Kalshi Adds Fractional Contract Trading
Sometimes all you want is a slice
This month, Kalshi quietly rolled out functionality allowing users to buy and sell fractional contracts.
Kalshi’s latest feature was teased back in January in a CFTC filing, notifying the agency of an update to its rulebook. However, the feature only appears to have become available as of March 13, based on a change to Kalshi’s data structure that added decimal values to the number of contracts traded in each transaction.
At first, usage of the new feature was extremely low, suggesting that it may have been a limited beta test. Until March 25, there were only single-digit numbers of transactions involving fractional shares on most days, up to a few dozen at most.
However, since March 26, the feature has seen wider use, with tens of thousands of traders taking advantage of the option each day.
What’s the Point of Fractional Trading?
The fractional trading feature on Kalshi will likely be familiar to users of self-directed retail investment apps like Robinhood. Because these apps allow commission-free stock purchases, they’re popular with users — often young adults — looking to invest very small amounts at a time.
In that context, the ability to buy fractions of a share serves an important practical purpose: It allows access to certain blue-chip stocks that would otherwise be out of reach. For instance, Apple currently trades at roughly $250 per share. A student setting aside $50 per paycheck to start their investment portfolio would find it difficult at that price to include Apple in their portfolio, without the ability to buy a fraction of a share.
For a prediction market like Kalshi, however, the purpose is largely cosmetic. Every contract is priced at less than a dollar, regardless of what event it pertains to. No one is being priced out of any market.
However, a side effect of fractional stock trading is that it has created the user expectation of being able to buy and sell in nice, round dollar amounts. If Yes contracts for a given market are priced at 17 cents, it’s possible to buy $14.96 worth of whole contracts, or $15.13. But those options might be aesthetically displeasing for someone looking to put down $15, especially if the other financial apps they use have established the expectation that they can do so.
Fixing that issue is explicitly Kalshi’s rationale for allowing fractional contracts. In its January CFTC filing, it wrote:
“Fractional shares shall allow traders to transact in non-integer numbers of contracts, facilitating order fills to always be possible in whole dollar amounts.”
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