1/22
Big raises from Kalshi and Polymarket in the past few weeks.
It’s an interesting dynamic we’re seeing play out here though.
Essentially Kalshi racing to become Polymarket, before Polymarket becomes Kalshi.
Here’s my thoughts on where they are headed and what I’m looking for to decide where to place bets on the prediction market space!
2/22
Kalshi started off as only regulated offchain markets.
It meant broad US access, but cumbersome limits.
For example, Kalshi has to file new paperwork with each market and is not allowed markets on certain US political events.
They also have full KYC/AML obligations.
3/22
The upside meant early access to legal distribution partners like Robinhood, and legal US access.
But with the Trump election that most is less valuable.
4/22
So we see @Kalshi raising from top crypto firms, and hiring folks like @j0hnwang and @beast_ico as they explore what decentralization and crypto look like in their product.
5/22
Meanwhile @Polymarket is entering the US market, and raising from @ICE_Markets as they explore what regulated US products looks like in their space.
They’ve benefited from a lack of regulation and broad access so far.
6/22
The big hurdle that @Polymarket has is actually oracles though.
Not being a regulated market, they can’t be involved in the resolution process and so they’ve used external oracles so far like UMA - which is a mess, it’s basically popularity voting.
7/22
While both rapidly explore the others product sector, they both come back to two core questions:
-How do you get new, non-gamblers, to discover AND use prediction markets?
-How do you make visiting the prediction market a habitual part of internet usage?
8/22
So far, both have spent heavy on influencers and news headline posting accounts on Twitter.
But, it’s likely they’ll need to delve deeper into the product side.
Because markets are high-churn product you need a deep sticking point beyond the betting.
9/22
The prediction market that succeeds most broadly will likely look more like:
-the next 538 polling aggregator/newsroom
-the next ESPN news desk
-the next stocktwits social network
-an ad network
-or an embedded widget in Twitter
10/22
They’ll need to either build newsrooms, pollsters, sportscasters or social networks to own an audience.
Or package up their offering like ads or widgets to get syndication to an audience.
Or make an off the shelf way for any niche creator to push their own whitelabel of it.
11/22
Because when a product needs to scale their are two options:
1) Own the funnel (be the thing that brings the audience)
Or
2) Be the infrastructure
12/22
Right now I think @shayne_coplan and the @Polymarket team have the right foundation to move most quickly on that.
But, it’s a very complex and differentiated product space they are moving into.
13/22
And now @Kalshi has @a16z backing them who has a lot more experience at both media presence, media infrastructure and contacts in traditional syndication.
14/22
So I think if @Polymarket wants to hold that lead it will need to seize a few key avenues:
1) Aim to be an infrastructure provider for creators to build market powered content on Polymarket.
2) Replace UMA oracles with an adjudication model
15/22
3) Create a flagship internal publication to prove the infrastructure in #1
Right now traditional pollsters are struggling. Outlets like 538 closed, and government data is shoddy.
So…
16/22
A publication on political and economic data that combines prediction market data, with aggregation and its own surveys would drive tremendous eyeballs.
It would be frequently quoted on things like Bloomberg and CNN as well as social.
17/22
There is a RARE opportunity here, when trust in government data is *so* low, that you could actually replace it as the source; and once entrenched that moat is hard to break.
It’s audacious and a gamble, so I’m not sure Kalshi would do it, but I think @shayne_coplan has enough audacity in him to go “yeah, we’re the data now!”
18/22
You basically end up building out a Tumblr/Medium style platform where users connect and follow publications that embed prediction markets.
You have your own in-house data publication that replaces 538, BLS reports, and inflation reports.
19/22
That drives two funnels:
1) Mainstream top of funnel awareness through syndication on to news channels as *the* trusted data source.
2) Niche readers following experts publishing in their own category who curate relevant markets.
20/22
That’s the kind of moat that would be tough to breech.
The prediction market that pursues that is the one I’d bet on most heavily.
21/22
Right now, between the bets, if I was to pick one to farm (assuming they both eventually have tokens) I’d lean towards @Polymarket
While I don’t know their plans yet, so far they have a track record of larger swings, which I think is needed here.
22/22
That says it is ALL up for grabs, even from a third entrant. Maybe @MyriadMarkets, @Truemarketsorg, @OvertimeMarkets or some other player makes a Hail Mary and over pays for the right talent to execute that newsroom and platform combo.
Because I think it will come down to, who can build the right tools for creators, and, who can hire the right talent to build out that trusted data-driven politics & economic news room in house.
Which will likely take some sort of non-traditional deal structure where the team gets upside, as the kind of talent who can build that is a rare combo of operator, data science and editorial, and that’s not a cheap employee!
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