Kalshi and S&P Dow Jones Indices Partner to Develop the Next Generation of Financial Markets

Kalshi and S&P Dow Jones Indices (S&P DJI) are joining forces to build the next generation of financial markets. The two industry-leading giants entered a multi-year partnership to work together to create indices from event contracts on Kalshi. As a result, investors will have new ways to trade S&P DJI’s benchmarks on Kalshi. Notably, this partnership comes amidst Kalshi’s fundraising haul of $1 billion at a $40 billion post-money valuation. 

The evolving nature of financial markets 

Financial markets are always evolving. The Dow launched in 1896, while the S&P launched about 60 years later in 1957. The goal was to put individual stocks into a single benchmark, thereby giving traders a clearer, bigger picture of the broader market. 

More products were then built around those benchmarks, including index funds, futures, options, and ETFs, transforming investing over time. These new products gave traders more ways to gain diversified exposure. Moreover, they could hedge broad market swings and participate in the market’s upside without relying on one company. 

The indices became the foundations of global finance, drawing in individual investors, institutions, and pension funds across the world. As the markets’ evolution continued, indices and the financial products built around them expanded to currencies, bonds, commodities, and more. By the end of 2024, the S&P 500 alone had benchmarked or indexed more than $20 trillion. 

The markets are still evolving today, and the next step in the evolution involves bringing that structure to everyday events that shape people’s lives. This is where the partnership between Kalshi and the S&P DJI comes into play – the development of indices based on Kalshi’s event contracts. 

Opening up new possibilities 

Event contracts on Kalshi turn people’s expectations about outcomes of real-world events into prices. The prices keep fluctuating as people trade, reflecting their changing views about the said outcomes. To this end, combining related contracts into an index would give people a broader, clearer view of how expectations are changing across a whole category of events. 

This could open up a wide range of new possibilities. For example, there could be an index of political power, revealing expectations across elections. There could also be an index of weather risks that shape food production, business revenues, and energy demands. Even an index of sports outcomes carries economic consequences for advertisers, broadcasters, small businesses, and cities. An index of supply chain risk could combine signals about likely trade disruptions. Moreover, an index of AI’s impact on employment could help people follow expectations about changes in the labor market. 

Over time, the products built around these event-based indices could offer diversified exposure to the events and create new ways to hedge their impact. In the same way that stock indices became the basis for derivatives and funds, event contract indices could also support financial products that cover risks that individuals and businesses deal with every day. 

The S&P DJI’s role 

The S&P DJI has the necessary experience and infrastructure to turn the new markets into consistent measures that people can follow over time. They have the resources to set the rules for what goes into the indices, how their components are combined, and how they change in response to the evolving underlying markets. 

Notably, the partnership also gives Kalshi permission to list contracts on the Dow Jones Industrial Average, the S&P 500, and other S&P DJI indices that settle directly to official S&P DJI data. The S&P DJI uses established methods to calculate its indices and publish the official values, which determine the outcomes of the said contracts on Kalshi. As a result, traders and investors will get a new way to gain exposure to these benchmarks through Kalshi markets. 

Kalshi going strong 

Notably, Kalshi announced a $1 billion Series G at a $40 billion post-money valuation just two days after announcing the partnership with the S&P DJI. The fundraising was co-led by Wellington and Sequoia, alongside Baillie Gifford, Stripes, Andreessen Horowitz, Coatue, Layer Global, Morgan Stanley Investment Management, Sequoia Global Equities, CapitalG, Hudson River Trading, and Balyasny Asset Management. 

Interestingly, Kalshi specifically said that the funding would go towards accelerating its long-term vision of building a next-generation financial exchange. The prediction market operator further said that it would invest in institutional sales, product development, and distribution to support sophisticated individuals, hedge funds, financial institutions, and proprietary trading firms. Moreover, it highlighted its planned expansion in Europe and Latin America. 

Indeed, Kalshi is growing in leaps. The platform has more than 30 million accounts. Non-sports annualized revenue now stands at over $1 billion, while overall annualized trading volume is above $1 trillion. Overall, the platform accounts for over 75% of prediction market trading volume. Moreover, Kalshi’s international retail business is now approaching $100 million in annualized trading fees only one year after launching in more than 140 countries. 

In addition to the partnership with S&P DJI, Kalshi also has a growing ecosystem of strategic partnerships. The expanding web includes Interactive Brokers, S&P, Nasdaq, PayPal, Clear Street, Wealthsimple, Plus 500, Cantor Fitzgerald, Block, Public.com, and Alpaca.