Who stands between you and the exchange, and what each one holds

The prediction-market tab inside an app you already use is rarely the exchange. Behind it there can be one firm, two or three, and each is defined less by its logo than by what it is allowed to hold and what it is allowed to decide. The exchange's own rulebook names two of them, the futures commission merchant and the introducing broker. Two CFTC staff letters of 2026 add a third, the software provider that holds nothing at all.

This page sets the three beside the case with nobody in between, using Kalshi's rulebook, version 1.29, because it spells out every route in one document, the two CFTC letters, and one introducing broker's own account of who does what.

How it works

Directly: you are the member

A direct account on Kalshi is a membership. Rule 3.1 calls it a Self-Clearing Member, says plainly that its accounts "are not carried by an FCM", and makes the application itself an agreement "to become a member of Clearing House, and be bound by Clearing House's Rules". The exchange collects whatever it considers necessary "to verify the applicant's identity, perform a criminal background check", and funds move between your Kalshi account and a bank account in your own name. One member, one account: Rule 3.1(h) bars a second.

Note the word the rulebook uses for the money. Under Rule 3.1(e), "All funds deposited by Self-Clearing Members shall constitute 'Proprietary Funds' in accordance with CFTC Regulations." Rule 3.2, a page later, has a broker confirm that it keeps its customers' money in "Customer segregated funds accounts". Two routes, two different words for the same dollar. What protection attaches to each is a question for the clearing house's rulebook and the CFTC's regulations, and this page does not answer it; it notes only that the rulebook does not treat them as one thing.

Through a futures commission merchant: you are the broker's customer

On a brokered route your relationship is with the broker, a futures commission merchant, and the exchange reaches you through it. Kalshi's rules divide the work this way:

• The money. To be admitted, an FCM confirms it will hold customer funds in segregated customer accounts, and signs a guarantee to the clearing house for "the applicant's transactions and those of the applicant's FCM Customers" (Rule 3.2(b)). If your account goes negative from trading, the FCM may liquidate your positions (Rule 3.3(f)).
• The identity check. "FCMs must perform all required KYC, CDD and AML activities for their FCM Customers" (Rule 3.8(g)).
• The paperwork. The FCM must give you the rulebook, the terms of each contract and notice of new rules and amendments (Rule 3.2(f)), and must document that you acknowledged the rulebook before you trade (Rule 3.3(a)).
• The interest. Whether interest on collateral reaches you is governed, for FCM customers, "by the agreements between the clearinghouse and the FCM, and between the FCM and the FCM Customer" (Rule 8.1(c)). What your money does while you wait works through what that means.

The contract you hold is the same one a direct member holds; the broker resolves nothing. Kalshi direct or through a broker sets four brokers on that one order book side by side, with their fees, their state lists and their own applications.

Through an introducing broker: the order goes one way, the money another

An introducing broker is registered with the CFTC and a member of the National Futures Association, as Rule 3.4(b) requires, and it may take your order. It does not carry the account. Kalshi's Rule 3.5(c) says its customers "must access Clearing House through a futures commission merchant", and Rule 3.4(e) lets it submit orders only for a customer who clears that way. The rulebook still puts the identity, customer due diligence and anti-money-laundering duty on the introducing broker for its own customers (Rule 3.9(f)).

How that splits in practice is easiest to see in a firm that writes it down. Lumina Markets, which describes itself in its own footer as a CFTC-registered introducing broker and NFA member, says in its help centre that opening an account with it opens "a brokerage account at Interactive Brokers", the clearing firm that "carries the account, holds the funds, and runs verification". Identity verification, anti-money-laundering screening and bank verification "are run by IBKR, not Lumina"; deposits and withdrawals are processed by it; statements, confirmations and tax forms are generated by it. The same page says the two are "affiliated companies under common ownership". So the app's name is on your screen, and a second firm's name is on your money.

Through a wallet or other software: a door with nothing behind it

On 17 March 2026 the CFTC's Market Participants Division answered a request from Phantom Technologies, the developer of a self-custodial crypto wallet, which wanted to let its users trade CFTC-regulated derivatives, "including event contracts", through its software. The division found that what Phantom proposed would ordinarily require registration as an introducing broker, and issued Letter 26-09: a no-action position instead.

What the software may do, on the letter's description: show market data and positions, let the user "submit orders ... directly to" a designated contract market, futures commission merchant or introducing broker, market those firms and steer users to them, take a share of their revenue, and "charge a transaction-based fee directly to Users". What it may not do is the sentence the whole position rests on: "At no point would Phantom hold, control, or take into custody User assets, generate express 'buy' or 'sell' signals, or exercise discretion with respect to the routing or execution of User orders."

And where the money is instead: the user keeps the funds securing their positions "in custody with the DCM's derivatives clearing organization ('DCO') and/or an FCM that is a member of such DCO". The letter calls this a "custodial" model. The self-custodial wallet holds your crypto; it does not hold your event-contract money.

On 17 September 2026 the division extended the same position, in Letter 26-25, to any "Passive Software Provider" on substantially the same terms, and noted that such providers "are not limited to providers of crypto asset related software". Until then only Phantom could rely on its letter. Ten conditions come with it. The ones that change something for a user:

1. You receive, and acknowledge, a disclosure of the provider's relationship with the exchange or broker, "addressing potential conflicts of interest (including fees)".
2. You receive and acknowledge a risk disclosure statement, unless the exchange or broker is already obliged to give you one.
3. You are onboarded as a direct member of the exchange or a customer of the broker, and "continue to have the ability to access the respective Registrant independently of the PSP".
4. The provider and each exchange or broker it works with sign an undertaking to be "jointly and severally liable" for the provider's violations of the Act, and file it with the division.

Both letters state their limits in their own text. They last "until the effective date of a Commission rulemaking or guidance" on the subject, "represent the views of the Division only", are "not binding on the Commission", and may be modified, suspended or terminated at the division's discretion.

What it costs

Each layer can charge, and only some of them are on the exchange's fee schedule.

• The exchange's fee is the floor on every route. Kalshi's Rule 3.13(d) has fees deducted from a direct member's own account and, for a broker's customers, from the customer account at the FCM.
• The futures commission merchant may add a fee of its own; the broker comparison records what four of them add.
• An introducing broker's clearing firm may charge for moving money. Lumina's page says "the fees on extra withdrawals are processed and charged by IBKR".
• A software provider may charge a transaction-based fee directly, and may also be paid a share of the exchange's or broker's revenue for bringing you. Both letters allow both, and require the conflict, "including fees", to be disclosed to you.

What you can do about it

Find the legal names before you fund anything. For each app, write down three: the firm in front of you, the firm that carries your account, and the exchange whose contract you will hold. A footer line such as "CFTC-registered Introducing Broker and Member NFA" tells you the first is not the second. The glossary entry on the futures commission merchant shows how to check a firm's registration in a minute.

Send each problem to the firm that owns it. A rejected document, a delayed withdrawal or a missing statement belongs to the firm that carries the account, not to the app and not to the exchange. A disputed outcome belongs to the exchange; who decides the outcome covers how that works. A year-end form comes from whoever holds the account; who sends you a tax form sets out who sends what.

On a wallet or software app, look for the acknowledgement. An app relying on Letter 26-25 has to show you its relationship and its fees and record that you acknowledged them. If you were never asked, ask the app which exchange or broker you were onboarded with, and under what.

Confirm you can reach the account without the app. The staff letters make independent access a condition, and Kalshi's Rule 3.3(d) lets a broker's customer move positions to their own exchange account on closing. Log in to the carrying firm once directly, so that you know the route exists before you need it.

Do not carry wallet assumptions across. A self-custodial wallet's promise is about the keys to your crypto. Event-contract money under these letters sits with a clearing house or a broker, and the key on your phone does not reach it. Where your key lives is about the other case, where the software does hold something.

The venue cards in prediction market venues record, for each app, whether it is an exchange or a broker in front of one.