Kalshi, a prediction market exchange, is in final-stage talks to raise $1 billion in new funding.

Reuters recently reported that, if the deal is completed, Kalshi's valuation would be about $40 billion.

The report said new investors including Tiger Global and Dragoneer Investment Group would join existing backers. Existing investor Sequoia Capital is discussing a plan to lead the investment with Wellington Management. The funding is expected to be wrapped up within a few weeks. Kalshi raised $1 billion in May at a valuation of $22 billion.

Kalshi appears to be seeking to widen the gap with rival Polymarket through this funding round. Data from Dune Analytics show Kalshi has been eating into Polymarket's market share over the past year.

Polymarket faced difficulties in launching its U.S. service and was also investigated by the U.S. Commodity Futures Trading Commission (CFTC). Polymarket is also discussing raising $1 billion in funding.

Kalshi is expanding its business beyond prediction markets that trade outcomes of sports games and elections into a platform where various assets can be traded in one place. It also appears to be competing with traditional exchanges such as CME Group and Intercontinental Exchange, the parent of the New York Stock Exchange. Kalshi is also in early talks about going public in an IPO within a few years.

At the same time, concerns are growing over the rise of prediction markets. Investors also bet on U.S. large-cap stocks such as Nvidia and Apple in prediction markets. Some lawmakers, including U.S. Senator Adam Schiff, are raising issues about investor protection and market oversight for prediction market platforms.