Why Billionaires Are Piling Into Prediction Markets

On a frigid winter morning in 2023, discount brokerage firm billionaire Charles Schwab arrived at the SoHo offices of little known prediction market start-up Kalshi. Under his arm were several binders which seemed to be bursting at their seams. The idea that this Wall Street legend had taken the time to thoroughly study their tiny operation shocked Kalshi’s then 27-year old cofounders Tarek Mansour and Luana Lopes Lara. Two years earlier, Schwab and another iconic Wall Streeter, Henry Kravis, had made angel investments in Mansour’s firm in a $30 million funding round that gave Kalshi a $120 million valuation.

“Within a few minutes of my first call with Chuck, he was like ‘I want to invest,’” says 29-year-old Mansour. “He said it reminded him of when he started Charles Schwab, and it was the first time in a while he had seen a company that could fundamentally change financial markets.” Today, Kalshi is one of Chuck Schwab’s largest investments outside of the $176 billion brokerage firm bearing his name. In June, the startup was valued at $2 billion in a funding round that attracted another Wall Street billionaire, Peng Zhao, the veteran CEO of Citadel Securities.  Schwab, Kravis and Zhao are in good company. Prediction markets are hotspots for investments from the smartest billionaires in finance.

Betting on elections and sports games is nothing new: It has existed in the U.S. since the 1800s, and the modern prediction market—which allows users to bet on the outcome of future events by buying and selling “Yes” or “No” contracts—was first devised in 1988 at the University of Iowa. Early iterations such as Intrade and PredictIt were publicly available in the 2010s, though they were largely constrained by regulatory issues and lack of traction. Though Kalshi isn’t the first of its kind, it made history last October when a federal court ruling authorized Kalshi to offer presidential election contracts, which had been illegal for over a century.

The presidential election changed the game: After winning regulatory approval for election wagering, Kalshi’s user base grew tenfold in less than a month, culminating in two million users betting more than $1 billion in the lead up to election night. Polymarket users wagered a staggering $3.6 billion on Trump or Harris. Momentum from the election catapulted prediction markets into cultural relevance, unearthing a trove of seemingly limitless betting opportunities, from next year’s Oscar nominees to the chances of Astronomer’s CEO filing for divorce after his Coldplay concert jumbotron embrace.

Ask the billionaire traders why they want into the prediction markets business and you are likely to get a lot of high-minded responses.

From a financial services perspective, it makes money the old-fashioned way, by taking a commission or fee from every contract bought or sold. The price of a contract is tied to the market’s perceived probability of an event, ranging between one and 99 cents. Buy one 10 cent contract, predicting that Peter Hegseth will be the first to leave the Trump cabinet, and the fee is a penny, or a 10% fee. Pay $50 for 100 “Yes” contracts wagering that the U.S. government will shut down in 2026, and Kalshi will pocket $1.75, or a 3.5% fee, based on the company’s sliding fee formula. Kalshi also charges 2% on all debt card deposits and a $2 flat fee to withdraw your winnings from your account.

But variable fees aren’t the only reason Kalshi is attracting billionaire backers. Unlike stocks, which are fungible, and can be traded and settled on any number of brokerages, contracts in prediction markets are proprietary, effectively creating a proverbial moat and locking users into the marketplace the markets were created on.

With approximately $1 billion in current monthly volume, Kalshi has processed $6.9 billion in total volume since inception—$6.4 billion of which has come since October 2024. And the startup not only attracts speculators directly on its website and mobile app, but also white labels its markets to brokers like Robinhood and Webull, adding liquidity and scale. Mansour says the firm will be adding more than a dozen brokers in the next year.

If more gasoline can be thrown on prediction markets mania, it will likely be coming from Trumpworld. President Trump’s eldest son, Donald Trump Jr., joined Kalshi as a strategic advisor in January.  There’s more. Charles Schwab’s granddaughter Samantha Schwab, whose only other professional work experience has been with the Trump administration, had a yearlong stint on Kalshi’s business development team before joining the U.S. Department of Treasury as deputy chief of staff in January, according to her LinkedIn page.

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