Kalshi and Polymarket Integrate Cryptocurrency into Prediction Markets

In a move to increase liquidity and streamline transactions, Kalshi Klear, the clearing house for the prediction market, has submitted a filing to the Commodity Futures Trading Commission to allow its Self-Clearing Members to use cryptocurrency to fund their accounts. On the other hand, Polymarket’s recent SEC filing alludes to the potential launch of its own token, sparking speculation among crypto enthusiasts and prediction market observers about the company’s intentions as it prepares to relaunch in the US.

Currently, most accounts on Kalshi are primarily funded using US dollars, with only about 10% of deposits made in cryptocurrency. Conversely, Polymarket operates as a blockchain-based exchange platform, highlighting the variations in funding methods between the two platforms.

At present, when users deposit cryptocurrency on Kalshi, it is converted into dollars for trading purposes. However, with the proposed rule change for self-clearing institutional members, this conversion step would be eliminated, saving time and reducing conversion fees, potentially attracting a cohort of new crypto-focused participants. While the majority of Kalshi users are expected to continue funding their accounts with US dollars, the amendment is likely to inject some liquidity into the markets, addressing one of the challenges faced by prediction markets – limited liquidity which restricts trading volume and tightens spreads.

Kalshi’s filing, published by Sportico’s Dan Bernstein, is dated September 19 and indicates that the policy amendment will be effective from October 2, if not later. As a Derivatives Clearing Organization registered with the CFTC, Kalshi has the authority to self-certify such a change, which will come into effect automatically after 10 business days unless the CFTC intervenes.

Comparing Kalshi and Polymarket, both platforms are strategizing to embrace more crypto integration in the US, albeit taking different regulatory approaches. Polymarket, known for its crypto-centric ethos, although exiting the US in January 2022, still attracts American users to its platform. Conversely, Kalshi views the inclusion of crypto as an emerging opportunity and potentially a necessity as it prepares for the return of its prominent competitor in the US market.

The initiatives by Kalshi and Polymarket to incorporate cryptocurrencies into their platforms signify a significant shift in the prediction market landscape, aiming to cater to the evolving needs and preferences of users in the dynamic world of crypto trading and prediction markets.