Prediction market leader Kalshi is negotiating a new funding round that could nearly double its valuation to $40 billion within three months, with Sequoia Capital and Wellington Management in talks to lead the investment.

According to a report from August 12, Kalshi is in advanced discussions to secure at least $750 million in fresh capital, targeting a valuation of $40 billion. Sequoia Capital and Wellington Management are discussing a co-lead role in the round. Sources indicate that the final size of the financing has not been determined and remains subject to change. Spokespeople for Kalshi, Sequoia, and Wellington all declined to comment.

This valuation represents a near-doubling from Kalshi's previous funding round in May, when the company raised $1 billion at a $22 billion valuation. The surge in just three months underscores the market's intense enthusiasm for the prediction market sector.

Revenue Explosion, Fueled by the World Cup

Kalshi's rapid valuation growth is driven by a sharp expansion in revenue.

Kalshi's annualized revenue surpassed $4 billion in July, doubling from approximately two months earlier, with World Cup-related betting contracts acting as the primary catalyst.

Currently, sports contracts account for over 80% of Kalshi's trading volume. This structure means Kalshi's revenue is highly dependent on event cycles, with traffic spikes from major events like the World Cup exhibiting clear seasonality.

At the same time, the company faces significant marketing expenditure pressures and potential new state-level taxes.

Investor Landscape: Existing Backers Double Down, New Faces Enter

Sequoia Capital is an existing investor in Kalshi, with partner Alfred Lin serving on the board. If successful in leading this round, it would further solidify Sequoia's bet on this sector.

Wellington Management is a potential new investor. The asset management giant has a history of making private investments ahead of companies' IPOs. Such "pre-IPO" moves typically signal an optimistic view of the company's listing prospects.

The Information reported in June that Kalshi has held informal discussions with several banks regarding a potential listing as early as next year. Wellington's entry aligns closely with this timeline.

Regulatory Cloud: Federal License vs. State-Level Lawsuits

Kalshi's rapid growth is not without risk.

The company is currently embroiled in legal disputes with regulators in multiple states, who accuse Kalshi of operating an illegal gambling business. Kalshi's position is clear: "The company is regulated by the Commodity Futures Trading Commission (CFTC), and state regulators do not have the authority to shut down a federally licensed exchange."

Kalshi received its exchange license from the CFTC in 2020. Jeff Bandman, the lawyer who helped secure that application, announced this week he is returning to the company as CEO of Kalshi Prime, which handles customer service for the company's margin perpetual futures business.

This jurisdictional battle between federal and state regulators is a key hurdle Kalshi must clear before moving toward an IPO.