Four years after the meme stock frenzy, prediction markets have blurred the line between investing and gambling by expanding beyond political wagers. Polymarket and Kalshi saw app downloads fall after November, while Polymarket plans a U.S. re-entry under friendlier regulations. Kalshi won a court victory permitting political event contracts, arguing these instruments are analogous to commodity futures and allow hedging electoral outcomes. Kalshi launched nationwide sports-based event contracts and partnered with Robinhood, claiming the products constitute investing rather than state-regulated sports betting. New Jersey and Nevada issued cease-and-desist letters, and Robinhood sued both states to defend user access.
Those carefully tracking the presidential odds of the 2024 election might have thought that Polymarket and Kalshi would recede into the shadows after November, ready to emerge again in four years like a cash-crazed groundhog. And to some degree, they would have been right-app downloads have plummeted for both platforms. But as the offshore Polymarket plots its re-entry into the U.S. under ( ahem) more favorable regulatory conditions, Kalshi is trying to rewrite regulations altogether.
Sequoia-backed Kalshi triumphed in its first battle last fall when it won a court case against its regulator, the Commodity Futures Trading Commission, that allowed the platform to offer political-based event contracts. Kalshi argued the instruments were no different than any other type of future. Traders are allowed to hedge against price swings in commodities like oil and wheat. Why not elections?
After November, emboldened by its victory and in search of new markets, Kalshi took an even bolder step-it launched sports-based event contracts nationwide. Users could buy stakes in the outcome of NFL or NBA games, though Kalshi was sure to make clear that this wasn't sports betting, which the CFTC prohibits and is left to the states. This was investing, Kalshi argued.
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