Kalshi has asked the U.S. Commodity Futures Trading Commission to approve a new margin framework for certain event contracts, a change that would move some trades away from the platform’s current fully collateralized model. The proposal was filed by Kalshi Klear on Sept. 22 under CFTC Regulation 40.5(a).

If approved, the framework would apply only to selected contracts tied to objectively verifiable events and would be limited to qualified participants. Kalshi said sports-related contracts would be excluded, and the company told CNBC that culture and mention markets would also remain outside the program.

Which contracts could qualify

Kalshi’s filing covers event contracts linked to areas such as economic data, financial developments, politics and commercial activity. Under the proposal, eligibility would be decided product by product, and potentially by side of the contract as well, rather than being granted across the board.

That distinction matters because Kalshi’s contracts are binary products that settle at either $1 or $0 depending on whether a specified outcome occurs. Before settlement, prices trade between those endpoints, which means the maximum loss is defined in advance for both sides of the market.

A YES buyer can lose no more than the amount paid, while the NO side can lose no more than $1 minus the YES price. Kalshi said this bounded payoff structure allows its clearinghouse to assess margin separately for YES and NO positions.

How the margin system would work

Instead of requiring traders to post enough funds upfront to cover the full maximum loss, Kalshi wants to use an initial-margin model based on adverse price moves. In practice, that would allow an eligible participant to control more contracts than under full pre-funding.

Newly listed products would remain fully collateralized at first. Kalshi Klear would then decide whether to allow margin for both sides of a contract, only one side, or neither. The filing says sudden or early resolution can create different risks for YES and NO positions, which is why the two sides would be evaluated separately.

Collateral requirements would also increase as a contract nears expiration or when market conditions point to a higher risk of abrupt repricing. Even contracts classified as margined would move back toward full collateralization near resolution. Kalshi also proposed extra protections including volatility floors, concentration charges and liquidity adjustments tied to the cost of closing positions after a clearing-member default.

Access would be limited to professional participants

The proposed system would not be open to all Kalshi users. Eligible contracts could be cleared only through a registered futures commission merchant or by an eligible contract participant that Kalshi Klear approves as a self-clearing member.

Eligible contract participants typically include institutions and other entities that meet financial thresholds under U.S. commodities law. That would place the margined product with hedge funds, trading firms and similar professional participants rather than ordinary retail customers.

Kalshi also said portfolio offsets would be allowed only for related contracts with dependable payoff links or correlations. Portfolios would need to pass loss backtesting before receiving that treatment.

Risk controls and what happens next

Kalshi is seeking approval to apply a one-day, or 24-hour, margin period of risk for qualifying contracts, representing the time it estimates would be needed to manage or close a position after a default. The company said its model aims to maintain a confidence level above the 99% minimum required by CFTC rules and that testing was performed separately for YES and NO positions.

Among the safeguards described in the filing is a dual-speed volatility measure designed to raise margin quickly after a price shock but lower it more gradually when markets calm. Kalshi said its guaranty fund would back margined event contracts and perpetual futures through separate contract segments.

According to the filing, the amendments would take effect no earlier than the first business day after the 45th calendar day following submission, unless either Kalshi or the CFTC sets a later date. Some technical sections on model design, calibration and validation were withheld from the public version after Kalshi requested confidential treatment.

Source: crypto.news