Kalshi's long odds come at a cost… | PitchBook News Summary

1. Key Themes

Kalshi's volume growth is masking fee/monetization weakness

Kalshi's trading volume is exploding, but the revenue it captures per dollar traded is deteriorating fast because users are shifting into low-margin combo bets.

"We estimate that the number of contracts traded grew at more than twice the pace of the fees they generated... Kalshi's gross event take rate, or the share of trading volume that Kalshi keeps as fees, falling from 1.21% in January to 0.71% in August." "While August contract volumes were nearly 320% higher than in January, we estimate gross fees (before discounts Kalshi gives traders) were only 145% higher."

Credit stress is concentrating in software, and getting more severe, not just more widespread

Private credit distress is broadening across the BDC universe, but the real signal is that dollar exposure is rising faster than borrower counts — meaning bigger, more systemically important companies are the ones cracking.

"Software names account for 36% of debt under pressure, the largest share by sector, according to LCD's analysis of more than 180 business development companies (BDCs)." "Dollar exposure is growing faster than borrower count as larger, more consequential names show signs of stress. The volume of first-lien term loan and unitranche investments under pressure rose by 92% since the end of 2025, to $47 billion."

Public markets are rewarding real fundamentals again, raising the bar for IPO readiness

After a period of caution, the market is reversing course and rewarding growth-stage companies with durable, provable performance — a signal that "story stocks" without fundamentals may struggle in the current IPO window.

"84% of U.S. expansion-stage companies that went public in H1 2026 traded above their last private valuation, a sharp reversal from the prior-year pattern... strong operating evidence matters when preparing for a public listing."

AI infrastructure and agent-tooling capital is still flowing at massive scale

Despite broader market caution elsewhere, capital continues to pour into AI model developers, agent infrastructure, and adjacent hardware at enormous valuations.

"DeepSeek is raising a 50 billion yuan ($7.5 billion) round at a valuation of 500 billion yuan ($75 billion) ahead of a planned IPO in Shanghai." "Island, the developer of a control plane for enterprise AI agents, secured a $400 million Series F led by Evolution Equity Partners at a $6.4 billion valuation."

2. Contrarian Perspectives

A shrinking take rate isn't automatically a red flag — but it demands scrutiny of growth quality. Instead of treating Kalshi's falling fee capture as an alarm bell, PitchBook frames it as conditionally fine — a stance that cuts against the instinct to read declining monetization as a warning sign.

"A lower take rate isn't necessarily a bad thing, as long as volume growth continues to offset it. However, understanding where the growth is coming from is important as competition ramps up and differences between companies become clearer."

Most stressed credit borrowers are still paying cash, not masking distress with PIK. This is counter to the common narrative that private credit stress is being hidden through payment-in-kind conversions; the data suggests the pressure is more "real" and less obscured than the popular narrative assumes.

"Most stressed borrowers are still paying cash. Out of the 583 companies on the watchlist at the end of June, roughly half did not use payment-in-kind (PIK) interest in the last 12 months."

3. Companies Identified

Kalshi — Prediction market platform. Mentioned as the subject of a PitchBook initiation report showing volume/fee divergence. "Prediction market Kalshi's momentum keeps accelerating—it just hit a new record on the back of a new NFL season—but as trading volumes swell, its fees are struggling to keep pace."
DeepSeek — China-based AI model developer. Mentioned for a massive new funding round ahead of IPO. "is raising a 50 billion yuan ($7.5 billion) round at a valuation of 500 billion yuan ($75 billion) ahead of a planned IPO in Shanghai."
Island — Developer of a control plane for enterprise AI agents. Notable for large Series F at high valuation. "secured a $400 million Series F led by Evolution Equity Partners at a $6.4 billion valuation."
Precision Neuroscience — Brain-computer interface startup. Notable for large raise from high-profile backers. "raised a $250 million Series D led by Pershing Square and the Ackman Oxman Institute."
Rightway — Pharmacy benefit and care navigation startup. Notable for IPO exploration. "valued at $1.75 billion and is exploring an IPO in the next few years, Bloomberg reported."
Figs — Healthcare apparel/DTC company. Cited as a case study in DTC brand durability and cultural relevance. "From hospital bedsides to the Emmys, Figs is making healthcare glamorous."
Stack Infrastructure — Blue Owl-backed data center operator. Notable as subject of a large potential acquisition. "began talks... to acquire the company's data centers in the Asia-Pacific region, which could be valued at around $20 billion to $25 billion."
Flock Safety — Andreessen Horowitz-backed physical security/camera startup. Notable as a potential sale candidate. "is in talks to sell itself, Semafor reported."
Glass Lewis / Clarity AI — Governance research firm merging with an ESG/insights platform. Notable as an example of ESG consolidation/rebranding. "agreed to merge with Clarity AI, an environmental and social insights platform developer."

4. People Identified

Franco Granda — Senior Research Analyst, Private Company Coverage, PitchBook. Authored the Kalshi analysis. Byline on "Why Kalshi's fastest-growing bets pay the least."
Marina Lukatsky — Senior Director, Global Head of Research, Credit and US Private Equity, PitchBook. Authored the private credit stress analysis. Byline on "Software leads the pack of borrowers under growing pressure in private credit."

5. Operating Insights

Monitor the mix, not just the top-line, for consumption/marketplace businesses. Kalshi's case shows that aggregate volume growth can obscure a shift toward structurally lower-margin product categories; operators and investors evaluating usage-based or take-rate businesses should decompose growth by product mix before extrapolating revenue trajectories.

"As combo contracts accounted for a larger share of the volume mix, climbing from 13% in January to 45% in August, their lower take rate (0.30%) compared to other categories like sports (1.07%) represented a 67.5% drag on fee expansion."

For late-stage/pre-IPO companies, "credible growth" evidence — not narrative — is now the deciding factor in public market reception. Founders and boards prepping for a listing should prioritize demonstrable, durable operating metrics over growth-at-all-costs positioning.

"It finds that 84% of U.S. expansion-stage companies that went public in H1 2026 traded above their last private valuation... the message is clear: strong operating evidence matters when preparing for a public listing."

6. Overlooked Insights

Female-founder VC deal activity is heavily concentrated in early stages, but later-stage deals drive the overwhelming majority of dollars — a structural dynamic worth tracking for anyone assessing capital access gaps at scale rather than just deal count.

"US VC deals involving female founders were most numerous at the angel and seed stage... accounting for 22,249 deals worth $44.6 billion. Although later-stage VC deals numbered just 12,277, total capital raised was $556.2 billion—over four times early VC's $131.5 billion across 13,963 deals."

PE is increasingly moving into law firm ownership structures via management services organizations, a niche but potentially disruptive shift to professional services economics that's easy to miss amid bigger deal headlines.

"The intertwining of PE and law firms could change income structure for lawyers, with management services organizations potentially boosting liquidity events."