Kalshi, the only regulated prediction market platform in the United States, is now venturing into the world of cryptocurrency. This move comes as digital currencies are experiencing a resurgence after a two-year slump.
It’s important to note that while these predictions are related to cryptocurrency, they will still be conducted in U.S. dollars, just like all other markets on Kalshi. Traders on the platform have the opportunity to bet on various topics, such as the number of rate cuts the Federal Reserve will make this year, the amount of snowfall in New York in March, and even the winner of the Oscar for best screenplay.
Kalshi’s decision to enter the world of crypto coincides with the beginning of a bull market for digital assets, with the launch of bitcoin exchange-traded funds and other factors causing prices to soar. The CoinDesk 20 Index, which tracks major digital assets, has already seen a nearly 50% increase this year.
This move also aligns with the renewed interest in prediction markets from investors. For many years, these markets were seen as a niche activity and an academic interest. However, recent research from Bitwise Investments predicts that over $100 million will be invested in prediction markets by 2024, making it a new “killer app” for the crypto world. Even former U.S. President Donald Trump has been actively involved in crypto-based prediction markets, regularly posting screenshots of his favorable odds for retaking the White House on Polymarket.
Prediction markets are more than just a form of gambling, according to advocates. By requiring participants to invest their money, these markets reveal what people truly believe and provide a more accurate representation of public sentiment compared to traditional polls and pundits.
These markets typically involve yes-or-no questions with verifiable outcomes within a set time period. For example, on Kalshi’s “Will the U.S. ban TikTok this year?” market, “yes” shares were trading at 25 cents, indicating a 25% chance of a ban before December 31st, while “no” shares were at 78 cents. If the prediction turns out to be correct, each share pays out $1, otherwise, it pays nothing.
In following the footsteps of its competitor Polymarket, which currently has nearly 40 markets related to crypto outcomes, Kalshi is expanding its services to allow clients to bet on crypto. This is made possible by Kalshi’s license from the Commodity Futures Trading Commission (CFTC), as Polymarket is barred from operating in the U.S. due to a settlement with the CFTC.
However, this regulatory approval also has its challenges. Kalshi is currently in a legal battle with the CFTC over the right to list markets on which party will control each house of the U.S. Congress. Similarly, PredictIt, a popular election betting site, is operating under a special exemption from the CFTC but is limited in its growth and activities. They have also sued the CFTC after being ordered to shut down.
