Prediction market giants clash, Kalshi and Polymarket compete fiercely

Byline: Yash Roy, Bloomberg

Compilation: Saoirse, Foresight News

This is an ad that the U.S. prediction market platform Kalshi ran in March at bus stops in Washington, D.C., with the slogan “We don’t do death markets.” It emphasizes its own compliance with federal oversight in order to attack rival Polymarket’s overseas, unregulated operations and the sensitive contracts tied to military conflicts. Photographer: Daniel Hoyer / Bloomberg

As competition in the prediction market industry grows increasingly intense—along with the fact that this emerging field is now facing close regulatory scrutiny from Washington—Kalshi and Polymarket are trading major allegations, launching an all-out verbal offensive against each other.

The two platforms have been at odds for some time, but the conflict has recently escalated dramatically—Kalshi has launched an extremely targeted advertising campaign, and its employees have also publicly posted criticisms of Polymarket. The rhetoric on both sides has rapidly grown even more combative.

On Monday, Benjamin Freeman, who oversees Kalshi’s political and election markets business, wrote on social media: “Polymarket’s irresponsible, dangerous, and possibly rule-violating behavior is threatening the space for legitimate prediction markets in the United States.”

The accusation quickly triggered a fierce back-and-forth between the two companies.

In a statement, Polymarket responded: “We welcome competition, but we believe discussions should be grounded in facts. Misleading the public only harms the entire industry and the interests of participants.”

Kalshi spokesperson Elisabeth Diana, in turn, fired back directly: “That’s rich coming from a company whose vast majority of trading volume is overseas and unregulated—where platform rules even allow ‘death markets’ to exist.”

(Note: Death Markets (“death markets”) are an industry-wide umbrella term for trading contracts in prediction markets that bet directly or indirectly on life-related events such as the death of people, military conflicts, assassinations, and other such incidents. They are also known as ‘assassination markets.’)

At the moment this internal dispute erupted, it was a critical period in which Polymarket and Kalshi are competing for the leading position in the fast-growing prediction market industry. The industry offers Americans a brand-new way to place bets on all kinds of events—sports games, election outcomes, and more. Based on data compiled by users on Dune Analytics, the two startup firms have recently posted consecutive weekly transaction-volume record highs, and their combined nominal trading volume is now approaching $6 billion.

Prediction market trading volume reaches billions

Polymarket and Kalshi’s weekly nominal trading volume. Note: Data is for the week of March 9; source: @datadashboards on Dune Analytics

At the heart of the dispute is a fundamental difference between the way the trading platforms are set up and how they operate. Kalshi’s headquarters is in the United States and it is regulated by the U.S. Commodity Futures Trading Commission (CFTC); meanwhile, Polymarket’s main trading platform is located overseas.

Leveraging its overseas operating advantage, Polymarket has launched contracts related to military conflicts, including war developments involving Iran. Kalshi calls out that these kinds of products are neither ethical nor legal.

One of Kalshi’s ads spells it out plainly: “We don’t do death markets.”

Starting earlier this week, this Kalshi marketing campaign—shaped like a “platform rules checklist”—began appearing at bus stops and subway stations in Washington.

One of the entries reads: “Rule 1: We ban insider trading, because Kalshi is a federally regulated U.S. exchange.” In the eyes of industry observers, the implied message is obvious: Polymarket’s main platform is not governed by U.S. regulators.

“BETS OFF Act” signage; U.S. Representative Greg Casar and U.S. Senator Chris Murphy speak at a news conference about the “Banning Sensitive Operations and Federal Functions Trading (BETS OFF)” Act. Photographer: Stephanie Reynolds / Bloomberg

Earlier, there were allegations that someone used insider information to place improper bets on U.S. military actions involving Iran and Venezuela, and Congress has shifted its focus to the issue of insider trading in prediction markets. In response, Kalshi has taken a tougher stance, imposing penalties on users it deems to have violated rules—such as fines and suspending trading—while Polymarket has been comparatively hands-off. However, as regulatory attention has increased, the platform has recently also published its own insider trading rules.

Kalshi spokesperson Diana said: “We want to lay out these major differences clearly. Right now, many people in the market lump Kalshi and Polymarket together, and also confuse the different paths our two companies take on regulatory compliance.”

In addition to its overseas main platform, Polymarket also has a platform that is regulated in the United States, though it is still in testing. In its statement, the company said that both of its platforms apply “the same strict market integrity standards, including prohibitions on insider trading and market manipulation, proactive monitoring of trades, and ongoing communication and coordination with regulators and law enforcement authorities.”

A Polymarket website listing trades about whether the Houthis will attack Israel’s territory. Photographer: Gabby Jones / Bloomberg

Just a few months ago, Kalshi co-founder Luana Lopes Lara had also tried to ease tensions between the two rival companies. In a social media post last October, she said she hoped the industry could move past “destructive infighting” and grow together.

But it now appears that vision has largely fallen flat.

In particular, after Kalshi’s advisor, former CFTC commissioner Brian Quintenz, joined the fray, the differences became even harder to reconcile. In reporting about prosecutors investigating insider trading, Brian Quintenz this week publicly hinted on social media that the relevant investigation should focus on Polymarket. When Bloomberg News reached out to him, he declined to comment further.