Most of Kalshi’s members are drawn to the exchange for the same reason that others are drawn to stocks or options: a desire to profit from their convictions and increase their financial stability. However, the nature of event contracts oftentimes makes these strategies more approachable, flexible, and exciting, as we’ll discuss in more detail below.

Trading your convictions

Let’s say that based on your research, you’re confident that the world is going to see a dramatic shift towards electric vehicles in the next decade. How can you take advantage of this information? Using traditional instruments, the most common strategy would be to buy the stock of a successful electric car company, like Tesla. If the popularity of electric cars booms, the thinking goes, Tesla’s sales will skyrocket and you’ll make a fortune. That might work out, but unfortunately, the purchase of Tesla stock leaves you open to some excess risk. What if a new car manufacturer emerges with better technology? What if Elon Musk makes an unfortunate tweet? Your underlying hypothesis about electric vehicles could be totally accurate, and your investment could still perform poorly.

In contrast, Kalshi allows you to express your opinion by trading directly on the sale of electric vehicles. Will electric vehicles exceed 4% market share in the U.S. by 2023? If you answer the question correctly and hold your contracts until expiration, you’ll profit. Because the market is tied to an underlying measurement about the real world, you’ll take on no risk from mispricings due to public sentiment; if the rest of the world is misinformed, that just means you can acquire the contract at a bargain.

Reducing financial risk

The other primary use of Kalshi is to reduce the financial risks you’re exposed to through everyday life. You can think of event contracts as functioning a bit like insurance. Many people accept the cost of health insurance because they prefer a fixed monthly premium, which can be budgeted for, to unpredictable medical costs. This strategy of betting against yourself is known as “hedging” (it’s what hedge-funds are famous for).

Kalshi lets you hedge against a range of events which might affect your finances. Imagine that you’ve bought tickets to a baseball game for $100. The day before, you look at the forecast and see there’s a 10% chance of rain. There’s a good chance things will work out, but you’re still worried. You go to Kalshi and spend $10 to buy 100 contracts on the Yes side of “Will it rain tomorrow?” Now you can rest easy: If there’s great weather, you’ll lose the $10 you spent on Kalshi’s contracts, but you’ll be able to watch the game. If it rains, you’ll spend the day resting at home, having recouped the entire cost of your ticket through your contracts. With practice, Kalshi allows you to hedge against threats as varied as pandemics, climate change, and unfavorable legislation.