Kalshi CEO: The potential market size for large institutional risk transfer transactions could reach $10-15 trillion

Comparing news, in response to the first customized commodity transaction recently completed on the Kalshi platform, Kalshi CEO Tarek Mansour said in an article on the X platform, “Historically, the bottleneck in institutional risk transfer has been liquidity. Liquidity bottlenecks are the lack of price benchmarks for each type of associated risk (such as WTI for oil). Kalshi has built a large community of the world's top hyperforecasters, who are at the forefront of the world in terms of risk pricing. This allows us to provide price benchmarks for a wider range of issues faced by people and institutions. Institutions have begun to adopt these price benchmarks by incorporating them into traditional asset pricing models. While there is still work to be done, we're seeing data use cases and integrations rapidly expand.

The next stage is to use price benchmarks to transfer risk through bulk transactions and requests for quotations (RFQ). This phase is still early, but it's already taking shape. It is still difficult to estimate the size of the risk transfer market for non-traditional financial targets. The closest reference is the reinsurance market and the derivatives sector of banks: reinsurance of about $700 billion; insurance-related securities and parametric insurance (such as disaster bonds) of about $120-135 billion; and bank derivatives (structured products, trader-to-dealer, exotic products, etc.) of about $200-400 billion. The current market is around $1-1.5 trillion, but most of it is illiquid and over-the-counter (OTC, i.e. trading with a single counterparty). Every time the main OTC market shifts to exchange trading, the market grows significantly due to the establishment of price benchmarks, narrowing spreads, the end of the monopoly of Wall Street elites, and the entry of new players. Interest rate swaps increase 10-15 times, stock options increase 20-30 times, and energy derivatives increase 5-8 times. “Institutional use cases for forecasting markets could create a $10-15 trillion market with more upside, depending on the extent to which they democratize what is currently limited to Wall Street.”