Here’s a riddle: two startups are competing to conquer a hot new sector. How is it that Startup A, which seems to have taken the lead in the market, is estimated at $5 billion, while startup B – which isn’t even available in the US right now – is worth almost twice as much? The answer probably has something to do with cryptography.
The above scenario depicts the race between Kalshi and Polymarket to dominate prediction markets, a field that has been around for years but only took off in 2024 thanks to a more permissive regulatory environment. Currently, Kalshi is accumulating new US users, who bet on everything from sports to political events, while Polymarket is still in the process of obtaining the necessary documents to operate legally in that country. Both companies announced new fundraising rounds last week, but Polymarket made a splash with a valuation of 9 billion dollars.
The two startups’ offerings are as similar as those of Uber and Lyft. The only significant difference, besides Kalshi’s head start in the regulatory process, is that Polymarket is built on blockchain rails. Kalshi is interference to add crypto capacity, but it will struggle to catch up with its rival, which has been transacting on the Polygon layer 2 network since its inception and whose founder participated in the Ethereum crowdsale while still in high school. Critics may find much fault with Polymarket, but no one can doubt the bona fides of its cryptography.
A more difficult question is Why Polymarket’s crypto pedigree earns it much more than its rival. This is especially the case at a time when Kalshi is capturing a large portion of the US sports gambling market and beating Polymarket in terms of app downloads and active users. The answer here can probably be summed up in two words: falling chips.
Shayne Coplan, CEO of Polymarket, shared a job last week, which ranked cryptocurrencies, including a fictional token called POLY, in fifth place, just behind Solana and Ethereum. The company has hinted elsewhere that the token is likely to fall next year and, if that happens, investors in Coplan and Polymarket will be able to take advantage of a windfall.
Kalshi’s founders, meanwhile, will likely have to get rich the old-fashioned way: by building the most popular service and working to expand and defend its big first-mover advantage in the United States. The task won’t get any easier given that fast-moving giants like Robinhood and Coinbase are also taking a keen interest in the emerging prediction market sector.
The final wild card in all of this is that Polymarket and Kalshi are run by flawed CEOs. As I noted in a recent magazine article, there are red flags about whether Coplan has the maturity to see a fast-moving startup through to the end. Kalshi CEO Tarek Mansour, meanwhile, has a penchant for underhanded tactics that have damaged his company’s reputation.
Finally, there is the question of which startup can perform better in a controversial and highly regulated new industry. Currently, Kalshi has an advantage in this area due to its strict legal approach regarding issues such as dispute resolution and ethical controls. Polymarket, on the other hand, has a murky process for disputes that is controlled by the owners of an obscure cryptocurrency. The company also has a hands-off attitude in approving contracts, which has led to controversy over listing “arson market” bets like those of President Donald Trump. disappearanceand a history of wash trading on its platform. These are challenges that a simple drop of chips will not solve.
Jeff John Roberts
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@jeffjohnroberts
DECENTRALIZED NEWS
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MAIN CHARACTER OF THE WEEK
Anthony Kwan—Bloomberg/Getty Images
“Bitcoin Jesus,” or Roger Ver, a colorful figure from the early days of crypto who earned his nickname by handing out Bitcoin to random people, is back in the news. Ver, who renounced his US citizenship in 2014, was arrested in Spain for criminal US tax evasion last year, but has now reached a regulation with the Department of Justice making him pay $48 million to have the charges dropped.
EVEN WHERE
@crypto_rand
The modest gains that followed Friday’s massive market collapse gave rise to a series of memes, such as one above Thanks to the crypto-bulls who are reassuring themselves, the worst is over. But at a time when the market as a whole appears overheated, the actual trajectory remains uncertain.
