Kalshi Co-Founder Says In-House Trading Arm ‘Not Profitable’

Kalshi’s in-house market maker is “not profitable” and traded about $310 million on sports last month, according to one of the prediction market’s co-founders.

Luana Lopes Lara — who co-founded Kalshi with Tarek Mansour — posted on X in response to a class-action lawsuit filed in the U.S. District Court for the Southern District of New York last week.

The class action alleged that Kalshi was “duping” customers by advertising a peer-to-peer service while also operating an in-house market maker, Kalshi Trading. Kalshi Trading offers bets to users on many markets, typically on both sides of a contract.

“Consumers on Kalshi do not only bet against each other — they also bet against the House. Kalshi operates institutional market makers, which also gamble against the consumer,” the class-action complaint reads.

Lopes Lara wrote that this complaint mischaracterized the role of Kalshi Trading.

“Yes, one of the participants on the exchange is our affiliate, Kalshi Trading,” her post read. “This is a common and regulated practice in our industry, which helps provide liquidity for a better user experience. Many financial exchanges have similar setups, especially for new products.”

Lopes Lara said that Kalshi Trading “receives no preferential access or treatment that gives them any advantage” and “operates as a separate team” to the exchange.

She called the lawsuit “baseless” and said the claims against the business were a “smear campaign.”

Accounts ‘paid to amplify’ claims?

Lopes Lara also said that some social media accounts were “paid by our competitor to amplify” the lawsuit.

Included in her X post was a screenshot of a post by an account named Rawsalerts, which Lara appeared to suggest was among the social media accounts paid to amplify the story. Rawsalerts has a Polymarket badge on its account, typically used by affiliates who receive payment for promotion of the site.

Also included in the post was a screenshot of a message that appears to be from Polymarket growth lead William LeGate. The message says that Polymarket acquired the Rawsalerts account for $500,000. Polymarket and Rawsalerts did not immediately respond to requests for comment from InGame.

Lopes Lara: Kalshi Trading does not make profit

Lopes Lara went on to provide information about the market maker’s financial performance for the first time, writing the operation is “not profitable,” and “is less than 6% of the making volume” for sports contracts in November.

While Kalshi Trading may not be profitable in practice, official documents filed with the Commodity Futures Trading Commission (CFTC) show that the purpose of the operation is to seek profit. It is generally considered to be difficult to make a profit while making markets due to a phenomenon called adverse selection. Adverse selection means that trade offers that get accepted are more likely to be poorly priced, because “takers” are more likely to accept bets that they believe to be good value.

Lopes Lara did not provide more information about Kalshi Trading’s profitability, such as whether she was counting the unit’s performance in trades only, or whether it also included expenses such as salaries for its employees.

During November, $5.82 billion was traded on Kalshi, including around $5.17 billion on sports, according to InGame’s analysis of Kalshi’s trading data.

If Kalshi Trading was the market maker for 6% of sports trades, that means it traded $310 million on sports during the month.

Lopes Lara did not provide details of how much Kalshi Trading trades on non-sports markets. These markets usually have less volume than sports markets, and so market makers are more likely to be needed in order to provide liquidity for other traders. This means that Kalshi Trading’s share of overall volume may be higher than it would be on sports alone.

Other external market makers operate on Kalshi too, and receive rebates or other benefits in return for providing trade offers for other Kalshi users to take.

Susquehanna International Group is believed to be the largest external market maker on Kalshi. Last week, Susquehanna announced it would also trade on an upcoming exchange to be launched by Robinhood. 

More Kalshi legal developments

The class action formed part of a busy Thanksgiving period for Kalshi’s legal team. Elsewhere, Kalshi filed notice in the U.S. District Court for the District of Nevada that it will appeal last week’s dissolution of an injunction to the Ninth Circuit Court of Appeals. Kalshi has requested that the court stays enforcement of Nevada’s cease-and-desist against the prediction market until the appeal is heard.

The Ninth Circuit appears set to hear two Kalshi-related appeals, as three California tribes also appealed a decision from the Northern District of California not to block Kalshi from operating on tribal lands.

In the Third Circuit, meanwhile, the state of New Jersey filed a “notice of supplemental authority” in its lawsuit against Kalshi. The state pointed to the dissolution of the Nevada injunction and argued that the same should be done in New Jersey, where a district court had granted an injunction to Kalshi in April.