Kalshi is raising tens of millions in loans from venture capitalists and planning a round of more than $50 million amid a boom in election betting, source says

Investors are rushing to pour millions into the hot startup called Kalshi in the form of loans or even, unusually, “we’ll figure it out later” cash. Kalshi is an exchange that allows people to bet on formal commodity trading contracts on the outcome of cultural events, from election results to how long Taylor Swift’s latest album will top the charts.

The stakes on the outcome of the upcoming US election have driven demand so high that Kalshi has risen to number one in the Apple app store after years of not being ranked in the financial category, and to number seven overall as of this writing.

Kalshi’s need for cash reserves has skyrocketed to provide instant funding to clients betting on US elections. Over the past few days, the five-year-old Sequoia-backed startup has received tens of millions in short-term loans from investors, according to a source familiar with the matter. In addition, the company is currently in talks with new and existing investors to raise up to $50 million in formal capital, although it is also possible the startup could raise more, the person said.

Among the investors who provided capital to Kalshi so the company could sustain its growth until Election Day was venture capital firm Neo, an early backer. Neo founder Ali Pavroti sent Kalshi a total of $12.4 million, including $5.4 million of Neo capital and $7 million of Pavroti’s personal funds, according to a now-deleted tweet posted by Kalshi co-founder and CEO Tarek Mansour. Although it is extremely rare for investors to send money (much less millions) without fixed terms and a signed contract, Pavroti’s message to Mansour said: “We will be able to determine the terms later.”

Kalshi opened its election market last month after a judge rejected a request by the Commodity Futures and Trading Commission to block trading in election-related derivatives. (The CFTC is appealing the court’s decision.) Since then, the company has sold nearly $200 million in contracts to people willing to bet on the outcome of a political race, Mansour told CNBC on Monday. “The demand curve is really exponential,” he said.

Kalshi rushed to increase his cash position in anticipation of additional bets on the US elections. Like most brokerages, the company offers instant financing to new users. This means that users can start trading immediately, although the official transfer of funds from the client’s bank account to Kalsha’s account may take two to three business days.

While investors believe Kalshi’s growth spurt will subside after the election, they believe the company has grown so much in the past month that it won’t return to its previous size, the person said.

After Kalshi won his case against the CFTC, other companies began offering voting contracts to US citizens. On Monday, Robinhood introduced a betting market for the presidential election. Interactive Brokers also entered into election contracts following Kalsha’s legal victory.

In addition to Sequoia and Neo, Kalsha’s backers include Y Combinator, Henry Kravis and Mantis VC. The company has raised a total of $106 million in equity capital and was last valued at $787 million, according to PitchBook.