for investors to trade event contracts.

Let’s break that down.

An event contract is a type of derivative whose value depends on another commodity. In Kalshi’s case, an event contract’s value comes from users’ confidence in an event happening. On Kalshi’s platform, event contracts will get their prices from how much traders will pay for a yes or no. The price will fluctuate as trader consensus converges on a clear answer. In this way, Kalshi’s exchange will act like a betting exchange.

However, Kalshi can’t offer event contracts on certain events. Federal law prohibits event contracts on geopolitical events like whether a war will break out in a certain country. Kalshi also can’t offer event contracts on political events, like elections, votes, or impeachments.

Why Kalshi Doesn’t Offer Event Contracts On Sports

Kalshi doesn’t offer any event contracts on sports wagers. That makes sense for one important reason: market access.

The Wall Street Journal reports that Kalshi “worked closely with the CFTC to create a regulated market.” That wasn’t just for investor benefit–although they surely appreciated the risk reduction. But operating as a derivatives market also gave Kalshi nation-wide market access. If it offered sports questions, Kalshi risked limiting itself to only a few states at a time. It’d only be allowed in states that offered sports betting, and it would have to change its platform to conform to each state’s regulations.

Kalshi’s founders seem to have legitimate desires to cooperate with federal oversight watchdogs. But there’s a massive strategic upside to avoiding comparisons between its company and every sportsbook’s prop bet section. Kalshi is guaranteed nationwide access and it doesn’t have to compete with increasingly competitive sportsbooks. It’s a win-win.

What Sets Investing Apart From Sports Betting

Despite misconceptions about and hostility toward the finance industry, investing is different from sports betting–and gambling more broadly. There are four important areas of difference between investment platforms and sportsbooks:

  • House Advantage
  • Types of Wagers and Investments
  • Regulation
  • Legal Distinctions

Some of these differences are hair-splitting. However, they mark important differences that set Kalshi squarely in the investing industry and not the gaming industry.

House Advantage

Sportsbooks have house advantages like casinos do. They tweak the odds so that no matter the outcome, they profit. In the long run, sports bettors are expected to lose. But investing has the opposite goal. Investors are supposed to profit in the long run. That’s the whole point of investing in companies and other financial securities.

However, event contracts are short-term investments. They don’t grow over time, so they’re riskier. They’re also all-or-nothing investments, making them far riskier than a 10-year treasury bond. But traders can buy or sell their stakes in event contracts until Kalshi determines the outcome. Traders can buy low and sell high or put all their confidence in getting the right answer.

Although traders can’t get it right every time, they can learn about their yes/no questions to tilt the odds in their favor. Market knowledge can give experienced traders a long-term gain analogous to a sportsbook’s house advantage.

Investors can create house advantages for themselves. Sports bettors can’t.

Types Of Wagers And Investments

Even though wagers are confined to sporting events, sportsbooks have a wider variety of wagers than Kalshi. Kalshi can only offer yes/no questions, which are like prop bets at sportsbooks. But even game lines offer more variety than that. Point spreads and over/under bets factor in a set number of points determined by each sportsbook.

Kalshi doesn’t go that far. The only factors that matter are the question and the outcome. Yes or no. No shades of gray. However, Kalshi has an infinitely wider variety of topics to choose from than any sportsbook.

So, if bettors want to stick to sports with a wider bet variety, sports betting is for them. But if they want a wide range of topics with one investment type, traders should check out Kalshi.


We mentioned before that Kalshi and the nation’s sportsbooks operated under different legal frameworks. Kalshi is part of a federally regulated industry that gives it nation-wide access. Sportsbooks are regulated state by state and are subject to slightly different regulations in each one. Everything from license registration requirements to legal wagers can vary by state.

That means different state gambling commissions regulate sportsbook companies. Kalshi only has to answer to federal securities watchdogs. But that means Kalshi only has to conform to one set of regulations. Sportsbook companies have to be nimble enough to adapt to the many states they do business in.

Kalshi is only regulated by one set of laws. Sportsbook companies must conform to several.

Legal Distinctions

Gambling and investing have two different legal definitions:

InvestingA term where capital is committed to generate income
GamblingAccepting, recording, or registering bets or carrying on a policy game or any other lottery, or playing any game of chance, for money or other things of value

Investments are meant to make money over time–even high-risk short-term investments. But when bettors gamble, there’s an understanding that winnings depend on chance. Gamblers know they’re not at a casino or a sportsbook to make a profit. They’re there for fun.

That’s the core of the legal distinction between gambling and investing. Investing is a business activity and gambling is entertainment.

However, that legal distinction will mean little to novice investors who dive blind into trading. There’s a reason individual Wall Street traders are called dumb money. The smaller body of market knowledge is expected to make less–and even lose money–compared to the big Wall Street firms. However, that doesn’t mean that investing is gambling. It just means that traders must know what they’re doing to make money.

Professional sports bettors can make themselves profitable, too. But one of the ways they do it is gaming the system through tactics like arbitrage betting. (That’s playing two sportsbooks against each other to profit no matter the outcome. Sportsbooks ban bettors for doing that.) It’s not a reliable source of income even for informed bettors. Although some professionals can make good money during certain parts of the year, sports betting is not the reliable career that investing is.

Kalshi’s Place In The Market

Kalshi will offer a unique financial service. It’ll open investing up to individual investors the way that Robinhood did. Event contracts are only priced between $0 and $1, so it’s hard for investors to bankrupt themselves. Kalshi also creates a financial instrument that puts a dollar amount on opinions about the future. (Although all investments are based on opinions about the future, Kalshi’s yes/no questions will value specific opinions–not just general confidence in the future.)

But Kalshi isn’t a gambling app or a sportsbook for the following reasons:

Traders can build portfolios with profitable long-term returns Sportsbooks win in the long run
Offers one type of investment on many subjects Only offer sports wagers, but have many type of bets
Governed by federal regulationsGoverned by state regulation
Nationwide market accessState-by-state market access
Money is used to generate profitProfit is left to chance

Sports bettors may be tempted to try Kalshi, and they’re welcome to. But bettors shouldn’t make the mistake of treating Kalshi like a gambling platform. Kalshi’s event contract prices don’t work like sportsbook odds. Sportsbooks set odds. Kalshi’s users are setting event contract prices. Strategies that work playing against the “house” aren’t going to work when community consensus is setting commodity prices.

The details about how Kalshi and event contracts work may be confusing to some. But the bottom line is that Kalshi is a trading app–not a gambling app. And anyone who thinks investing and gambling are the same doesn’t have the industry knowledge to successfully gamble or invest. Don’t be fooled by a single gain or loss. Long-term profits are the ones that matter. Those will ultimately separate professional investors from professional bettors.

About the Author
Christopher Gerlacher

Christopher Gerlacher

Writer and Contributor
Christopher Gerlacher is a Senior Writer and contributor for Gaming Today. He is a versatile and experienced writer with an impressive portfolio who has range from political and legislative pieces to sports and sports betting. He's a devout Broncos fan, for better or for worse, living in the foothills of Arvada, Colorado.

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