Key Takeaways
- • Kalshi, the largest U.S. prediction market valued at $40 billion, is developing non-binary products such as sliding-scale payouts and multi-market indexes, including the American Power Index (KPOW), which tracks the split in federal power between Democrats and Republicans.
- • Kalshi's Oct. 26 collaboration agreement with S&P Dow Jones Indices said it would "open the door for indices" on economics, sports and politics, a development of particular interest to asset managers because index structures often serve as benchmarks for ETFs.
- • Kalshi reports more than 800 institutional accounts on its platform, with more than 240 of those making over $1 million in trades in a single month, and it has begun rolling out perpetual futures under CFTC supervision.
- • Regulatory risk remains unresolved: the Utah Attorney General is suing Kalshi to classify prediction markets as gambling, and Better Markets has urged the SEC to reject ETF proposals based on election and sports markets.
Summary
Prediction market companies have moved from relative obscurity into prominent roles in the 2026 U.S. election cycle, and asset managers are now weighing whether these platforms can support more than binary yes-or-no wagers and serve as the foundation for new financial products, according to Pensions & Investments. Traditionally, prediction markets have paid out zero when a chosen outcome proves wrong, a structure that Pensions & Investments notes would be a difficult sell for ETFs. Kalshi has therefore been developing alternatives, including payouts on a sliding scale for bets that come close to correct and long-term indexes built from multiple underlying markets.
Kalshi, valued at $40 billion, has corporate partnerships that include a data integration deal with CBS News for election coverage and a collaboration agreement with S&P Dow Jones Indices announced Oct. 26. That agreement's stated aim to open the door for indices on economics, sports and politics is significant to asset managers, since S&P Dow Jones indexes frequently serve as benchmarks for financial products. Kalshi Head of Research Nicole Kagan told attendees at an October media event that the range of possible ETF underlyings is "really, really wide," citing sports, entertainment and macro financial topics. Kagan said the firm can now build products from its indices and hopes to move toward structured products such as ETFs based on its own markets as liquidity improves.
Institutional participation is a central part of the push. Kalshi leaders said at the October event that more than 800 institutional accounts are active on the platform, and more than 240 of those executed over $1 million in trades in a month. These accounts include businesses hedging exposures and financial firms such as hedge funds. Kalshi also began rolling out perpetual futures markets earlier in 2026 under the supervision of the Commodity Futures Trading Commission.
The regulatory framework remains unsettled. The Utah Attorney General is suing Kalshi, arguing that prediction markets should be treated as gambling under state law. Kalshi CEO Tarek Mansour argued in an Oct. 27 Wall Street Journal editorial that the company's markets differ from betting. Separately, Better Markets has asked the SEC to reject ETF proposals based on election and sports markets. Benjamin Schiffrin, the group's director of securities policy, told P&I such ETFs could confuse retail investors who rely on funds for diversification, stating, "ETFs allow people to essentially invest in a whole bunch of productive enterprises, all at the same time, in a diversified way... And these ETFs seem to the opposite of that."
Kalshi, valued at $40 billion, has corporate partnerships that include a data integration deal with CBS News for election coverage and a collaboration agreement with S&P Dow Jones Indices announced Oct. 26. That agreement's stated aim to open the door for indices on economics, sports and politics is significant to asset managers, since S&P Dow Jones indexes frequently serve as benchmarks for financial products. Kalshi Head of Research Nicole Kagan told attendees at an October media event that the range of possible ETF underlyings is "really, really wide," citing sports, entertainment and macro financial topics. Kagan said the firm can now build products from its indices and hopes to move toward structured products such as ETFs based on its own markets as liquidity improves.
Institutional participation is a central part of the push. Kalshi leaders said at the October event that more than 800 institutional accounts are active on the platform, and more than 240 of those executed over $1 million in trades in a month. These accounts include businesses hedging exposures and financial firms such as hedge funds. Kalshi also began rolling out perpetual futures markets earlier in 2026 under the supervision of the Commodity Futures Trading Commission.
The regulatory framework remains unsettled. The Utah Attorney General is suing Kalshi, arguing that prediction markets should be treated as gambling under state law. Kalshi CEO Tarek Mansour argued in an Oct. 27 Wall Street Journal editorial that the company's markets differ from betting. Separately, Better Markets has asked the SEC to reject ETF proposals based on election and sports markets. Benjamin Schiffrin, the group's director of securities policy, told P&I such ETFs could confuse retail investors who rely on funds for diversification, stating, "ETFs allow people to essentially invest in a whole bunch of productive enterprises, all at the same time, in a diversified way... And these ETFs seem to the opposite of that."
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