Early Kalshi Employee: Whoever Controls the Traffic, Controls the Market
An early employee of Kalshi argues that in prediction markets, control over user traffic—not exchange infrastructure—is the primary source of power. The article analyzes how Robinhood, a dominant retail distributor, can redirect user orders between regulated exchanges like Kalshi and ForecastEx with no change in user experience.
Key evidence includes a sudden shift of 35% of NBA game trading volume from Kalshi to ForecastEx in a single night, triggered by Robinhood. Similarly, weather markets saw ForecastEx capture over 60% of volume immediately after Robinhood began routing orders there, without affecting Kalshi’s baseline traffic.
The piece also highlights how Robinhood’s distribution massively amplified demand for new products like parlays, which grew from zero to nearly 300 million contracts per week after Robinhood integration.
The author admits to initially underestimating Robinhood’s incentive to vertically integrate by acquiring its own CFTC-regulated exchange—a move mirrored by competitor Underdog. In prediction markets, where users are retail and trade sizes small, liquidity depth is not a moat. The real leverage lies with who controls the flow of users.
marsbit03/25 16:18
