On a frigid winter morning in 2023, discount brokerage firm billionaire Charles Schwab arrived at the SoHo offices of little known prediction market start-up Kalshi. Under his arm were several binders which seemed to be bursting at their seams. The idea that this Wall Street legend had taken the time to thoroughly study their tiny operation shocked Kalshi’s then 27-year old cofounders Tarek Mansour and Luana Lopes Lara. Two years earlier, Schwab and another iconic Wall Streeter, Henry Kravis, had made angel investments in Mansour’s firm in a $30 million funding round that gave Kalshi a $120 million valuation.

“Within a few minutes of my first call with Chuck, he was like ‘I want to invest,’” says 29-year-old Mansour. “He said it reminded him of when he started Charles Schwab, and it was the first time in a while he had seen a company that could fundamentally change financial markets.” Today, Kalshi is one of Chuck Schwab’s largest investments outside of the $176 billion brokerage firm bearing his name. In June, the startup was valued at $2 billion in a funding round that attracted another Wall Street billionaire, Peng Zhao, the veteran CEO of Citadel Securities.

Schwab, Kravis and Zhao are in good company. Prediction markets are hotspots for investments from the smartest billionaires in finance. Interactive Brokers founder Thomas Peterffy (net worth: $72 billion) told Forbes he tried to acquire Kalshi shortly after its angel round in 2021. Spurned, but undeterred, Peterffy’s Interactive Brokers launched a subsidiary called ForecastEx a year ago and is now competing with Kalshi, with future events ranging from the NYC mayoral race to the year-end 2025 price of Bitcoin.

In April 2024, Jeff Yass’s ($65 billion) quantitative trading hedge fund Susquehanna International Group joined forces with Kalshi to provide liquidity as one of its primary market makers. More recently, Kalshi partnered with Vlad Tenev’s ($6.4 billion) Robinhood to add event contracts trading to the firm’s growing retail investment offerings.

Not to be outdone by its crosstown rival, blockchain-based prediction market Polymarket has attracted investments from billionaires including Palantir cofounder Peter Thiel ($25.3 billion), Ethereum founder Vitalik Buterin and Airbnb cofounder Joe Gebbia ($7.7 billion). In August, Polymarket was valued at $1 billion following a $135 million funding round led by Thiel's Founders Fund, according to Pitchbook. Coinbase’s founder Brian Armstrong ($13.7 billion) also announced in July the upcoming launch of an “Everything Exchange," which will offer........

© Forbes