👥Who are you trading with?

Kalshi operates like a stock exchange for events, matching individuals who have differing opinions on event contracts with one another. On Kalshi, you are always trading against another member of the platform, not the exchange itself.

You can think of every trade on the platform as a deal taking place between two participants: a “maker” and a “taker”. The maker is the first one to the table: They declare a side they’re willing to buy (Yes or No), how much they’re willing to pay, and how many contracts they are looking to buy at that price. Takers can see all available offers and match with the most generous one.

On Kalshi, there are three primary types of traders:

1. Directional traders: individuals or institutions who believe the pricing of a Yes or No contract is attractive relative to the likelihood of that event occurring.

2. Hedgers: individuals or institutions who have some external risk (inflation risk, interest rate risk, hurricane risk, etc) and want to protect themselves on the downside using Kalshi’s Event Contracts. Typically, hedgers are willing to pay a slight premium for the contracts, since it is more about protecting the downside, rather than maximizing upside.

3. Market makers: common participants in financial markets, a market maker's primary role is to provide liquidity to the market to ensure people can easily enter and exit their positions. One way a market maker does this is by buying a contract, and then soon after selling that contract to someone else at a slightly higher price. Market makers make money by collecting the spread (the difference between the bid and ask) - generally, they don’t have an opinion as to whether the price of a contract should go up or down. There are a number of market makers on Kalshi, primarily individuals and small institutions, who have found it remunerative to play the ever-important market-maker role on Kalshi. You can learn more about marketmaking on Kalshi here.

Today most participants in Kalshi fall into the first two categories. Additionally, the majority of participants on Kalshi today are retail traders, as opposed to institutional traders. Another significant player on the exchange is Kalshi Trading. Kalshi Trading is a separate entity from Kalshi Exchange - a different company with completely separate operations, and subject to strict informational barriers that prevent any non-public exchange information from being shared; they are a participant on the exchange just like everyone else.

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