Fintech: Why Kalshi at $2B is worth twice as much as Polymarket
Betting the house on U.S. sports
Hi Fintech Futurists âÂ
This week we analyse Polymarket and Kalshi who are at the forefront of a resurgence in interest-based, event-driven markets. We dive under the hood of the prediction market model, analysing the origins of this ânewâ asset class, and assess why investors think Kalshi, at $2B, is worth twice as much as Polymarket.
Todayâs agenda below.
FINTECH: Why Kalshi at $2B is worth twice as much as Polymarket
ANALYSIS: Understanding the $100B+ Crypto Treasury company boom (link here)
CURATED UPDATES: Paytech, Neobanks, Lending, Digital Investing
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Digital Investment & Banking Short Takes
Why Kalshi at $2B is worth twice as much as Polymarket
Prediction markets date back as far as 1988, when the University of Iowa launched the Iowa Electronic Markets (IEM) to allow participants to trade real-money contracts on the U.S. presidential election.
The idea was that the market price of these contracts was a better indication of the probability of an event happening because thereâs real money at stake. This is in contrast to both traditional polling which is based on sample surveys as well as casinos that act as single central bookmakers i.e. set the odds themselves.
IEM index contracts paid out based on the share of the popular vote received by each candidate e.g. if Candidate A won 52% of the vote, their contract paid $0.52. A typical trade looked like this:
Trader buys a number of 1$ contract bundles. Each bundle contains one contract for each major candidate .
Trader sells off the contracts they disagreed with, effectively betting on a particular outcome.
The price of each contract floats based on market demand, creating a live forecast of expected vote share.
If the Trader is correct, the contracts they decided to hold go up in value and they net a profit.
While academically successful, IEM failed to break out of the research niche due to UX barriers and regulatory constraints (it operated under an academic exemption with the CFTC). These initial index contracts gave rise to more popular formats like spread contracts and more importantly binary contracts; where you either win $1 if the event happens, or nothing if it doesnât.
In 2014, PredictIt launched to improve accessibility with a cleaner interface and garnered decent media attention. Markets surged amidst the 2016 US presidential election, with up to 300MM shares being traded the following year. But growth was fundamentally hindered by regulation. Event-based investment contracts fall squarely under the supervision of the CFTC, who granted PredictIt the right to operate under a âno actionâ letter as long as it shared data with its partner academic institution and abided by several limitations. Most notably, an $850 cap per person that severely limited liquidity and left mainstream and institutional use out of reach. In 2022, the CFTC abruptly revoked PredicItâs permission to operate entirely citing it had violated terms.
This set the stage for a new and scalable solution. Fast forward to today and both Polymarket and Kalshi have emerged as successful platforms, albeit with vastly different approaches.
Letâs start with Polymarket. Founded in 2020, the platform took a blockchain-based approach, curtailing regulatory restrictions by building on open, permissionless rails.
Polymarket is in some ways the evolution of the humble Catnip website, which was essentially just a front-end that connected to a liquidity pool on decentralized exchange Balancer. The liquidity pool enabled trading in a binary contract that would result to $1 or $0 depending on whether Trump would win the 2020 election.
A crucial part of the catnip experiment was figuring out a decentralized way of determining the âtruthâ of who won. This was enabled by plugging into a decentralized oracle system called Augur where actors put up a dollar stake (in Augurâs REP tokens) to make a virtual on-chain attestations on the outcome of a real-world event. These actors earn tokens if they attest in line with the majority, and lose their stake if not.
Polymarket built on this idea by launching a platform to enable anyone to create markets around real-world events. The project is built on Polygon, leveraging the UMA oracle, and offering a fast intuitive UX with no trading caps. Last year, it raised $70MM from Founders Fund (at an undisclosed valuation) despite the platform being ordered by the CFTC to restrict US users.
Polymarket handled nearly $7.5B in trading volume reaching a monthly high of 400k active wallets as users took to the platform to bet on the US election without restrictions on liquidity and bet sizes.
Deeper liquidity on Polymarket resulted in more confidence in the accuracy of its odds compared to its predecessors, resulting in major coverage in mainstream media . Famously, Polymarket had odds of Trump winning the election at 58% three days before the election compared to pollsters who had it deadlocked at 50/50.
Kalshi, meanwhile, took a traditional and regulatory-first approach to building its platform. The company was founded in 2018 by MIT classmates Tarek Mansour and Luana Lopes Lara during their time at Citadel. The pair spent two years working closely with regulators, becoming the first and only prediction market registered as a Designated Contract Market (DCM) with the CFTC. Unlike Polymarket, the platform is not built on blockchain rails and operates as a regular exchange with resolutions managed by Kalshi itself.
The platform likewise surged in popularity during the 2024 election, attracting $2.4B in annual trading volume with 1.3MM unique users onboarded and reaching the top spot in the Apple App Store in the Finance category. Volumes were notably lower than Polymarketâs $7.5B at the time.
Both are in the process of raising a fresh round of investment. Polymarket is in talks with Founderâs Fund to secure $200MM at a $1B valuation, while Kalshi, despite being smaller, just closed a similar $185MM round led by Paradigm at $2B.
We see several reasons for the discrepancy.
The first is a divergence in activity post-Elections. Polymarket has struggled to sustain activity in 2025, largely due to its inability to offer services in the US. Monthly active users in June were down -48% and volumes -61% from their Election period peak. The platform is on track to do around $615MM in volume this month, virtually unchanged from its monthly average in 2024.
Meanwhile, Kalshiâs $400MM July projection (estimated using a reported $2B in the last 6 months in Sports segment alone) is 2x higher compared to last yearâs average.
Kalshiâs growth stems primarily from US sports betting markets; where outcomes on golf, basketball, and UFC make up 4 of its top 5 markets by volume this month. This segment has experienced significant tailwinds since the country legalised sports betting in 2018. Since then, the total dollar volumes wagered, known as the âhandleâ, have more than doubled each year (CAGR of 115%) to $135B in 2024. Annualising Kalshiâs July volume shows itâs currently capturing less than 5% of this opportunity.
Kalshi recently showed its commitment to the segment during the NBA Finals this past month, when it released a viral AI generated marketing video. Production reportedly cost only $2,000 to create with Google Veo 3. Check it out below.
Another reason for Kalshiâs growth has been its ability to attract partnerships with large brokers, aided by its regulatory status. Back in March, the platform struck a partnership with Robinhood to power its in-app prediction market feature.
Robinhood customers traded 500MM options contracts in 1Q25 netting $240MM in transaction revenues. If prediction markets can reach 10% of that scale at a 50/50 revenue share, Kalshi could net $50MM in additional annual revenue.
However, the strength of Kalshiâs regulatory arbitrage could be wearing off. The CFTC closed its investigations into Polymarket last week amidst a positive shift in its regulatory stance towards crypto. The platform followed by purchasing derivatives and clearing house QCX for $112M, which will enable Polymarket to re-enter the US.
Despite stagnant volumes, the number of markets on Polymarket have continued to grow suggesting an active user base and a shift towards shorter-term events. For prospective users, it translates to a potentially diverse set of markets, hungry for liquidity.
Polymarket being an on-chain platform also presents a unique path to grow within DeFi. The team is already exploring launching its own stablecoin to replace Circleâs USDC as the the default trading currency, which would unlock new yield income on deposits. Composability in DeFi also offers on-chain traders the ability to structure more sophisticated trades using leverage and other lending markets.
New prediction markets offering more complex contracts and new value propositions are also emerging. These include Zeitgeist on Polkadot as well as more social alternatives like Manifold. Kalshiâs challenge is to protect its moat under growing competition both inside the US and from on-chain innovators around the globe.
đ Related Coverage đ
Long Take
We examine the rise of crypto treasury companies â publicly traded entities designed to hold and accumulate crypto assets like BTC, ETH, and TAO â as a bridge between traditional capital markets and decentralized finance. MicroStrategy leads this trend with $70B in Bitcoin, while newer players like SharpLink, The Ether Machine, and xTAO aim to replicate the strategy for Ethereum and AI-related tokens, using financial engineering to gain exposure and capital. The sector attracts both retail momentum and institutional capital, offering unique instruments for crypto exposure despite execution and market risks.
Curated Updates
Here are the rest of the updates hitting our radar.
Paytech
âPayPal unveils 'Pay with Crypto' feature - Finextra
FIS Partners with Circle to Unlock Stablecoin Money Movement - Circle
Xero enters binding agreement to acquire Melio for $2.5B - Accel
Crypto exchange Kraken debuts peer-to-peer payments app Krak - Reuters
Neobanks
PNC taps Coinbase to create crypto trading offering for bank customers - Reuters
Why JPMorgan Is Hitting Fintechs With Stunning New Fees For Data Access - Forbes
CaixaBank turns on instant cross-border mobile transfers - Finextra
Lending
â JPMorgan explores lending against clientsâ crypto holdings - FT
Bailey and Reeves clash over Revolut banking licence - Finextra
Digital Investing
âAmazon-backed Anthropic rolls out Claude AI for financial services - CNBC
Robinhood Tokenization Push Redefines Market Hours and Investor Access - Fintech Weekly
Kraken launches tokens to offer 24/7 trading of U.S. equities - Reuters
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Thank you very informative