How Kalshi Works: CFTC-Regulated Event Contracts, USD Settlement
Kalshi is the first CFTC-regulated event-contract exchange. Here's how its contracts, clearing, and US-bank custody actually work.
Kalshi is a Designated Contract Market (DCM) regulated by the Commodity Futures Trading Commission. That regulatory status is the most important thing to understand about how it works — every other design choice, from contract listing to fund custody to withdrawal timing, flows from CFTC requirements. Kalshi is what a prediction market looks like when it is built inside the US regulatory perimeter rather than around it.
Contracts are formally certified
Every contract Kalshi lists is filed with the CFTC, either as a self-certification or a request for approval. The contract specifies precise terms: what event, what resolution source, what dates, what payout structure, what position limits. This bureaucratic overhead is why Kalshi's catalog grows more slowly than Polymarket's — but it's also why every Kalshi contract has an unambiguous, pre-specified resolution source.
The certification process also gives users legal recourse. If Kalshi resolved a contract improperly, the CFTC is an actual regulator with enforcement authority. On unregulated venues, no such recourse exists.
Custody and clearing
Customer funds sit in segregated US bank accounts. Kalshi clears its own trades through a Derivatives Clearing Organization (DCO) it operates. There is no oracle and no chain; resolution is performed by Kalshi against the contract's specified resolution source. Segregation means user funds cannot be commingled with Kalshi's operating capital or lent against — a critical distinction from unregulated exchanges.
The DCO structure is unusual for a young company. Most exchanges rely on external clearing houses. Operating its own DCO lets Kalshi tightly integrate margin, position limits, and settlement — but it also concentrates operational risk in one company.
Deposit, trade, withdraw
Fund via ACH (free, same-day to instant for most accounts), debit card (small fee, instant), or wire. Trade through the web or mobile app against Kalshi's order book. Fees are taken on profitable closes — typically 1% to 7% of profit, varying by contract. Withdrawals go via ACH and settle in 1–3 business days. There is no crypto exposure at any point — your money is always in USD at a US bank.
Worked example: a Fed decision trade
You believe the Fed will cut rates 25bp at the next meeting. Kalshi lists "Fed cuts 25bp at Sep meeting?" with the FOMC press release as the resolution source. Yes trades at $0.61/$0.63. You buy 100 Yes contracts at $0.63, spending $63 plus a small opening fee. On decision day, the Fed cuts 25bp; the contract resolves Yes and you receive $100. Kalshi takes a fee on the $37 of profit — usually a few dollars, depending on the contract.
Total round-trip: about $63 in, about $93–$95 net out. Time from deposit to withdrawal: however long the market runs plus 1–3 days ACH. Compare that to Polymarket, where the same trade would involve USDC, Polygon gas, and USD↔USDC ramp costs.
When Kalshi breaks
Kalshi's failure modes are traditional-fintech failures: ACH processor delays, KYC backlogs during signup surges, identity-verification edge cases, and card-processor issues on debit deposits. The exchange itself is more reliable under load than crypto-rail platforms because it doesn't depend on chain throughput or RPC providers.
The one Kalshi-specific stress point is state-level pushback on sports contracts. Several state gaming regulators issued cease-and-desists in 2025; Kalshi has continued operating and defending its CFTC preemption in court, but availability of specific sports contracts can flicker as those cases develop.
Common pitfalls
Don't skip the KYC step at signup. Kalshi requires standard identity verification (name, address, SSN) and any mismatch delays account activation. Have a US bank account ready — international accounts are not currently supported.
Don't assume position limits are cosmetic. Kalshi's regulatory framework caps positions per market; on high-conviction trades, that cap can limit your upside. Read the contract's position limit before scaling in.
When to use Kalshi
Use Kalshi as your primary prediction-market platform if you are a US resident. It gives you legal cover, tax reporting, USD custody, and access to all major contract categories. Use it as a complement to Polymarket if you are international — Kalshi provides a cleaner-resolution US-macro contract that arbitrages well against Polymarket's crypto-rail equivalent.