Alpaca Partners with Kalshi to Add Prediction Markets to Its Stock and Cryptocurrency Infrastructure

Key Points of This Article

• Alpaca Derivatives, registered as an FCM with the CFTC, has not yet begun regulatory operations.
• The prediction market will operate 24/7, with a market size projected to reach $1 trillion by 2030.

Details of the Partnership with Kalshi

Fintech company Alpaca announced on August 31 its partnership with Kalshi, a leading operator of prediction markets. The partnership will integrate event contracts (prediction markets), which are regulated by the U.S. Commodity Futures Trading Commission (CFTC), into Alpaca's brokerage infrastructure for securities and cryptocurrencies.

This partnership follows Alpaca Derivatives registering as a futures commission merchant (FCM) with the National Futures Association (NFA). The new asset class of prediction markets will be added to the company's API infrastructure, which already handles stocks, options, bonds, and cryptocurrencies.

Prediction markets allow trading on the outcomes of specific events, such as election results or economic indicators, with a simple "yes" or "no" format. In the U.S., these are treated as CFTC-regulated derivatives, with Kalshi being the largest player in this space.

Through this partnership, Alpaca will manage custodial functions such as fund management, transaction detail issuance, and account management. Kalshi will provide the regulated trading market and clearing services after contracts are executed.

Max Crowley, Vice President of Business Development at Kalshi, described the partnership as a "significant step forward." He expressed that it would allow investors to incorporate prediction markets into the products they regularly use through Alpaca's existing ecosystem.

Background on the Expansion of Prediction Markets

According to CNBC, Alpaca's brokerage network includes over 300 financial institutions, with account numbers reaching 14 million. It is also reported that 83,000 users utilize the company's API monthly.

Regarding prediction markets, Kalshi's trading volume reportedly exceeded $40 billion in July. Research firm Bernstein predicts that the market size will reach $240 billion by 2026 and $1 trillion by 2030.

The types of event contracts that can be handled through the partnership will depend on the markets where Kalshi is listed and the regulatory environments of various countries. While Alpaca Derivatives has completed its registration as an FCM, the timeline for starting regulated operations has not been disclosed.

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