Kalshi, a US-regulated derivatives exchange, and The Weather Company announced a partnership Thursday to use Weather Company data for settlement of weather-linked contracts, with Kalshi probability data appearing in Weather Company's consumer platforms.
The arrangement creates a two-way data feed: Kalshi contracts on temperature, precipitation and other atmospheric conditions will settle against Weather Company observations, while Kalshi's real-time probability estimates will appear in Weather Company's mobile app and website. Weather Company becomes the primary settlement data provider for the contracts. Kalshi's weather contract volume has grown 500 percent year-over-year to $1.1 billion in annualized trading volume.
Weather derivatives have existed in traditional finance for decades, primarily used by utilities, agricultural operators and energy firms to hedge exposure to temperature swings and rainfall. A utility betting that winter temperatures will run warmer than forecast can lock in prices now rather than face higher demand and costs if the forecast proves wrong. The Intercontinental Exchange and the Chicago Mercantile Exchange operate weather futures markets, though with limited liquidity and participation restricted to institutional players.
Kalshi operates under a no-action letter from the Commodity Futures Trading Commission that permits retail traders to buy and sell binary contracts, bets that resolve to either zero or a fixed payout based on whether a specific outcome occurs. Weather outcomes are difficult to manipulate compared to financial metrics. Kalshi sued the CFTC over its ban on event contracts and received the letter in 2022.
The Weather Company, owned by IBM, maintains a global network of weather stations, radar systems and satellite feeds that generate real-time atmospheric data. Using that data as a settlement oracle removes reliance on any single exchange or third party to determine contract payoffs. Kalshi has previously settled contracts on election results using Associated Press data and on sports outcomes using official league records.
Kalshi's volume this year has expanded from political outcomes to include weather, sports and economic releases following the CFTC's 2022 relief. Weather Company gains access to a new distribution channel through Kalshi traders while adding probability data to its consumer offerings.
The integration does not require approval from the CFTC, as both entities are operating within the terms of Kalshi's existing no-action relief. Weather Company's role is technical rather than regulatory, it supplies the ground-truth data that makes contract settlement possible and visible to consumers in real time.
