Kalshi isin talks to raise money at a valuation of around $40 billion, a price thatwould nearly double what investors paid for the prediction market operator justlast month. The companycould close the round as soon as the third quarter, the FinancialTimes reported, citing people familiar with the discussions.Kalshideclined to comment on the talks. They come only weeks after the firm raised $1billion at a $22 billion valuation, a round backed by Coatue, SequoiaCapital, Andreessen Horowitz and Morgan Stanley.Valuation Climbs From $5Billion to $40 Billion in a YearTheproposed figure caps a steep run. Kalshi was valued at about $5 billion earlierlast year and $11 billion in December, before the May round lifted it to $22billion, according to the Financial Times. A closenear $40 billion would roughly double that price again in a matter of weeks.Tradingactivity has moved the same way. Kalshi pulled in more than $17 billion involume last month, up from less than $5 billion a year earlier, the paperreported. Theplatform recently crossed $100 billion in lifetime notionalvolume, helped byheavy World Cup activity.Investors Pile Into aCrowded Prediction MarketThe talksland in a sector that has drawn a wave of capital. Rival Polymarket held early discussions last October about a round that could value itbetween $12 billion and $15 billion, while offers at the time valued Kalshi atmore than $10 billion.The fieldhas grown more crowded since. Gemini secured a CFTC license in December after afive-year wait, letting the Winklevoss-founded exchange offer event contracts alongside Kalshi and Polymarket.Kalshistill holds the largest share of that market. It accounted for roughly two-thirds of US prediction market volume inmid-October, against Polymarket's share of about a third, based on DuneAnalytics data.State Lawsuits and a CMEChallenge Cloud the OutlookTheenthusiasm sits against a thickening legal backdrop. CME Group sued the Commodity Futures TradingCommission lastweek over the regulator's approval of Kalshi's perpetual futures, arguing thecontracts are swaps that belong under tougher rules.Several USstates have moved against the company as it expanded. Arizona filed criminalcharges in March, accusing Kalshi of running a gambling business without alicense and offering illegal wagers on elections. AMassachusetts judge in February barred it from offering sports markets in thatstate on public health and safety grounds.Kalshi iscontesting both cases. The company argues its event contracts should beregulated as derivatives by the CFTC, now led by a Trump appointee, which wouldlet it sidestep state gambling rules.The firm'srise has tracked a friendlier mood in Washington. President Donald Trump lastmonth called several critics of the platforms "scum" in a socialmedia post, and his eldest son, Donald Trump Jr, joined Kalshi as an adviser inearly 2025.Sports Bets Dominate, andMost Wagers LoseFor all theinvestor interest, the underlying business still looks a lot like betting.Sports wagers make up about 65% of Kalshi's volume, and multi-leg combo bets,similar to the parlays offered by sportsbooks, have proved popular since theirrollout last September, the Financial Times reported.Roughlytwo-thirds of bets placed on Kalshi lose money, a person familiar with thecompany's operations told the paper.Institutionalmoney is still edging in. A slice of derivatives firms already trade eventcontracts and many more are weighing entry, while brokers and exchanges buildthe plumbing to connect professional desks to the venues.This article was written by Damian Chmiel at www.financemagnates.com.