The tripartite competition among HIP-4, Polymarket, and Kalshi and their ultimate integration

Source: Galaxy; Compiled by Golden Finance Claw

The HIP-4 protocol upgrade of Hyperliquid marks the arrival of the third major prediction market model. Among existing market participants, Polymarket offers consumer-facing native discovery features, while Kalshi provides access to regulated US exchanges. Hyperliquid announced the upcoming launch of HIP-4 in February this year, aiming to bring outcome markets into the "financial hub," and activated the proposal on the mainnet on May 2nd. Prediction markets have proven to be one of the most useful new financial tools for hedgers and speculators in recent years. Hyperliquid has become an industry standard in perpetual futures execution and infrastructure, and is now actively positioning itself to compete in event trading volume.

Hyperliquid’s user base differs from that of Polymarket or Kalshi. These two companies have been dedicated to building products for non-cryptocurrency users for many years. They both feature polished user interfaces that allow users to "browse" prediction markets as easily as shopping on Amazon. Hyperliquid serves active native crypto traders through its terminal frontend. Although this user group is narrower, they are experienced traders, most hold stablecoins, and have wallets already set up. The design of HIP-4 is precisely to meet the needs of this type of user.

As of May 25th, HIP-4 has expanded from periodic BTC binary options to authoritative markets published by validators covering real off-chain events. Currently, real-time markets include:

1. "Will Bitcoin price be higher than X at date Y, time Z?" — a daily cycle binary contract, reset at 2 am Eastern Time, settled at expiry based on Bitcoin prices on HyperCore platform.

2. "What is Bitcoin’s price range on date X, time Y?" — a multi-result contract launched days after HIP-4 went live, with three outcomes (up, middle, down) settled by the same oracle.

3. Federal Reserve June interest rate decision (change/stay), expected to be announced around June 17.

4. May CPI YoY increase (exactly 4.3% / below 4.3% / above 4.3%), expected to be confirmed around June 10 based on official BLS data.

5. NBA Finals Game 4 (Nicks/Spurs).

6. 2026 NBA Champion (Nicks/Spurs).

7. 2026 World Cup winner (France/Spain/England/Portugal/Brazil/Argentina/Germany/etc.).

These products are relatively narrow in scope, which is natural in the early stages. The truly important questions are: what can HIP-4 achieve, how does it compare to Polymarket and Kalshi in terms of infrastructure, costs, and distribution, and what does its emergence mean for a field where all parties are moving from different starting points toward a "everything can be traded" model.

This article explores HIP-4 in depth: its features, comparisons with Polymarket and Kalshi, and its significance for the prediction market landscape.

Hyperliquid’s HIP-4 BTC real-time outcome market.

Executive Summary

• HIP-4 launched on Hyperliquid mainnet on May 2, 2026. The proposal was announced on February 2nd, went live on testnet that week, and was officially released after three months. Now, on Hyperliquid’s native engine HyperCore, outcome contracts share the same margin account with perpetual and spot contracts.

• Just days after Polymarket completed migration to the new Central Limit Order Book (CLOB v2) and stablecoin (pUSD), HIP-4 went live. In the same week, Bloomberg reported that Polymarket is seeking approval from US regulators to move its flagship exchange into the US.

• In April, total prediction market trading volume exceeded $150 billion. Kalshi set a new record with $14.81 billion in nominal trading volume (up 13.3% MoM), surpassing Polymarket for the first time in nominal volume, counterparty volume, and number of trades. Polymarket’s volume fell to $9.01 billion (down 14.8% MoM).

• The sector’s trading volume declined MoM for the first time in seven months, but the long-term growth trend remains strong: over the past two years, monthly volume has increased more than 17-fold. Bernstein analysts forecast the sector will grow from $51 billion in 2025 to $1 trillion by 2030.

• HIP-4 can directly access Hyperliquid’s on-chain CLOB HyperCore, sharing execution layer and unified margin account with perpetual and spot trading. Sub-second finality, around 200k orders per second throughput, and cross-margin composability are structural advantages that Polymarket (considering migration) and Kalshi (closed centralized infrastructure) cannot replicate without a full product rebuild.

• By day 25, HIP-4 accounted for 20.1% of Polymarket BTC prediction market 24-hour trading volume ($2.38 million for HIP-4 vs. $9.46 million for Polymarket).

As of early June, sample HIP-4 markets include: BTC binary options, price ranges, and expanded off-chain events such as Fed decisions, CPI, and sports events from May 25.

Current Prediction Market Status

Over the past 18 months, prediction markets have been one of the most notable growth points in crypto and broader fintech. We have written multiple articles about prediction markets and their derivatives, such as impact markets and decision markets. As of September 2025, Polymarket and Kalshi’s combined monthly trading volume was about $10k. By April 2026, their nominal trading volume reached approximately $24 billion, with monthly total trading surpassing $150 billion in that month alone. In less than two years, monthly volume grew over 17 times.

In April, Kalshi’s lead began to show structural changes.

Kalshi’s nominal trading volume in April hit $14.81 billion, a 13.3% increase from March’s record, setting a new high. Polymarket’s volume declined 14.8% to $9.01 billion. Kalshi’s lead expanded from $2.5 billion in March to $5.8 billion in April, creating the largest monthly gap ever between the two platforms. Kalshi also overtook Polymarket in trading volume ($5.42 billion vs. $1.99 billion) and number of trades (94.4 million vs. 87.4 million), reversing Polymarket’s long-standing lead in trade count.

Two structural factors explain Kalshi’s rise. First is product mix. In late April, sports contracts accounted for 74.3% of Kalshi’s weekly volume, with exotic multi-leg contracts pushing this to about 85%. Just the US Masters created $545 million in nominal volume, comparable to the Super Bowl single-game trading volume. Kalshi is well prepared for upcoming NBA Finals and 2026 FIFA World Cup. Nonetheless, sports markets are closer to betting than the information signal value generated by geopolitical or tech markets, even with some hedging use cases. The second factor is regulatory clarity. As a designated contract market (DCM) regulated by the US Commodity Futures Trading Commission (CFTC), Kalshi can establish distribution partnerships and enter the US retail market faster than Polymarket.

By the end of April, Polymarket’s category mix was more diversified (46% sports, 27% politics, 22% crypto), which offers structural advantages during political turbulence or cyclical crypto volatility, but becomes a disadvantage during periods with no political catalysts, such as April. During that period, active user count also declined from about 733k in March to 646k in April.

Excluding sports, Polymarket’s weekly trading volume usually leads.

"Little girl keeps asking for dates, she wants to scam Polymarket’s money" — as rapper Drake said in the song "Shabang" from his album ICEMAN.

Nevertheless, Polymarket’s economic benefits remain strong. In April, Polymarket collected $47.7 million in fees. Its user base is also much larger than Kalshi’s implied retail user base. Polymarket offers the richest non-sports trading markets among peers, announced an official partnership with MLB in March, and received a $200k strategic investment from Intercontinental Exchange (ICE), parent company of NYSE. The platform has acquired a CFTC-licensed exchange to operate a compliant US product, and is working to migrate its flagship exchange to the US (see below). Additionally, on April 28, Polymarket completed a major infrastructure upgrade (CLOB v2 and migration from USDC.e to its new internal collateral token pUSD), four days before HIP-4’s official launch.

In April, after seven consecutive months of record trading volume, the overall prediction market volume declined MoM for the first time. Whether this is a calendar effect (no Super Bowl, NCAA basketball, NFL playoffs in April) or a genuine demand peak remains to be seen, with May’s trend to be watched.

As of May 1, the total open interest in this sector was $1.11 billion, with Kalshi’s open interest at $630.7 million and Polymarket’s at $449.9 million (about 98% combined). Open interest in Limitless, predict.fun, and Opinion was below $15 million each.

Although starting points differ, all major trading platforms are moving toward the same "single account for all products" model.

What’s truly interesting is the strategic convergence behind the volume figures. Both Kalshi and Polymarket are reportedly building perpetual futures contracts. Hyperliquid has already built outcome markets using HIP-4. Each major platform is heading toward the same "single account for all products" model, just from different starting points.

HIP-4 Mechanism

HIP-4 adds outcome markets to Hyperliquid’s on-chain engine HyperCore. These are fully collateralized binary tools, settled at 0 or 1 depending on whether a discrete real-world event occurs. The mechanism is simple and familiar to prediction market traders: buy "Yes" at price P. If the event occurs, the contract settles at 1, and you profit (1 – P). Buy "No," and the result is the opposite. Maximum loss is always your entry cost. No leverage, no forced liquidation. According to Coinbase/Circle’s AQAv2 protocol, USDC will be the unified quote asset for all Hyperliquid markets; standard HIP-4 outcome markets will settle in USDC, while native USDH markets will be phased out.

To deploy a market, a builder must stake 1 million HYPE tokens, then define the event title, resolution time, oracle source, and optional challenge resolution window. This 1 million HYPE stake applies to markets deployed by the builder. Standard markets are published directly by validators, without builder staking, with deployment and settlement decided by on-chain validator votes.

A one-time, approximately 15-minute single-price clearing auction opens the market and determines the price that maximizes trading volume. Then, continuous limit/market trading occurs, with prices fluctuating between 0.001 and 0.999 until expiry. At settlement, the oracle publishes 0 or 1, and USDC is automatically paid out. Profit/loss cards are similar to those in perpetual trading, but the question shown is the market’s posed question, not an asset code, and position size is a number between 0 and 1, not a leveraged nominal amount. Disputes over settlement results may delay final settlement during the dispute window.

A notable technical detail: each outcome market contains two tokens (YES and NO), but their order books are merged to share liquidity. Buying YES at price P is equivalent to selling NO at price 1 – P. In the merged order book, price-time priority is promoted to price-side time priority. This means, at the same merged price level, sell orders are prioritized over buy orders. Advanced users can manually split and merge the main and side balances. Most operations are abstracted at the API layer, but this mechanism allows HIP-4 markets to offer tight spreads despite relatively low nominal liquidity.

HIP-4 charges no opening fees. Fees are only paid upon closing, destroying, or settling (in fact, during the initial testing phase, all outcome markets had zero fees). For traders, predicting the future on Hyperliquid is much cheaper than on Polymarket or Kalshi, which charge higher fees on profitable positions. Additionally, HIP-4’s fee structure is directly linked to Hyperliquid’s tiered fee system (trading volume in outcome markets counts toward the protocol’s tiered fee calculation), allowing active prediction market traders to enjoy lower real-time trading fees with a single unified account.

The first deployed contract covers daily Bitcoin price threshold events, reset at 2 am ET. Essentially, this is a "Will Bitcoin be above X at date Y, time Z?" binary. A few days after mainnet launch, Hyperliquid added multi-result markets, starting with a daily Bitcoin price range contract that settles into three ranges (up, down, middle). Future categories include politics, sports, macro data releases, crypto, and entertainment.

On May 25, the standard markets expanded to include off-chain events. Hyperliquid validators now publish markets directly using automated news push software as part of on-chain operations, with deployment and settlement decided by validator votes. The first off-chain markets include: Fed June rate decision (change/stay), CPI YoY data for May (~4.3%, settlement around June 10, from US BLS), and UEFA Champions League winner (Paris Saint-Germain or Arsenal). Settlement remains within Hyperliquid’s Layer 1: no external oracle, no UMA-style optimistic dispute layer (which is Polymarket’s Achilles’ heel), only validator voting based on predefined rules and automated pushes.

People naturally conflate HIP-4 with HIP-3, which is Hyperliquid’s framework for builders deploying perpetual futures. Both involve builders staking HYPE tokens to deploy markets on HyperCore. They share the same matching engine and order types. But these core components differ structurally, determining what assets each can trade.

HIP-3 perpetual contracts use continuous oracles, with price deviation limits around 1%. This design suits assets requiring continuous price discovery and leverage trading. HIP-3 is used for stocks, forex, commodities, and crypto—assets built by trade.xyz and other HIP-3 deployers. But it’s not suitable for discrete events.

Perpetual contracts cannot clearly express questions like "Did the Fed cut rates?" or "Did Trump win in Oregon?" Their payoffs are not continuous, nor are the oracles, and no funding rate can make the contract converge to the correct answer.

HIP-4 uses fixed-range settlement, involves no capital raising, and has no liquidation engine. Contracts are limited to their initial premium and rely on a single oracle quote, not streaming price data. For this reason, HIP-4 must be proposed as a separate protocol, not as a sub-function of HIP-3.

HIP-4’s most powerful feature may be that it allows traders to do more with other parts of their Hyperliquid account. The unified margin unlocks certain use cases that no standalone prediction market platform can achieve without a full product rebuild.

First, hedging discrete event risk against perpetual contracts. Historically, traders holding ETH perpetual long positions before Fed meetings had two options: reduce their position or accept binary risk exposure. HIP-4 introduces a third: buy "Yes" or "No" outcome contracts for the event itself within the same margin account. These outcome positions can partially offset directional risk of perpetuals without closing. For example, holding a $10k ETH perpetual long before a Fed decision, a trader can buy a $1,000 "Fed rate cut" no-contract. If the Fed holds rates steady, ETH drops, and the outcome pays (1 – P), offsetting some perpetual loss. If the Fed cuts, ETH rises, the outcome pays less, but the trader retains the upside of the perpetual. These hedges are stored in the same margin account and settled with the same collateral.

Second, market maker hedging of tail risks from discontinuous events. Delta-neutral perpetual market makers face tail risks from one-off events (regulatory announcements, protocol upgrades, macro surprises), which streaming perpetual hedges cannot clearly reflect. Before CPI releases, market makers quoting ETH or BTC perpetuals can hedge non-continuous risks with HIP-4 contracts, without transferring funds to another platform or running parallel options books. For professional liquidity providers on Hyperliquid, this is a risk management improvement.

For traders already using the same account for prediction and spot trading on Hyperliquid, entering prediction markets costs virtually nothing.

How does HIP-4 compare to similar products?

HIP-4, Polymarket, and Kalshi are all competing for the same ultimate goal: a platform where a user can express opinions on any event with a single account.

But they start from different points, have different products, infrastructure, and regulatory stances.

The table below highlights their key structural differences. The following sections will detail the most significant aspects of these differences.

User Experience & Discovery

Polymarket and Kalshi have been building consumer-facing frontends for years, both operating well. They target different user groups and build market depth differently.

Kalshi’s depth comes from programmatic, vertical-specific market creation. A single NBA game on Kalshi isn’t just one market; it includes player bets, spreads, and combo contracts. Extending this model across all major sports leagues, daily weather, economic data releases, and macro cycles could produce hundreds of thousands of active contracts. Ultimately, Kalshi achieves significant market depth within the verticals permitted by CFTC. The app is sports-centric (currently, sports events, including special bets, account for about 85% of weekly volume), with the simplest onboarding process in the industry. Supports USD deposits, no crypto wallets needed, no bridging, fully regulated (assuming users pass KYC). Kalshi is integrated into Robinhood and Coinbase apps, exposing prediction markets to millions of retail investors who wouldn’t otherwise download dedicated apps. This combination of programmatic depth, regulated user onboarding, and embedded distribution channels drove Polymarket’s significant April growth.

Polymarket’s scope is the opposite. Its depth is in breadth. Not limited by US commodity rules, Polymarket can list long-tail markets that Kalshi cannot legally touch: highly segmented international elections, diplomatic events, court rulings, Twitter debates, protocol upgrades, etc. Its category mix is the broadest among peers: politics (~27% weekly volume), sports (~46%), crypto (~22%), and culture/macroeconomics make up the rest. The frontend is browsing-focused, with curated categories, "hot" markets, social layers (comments), and onboarding flows to guide new users. By April, Polymarket had 646k monthly active users and the highest liquidity outside sports markets.

These products serve different user needs. If you want to trade NBA player stats or federal funds futures intraday, Kalshi’s strong programmatic trading is ideal. If you want to bet on UK elections or celebrity court rulings, Polymarket is the only choice. Both are feasible and unlikely to cannibalize each other in the short term. The key question is: which can better leverage institutional capital? Prediction markets as hedging tools for institutions may be the most profitable niche, and Kalshi seems best positioned for this.

HIP-4 does not have these features. Outcome markets are hidden within Hyperliquid’s trading terminal, alongside real trading and spot trading. No "browse markets" view, no trend info feed, no social layer, no distribution partnerships with retail brokers, and no programmatic market generation for sports or macro. To be fair, HIP-4 just launched. Its discovery features (if any) are built via frontends like Outcomexyz and Stratium, which are still small-scale.

This is a real gap in the near term.

The question is whether the builder ecosystem can quickly fill this gap and make a real impact. Hyperliquid’s framework explicitly invites third-party deployment of markets and frontends on HIP-4, similar to how HIP-3 perpetuals expanded on the platform (with trade.xyz alone accounting for most HIP-3 open interest). If outcome markets on Hyperliquid also develop a builder ecosystem, discovery gaps could close faster than expected. Otherwise, HIP-4 may remain a niche product for active traders.

Infrastructure

HyperCore is HIP-4’s strongest selling point and the biggest gap compared to Polymarket and Kalshi. Hyperliquid’s execution layer is an on-chain CLOB with sub-second finality, around 200k orders/sec throughput, and a unified margin engine capable of handling billions in daily volume. HIP-4 can integrate with this infrastructure without modification. Outcome markets share the same matching engine, order types, wallets, and collateral as trading and spot markets.

Currently, Polymarket runs a newly rebuilt central limit order book, but its infrastructure was not originally designed for this.

Polymarket runs on Ethereum Layer 2 Polygon. On April 28, the CLOB v2 upgrade fully rebuilt the matching engine and migrated collateral from USDC.e to pUSD, a major upgrade. But Polymarket still relies on blockchain infrastructure. Polymarket VP Josh Stevens has publicly admitted that to reach active trading levels, it must migrate to a dedicated blockchain. Any future infrastructure moves will take quarters of engineering effort and likely require a blockchain migration. Currently, Polymarket runs a newly rebuilt CLOB that was not originally designed for it.

Kalshi operates on centralized exchange infrastructure. It’s fast, stable, regulated, and closed. Kalshi cannot natively trade on-chain products, nor offer cross-margin with crypto positions, nor let users self-custody collateral. Its advantages are in USD trading convenience and regulatory transparency. For institutions needing CFTC regulation, Kalshi’s infrastructure is a key strength.

The ranking is: HyperCore is the most flexible execution layer among peers, Polymarket is in transition, and Kalshi has been closed from the start. But infrastructure alone doesn’t generate volume; it must be combined with markets, users, and discovery. That’s the part HIP-4 still needs to prove.

By day 25, HIP-4’s BTC outcome market accounted for 20% of Polymarket’s 24-hour BTC prediction volume ($2.38M vs. $9.46M).

Oracle

At mainnet launch on May 2, HIP-4 was limited to HyperCore’s price sources. It could only answer questions like "What is BTC price at time T?" The initial two markets—daily binary and multi-result range—were BTC price events. The May 25 expansion changed this. Hyperliquid validators now publish markets directly using automated news push software as part of on-chain operations, with deployment and settlement decided by validator votes. The parsing remains a closed loop within Hyperliquid Layer 1. No UMA-style optimistic dispute layer, no Chainlink or Pyth integration.

This is a third path prediction markets have not previously taken, and it’s worth clarifying. Polymarket uses UMA’s optimistic oracle, which resolves any real-world event via staking challenge. This oracle is permissionless and versatile, allowing Polymarket to incorporate any tweet, election, court ruling, or protocol upgrade into markets. Kalshi has CFTC-approved oracle sources, with each contract requiring registration for approval of the market and resolution method. While slower and more regulated than UMA, it offers high defensibility in regulation.

Hyperliquid’s validator oracle model is permissioned, not permissionless, meaning it cannot match UMA’s long-tail coverage. Validators must actively choose to publish each market, which ensures quality but limits throughput. Long-tail markets (e.g., niche elections, court rulings, controversial events) require a second phase of permissionless deployment and broader oracle integration, which has not yet been released. Until then, HIP-4 markets are limited to what validators can clearly resolve, constraining growth even if category coverage expands.

Regulatory Stance

These three platforms occupy three different regulatory positions, with impacts far beyond what my table can show.

Kalshi is a CFTC-regulated designated contract market (DCM), accessible to US retail users. This status enabled distribution via Robinhood and Coinbase. But Kalshi’s sports contracts face legal challenges in some states, which claim jurisdiction over such betting. Massachusetts has issued a ban, Wisconsin has sued. Several attorneys general are contesting the CFTC’s priority over state gambling laws. Venture firm (and investor in Kalshi) a16z sent a letter to the CFTC in April supporting federal primacy, a significant industry intervention, but the issue remains unresolved. If federal primacy is upheld, Kalshi will continue to grow its largest category—sports. If not, the 85% of April’s volume from sports will be split among states.

Polymarket is seeking full re-entry into the US market. It has established a foothold: after acquiring a CFTC-licensed exchange QCEX last year, Polymarket launched a compliant US version. But it’s smaller, with less coverage, liquidity, and categories than the overseas flagship. The real goal is to bring the flagship into the US. Reports suggest that during HIP-4’s launch week, Polymarket sought CFTC approval to do so. If approved, it would gain access to the US retail market after years of aspiration, presenting its most comprehensive markets and categories to US traders, rather than the limited version it currently operates domestically.

HIP-4 inherits Hyperliquid’s broader regulatory risks, which are in the legal gray area like other crypto-native DeFi. Reports indicate CME Group and ICE have urged US regulators to scrutinize Hyperliquid. News reports say these exchanges informed the CFTC and lawmakers that Hyperliquid’s decentralized environment poses manipulation and sanctions evasion risks, especially concerning 24/7 commodity and oil contracts long dominated by CME and ICE.

On-chain analyst ZachXBT notes that reports claim NYSE raised objections to Hyperliquid but not to Polymarket, which ICE owns with a $2 billion stake. ICE’s stake may suggest it wants to slow Hyperliquid’s prediction market push via HIP-4, not just its commodity markets under HIP-3. Critics see this as lobbying to curb fast-growing competitors, especially as both existing exchanges face CFTC and DOJ scrutiny over precise oil trading. Hyperliquid dismisses these allegations as "baseless concerns," arguing that public blockchains will expose rather than facilitate manipulation. On the day Bloomberg’s report was published, HYPE’s price dropped sharply.

Broader regulatory shifts are also underway. On May 14, the Senate Banking Committee passed the CLARITY Act by a bipartisan 15-9 vote, sending it to the full Senate. The bill would establish a federal framework classifying most digital assets as commodities under the CFTC, extending its derivatives regulation to crypto spot markets. It also provides safe harbors for non-custodial software developers (see Section 604, "Blockchain Regulatory Certainty Act" or "BRCA"). While initially aimed at prosecuting Tornado Cash and Samourai (open-source developers with no ongoing control), Hyperliquid’s active operation and on-chain settlement may make it different. If Hyperliquid’s developers are deemed "non-control persons" under Section 604, it could benefit. But it must also address the provisions of Chapter 3 of the CLARITY Act, especially Section 301, which involves securities law and BSA obligations. This includes exemptions for decentralized finance protocols, but if the protocol is deemed a non-decentralized trading platform, Section 301(a)(2)(A) could revoke those exemptions. Without exemptions, and if regulators find Hyperliquid non-decentralized, it would face BSA obligations under Section 301(b)(d)(D).

During the Senate Banking Committee hearing on May 14, some amendments to the latest draft of the CLARITY Act were made, but the publicly available version does not include these. Some reports suggest amendments related to BRCA. Negotiations over the bill’s language are ongoing, with unresolved issues around illicit finance and BRCA, so the final version could change before becoming law.

Beyond BRCA and BSA issues, Hyperliquid also hopes CFTC’s acceptance of perpetuals will extend to on-chain perpetual futures. This has not yet happened, and the future is uncertain, but Hyperliquid founder Jeff Yan met with policymakers in Washington in mid-May, spending a week with the Hyperliquid Policy Center.

In summary: whether Hyperliquid can replicate its offshore dominance in the US remains uncertain due to many regulatory hurdles.

The four dimensions summarized: Polymarket leads in oracle coverage and consumer UX, Kalshi in regulated US distribution and sports, HIP-4 in infrastructure and unified profit margins, with regulatory pathways possibly opening.

None of these three dominate all four dimensions. How each expands into other areas over the next 12-18 months will be key to the future of the space.

Risks

HIP-4 launched 25 days ago into an intensely competitive market, and it’s clear it may struggle to become a truly valuable product. The following risks are most likely to determine whether HIP-4 can surpass niche internal features and scale.

Market Breadth Limitations

Remaining limitations are about coverage scope, not category coverage. HIP-4 and Polymarket both filter which markets go live, so this is not a binary open/closed distinction. The difference lies in what each oracle layer can support. UMA’s optimistic oracle can resolve any real-world event, so Polymarket’s filtering is a product choice, not a technical limit; it can list nearly infinite long-tail events at any time. HIP-4’s validators/ oracles only resolve what the validator set can clearly adjudicate, so their filtering is constrained. Validators must actively choose to publish each market, which ensures quality but limits throughput. Long-tail markets (e.g., niche elections, court rulings, controversial social issues) require a second phase of permissionless deployment and broader oracle integration, which has not yet been released. Until then, HIP-4’s market catalog remains limited to what validators can resolve, constraining growth even if category coverage broadens.

Discovery Gap

Hyperliquid is a trading terminal, not a consumer product. Its outcome markets lack native browsing or social features. Hyperliquid relies on third-party frontends to fill this gap, similar to how trade.xyz extended HIP-3. Without this, HIP-4 will always be a niche for active traders, unable to reach Polymarket and Kalshi’s user bases. User discovery is also a risk, dependent on third-party development. Fortunately, the crypto space is highly developer-friendly.

Validator Centralization

Hyperliquid is run by 24 validators (soon 27), with a history including the March 2025 JELLY delisting incident, when the team froze a live market. This precedent is familiar to crypto-native users and forms the basis of trust. For binary, dispute-prone prediction markets, this is a real execution risk. The May 25 expansion makes this risk more concrete: standard market resolutions now depend on explicit validator votes, not external oracle posts. In practice, the validator management model pre-emptively mitigates this risk. Early standard markets (Fed rate, CPI, Euro final) are designed to be tightly coupled to a single authoritative source, ensuring deterministic resolution. More complex cases (macro revisions, disputed sports results, vague Fed statements) are markets where validators have motivation not to disclose. The closed-loop design eliminates third-party oracle disputes but concentrates resolution authority in validators, reflecting Hyperliquid’s understanding of trade-offs.

Regulatory Risks

Hyperliquid, like other DeFi platforms, operates in a regulatory gray area. The CLARITY Act offers a potential path to legal operation, but it’s not law yet. Until enacted, HIP-4 remains an offshore, unregulated venue. Lobbying by CME/ICE suggests this risk is real. Reports say these exchanges have informed the CFTC and lawmakers that Hyperliquid’s decentralized environment risks manipulation and sanctions evasion, especially concerning commodity and oil contracts long dominated by CME and ICE.

On-chain analyst ZachXBT notes NYSE objected to Hyperliquid but not Polymarket, which ICE owns with a $2 billion stake. ICE’s stake may aim to slow Hyperliquid’s prediction market push via HIP-4, not just its commodity markets under HIP-3. Critics see this as lobbying to curb fast-growing competitors, especially as both exchanges face CFTC and DOJ scrutiny over oil trading. Hyperliquid dismisses these as "baseless concerns," arguing that public blockchains will expose rather than enable manipulation. On Bloomberg’s report day, HYPE’s price fell sharply.

Broader regulatory shifts are ongoing. On May 14, the Senate Banking Committee passed the bipartisan CLARITY Act, sending it to the full Senate. The bill would create a federal framework classifying most digital assets as commodities under the CFTC, extending its derivatives authority to crypto spot markets. It also provides safe harbors for non-custodial developers (Section 604, "BRCA"). Originally aimed at prosecuting Tornado Cash and Samourai, Hyperliquid’s active on-chain operation makes it different. If developers are deemed "non-control persons" under Section 604, it could benefit. But it must also address provisions of Chapter 3, especially Section 301, involving securities law and BSA obligations. This includes exemptions for decentralized protocols, but if Hyperliquid is deemed a non-decentralized platform, Section 301(a)(2)(A) could revoke those exemptions. Without exemptions, and if regulators find it non-decentralized, Hyperliquid would face BSA obligations under Section 301(b)(d)(D).

During the May 14 hearing, some amendments to the bill were made, but the publicly available version does not include them. Some reports suggest amendments related to BRCA. Negotiations continue, with unresolved issues around illicit finance and BRCA, so the final bill could change before enactment.

Beyond BRCA and BSA, Hyperliquid hopes CFTC’s acceptance of perpetuals will extend to on-chain perpetual futures. This has not yet happened, and the future is uncertain, but founder Jeff Yan met with policymakers in Washington in mid-May, spending a week with the Hyperliquid Policy Center.

In summary: whether Hyperliquid can replicate offshore dominance in the US remains uncertain due to many regulatory hurdles.

The four dimensions summarized: Polymarket leads in oracle coverage and consumer UX, Kalshi in regulated US distribution and sports, HIP-4 in infrastructure and unified profit margins, with regulatory pathways possibly opening.

None of these three dominate all four dimensions. How each expands into other areas over the next 12-18 months will be key to the space’s future.

Risks

HIP-4 launched 25 days ago into a highly competitive market, and it’s clear it may struggle to become a truly valuable product. The following risks are most likely to determine whether HIP-4 can surpass internal niche features and scale.

Market Breadth Limitations

Remaining constraints are about coverage scope, not category diversity. HIP-4 and Polymarket both filter which markets go live; this is not a binary open/closed distinction. The difference lies in what each oracle layer can support. UMA’s optimistic oracle can resolve any real-world event, so Polymarket’s filtering is a product choice, not a technical limit; it can list nearly infinite long-tail events at will. HIP-4’s validators/oracles only resolve what they can clearly adjudicate, so their filtering is limited. Validators must actively choose to publish each market, which ensures quality but constrains throughput. Long-tail markets (e.g., niche elections, court rulings, controversial issues) require a second phase of permissionless deployment and broader oracle integration, which has not yet been released. Until then, HIP-4’s market catalog remains limited to what validators can resolve, constraining growth even if category coverage broadens.

Discovery Gap

Hyperliquid is a trading terminal, not a consumer product. Its outcome markets lack native browsing or social features. Hyperliquid relies on third-party frontends to fill this gap, similar to how trade.xyz extended HIP-3. Without this, HIP-4 will always be a niche for active traders, unable to reach Polymarket and Kalshi’s user bases. User discovery is also a risk, dependent on third-party development. Fortunately, the crypto space is highly developer-friendly.

Validator Centralization

Hyperliquid is run by 24 validators (soon 27), with a history including the March 2025 JELLY delisting incident, when the team froze a live market. This precedent is familiar to crypto-native users and forms the basis of trust. For binary, dispute-prone prediction markets, this is a real execution risk. The May 25 expansion makes this risk more concrete: standard market resolutions now depend on explicit validator votes, not external oracle posts. In practice, the validator management model pre-emptively mitigates this risk. Early standard markets (Fed rate, CPI, Euro final) are designed to be tightly coupled to a single authoritative source, ensuring deterministic resolution. More complex cases (macro revisions, disputed sports results, vague Fed statements) are markets where validators have motivation not to disclose. The closed-loop design eliminates third-party oracle disputes but concentrates resolution authority in validators, reflecting Hyperliquid’s understanding of trade-offs.

Regulatory Risks

Hyperliquid, like other DeFi platforms, operates in a regulatory gray area. The CLARITY Act offers a potential path to legality, but it’s not law yet. Until enacted, HIP-4 remains an offshore, unregulated venue. Lobbying by CME/ICE suggests this risk is real. Reports say these exchanges informed the CFTC and lawmakers that Hyperliquid’s decentralized environment risks manipulation and sanctions evasion, especially concerning commodity and oil contracts long dominated by CME and ICE.

On-chain analyst ZachXBT notes NYSE objected to Hyperliquid but not Polymarket, which ICE owns with a $2 billion stake. ICE’s stake may aim to slow Hyperliquid’s prediction market push via HIP-4, not just its commodity markets under HIP-3. Critics see this as lobbying to curb fast-growing competitors, especially as both exchanges face CFTC and DOJ scrutiny over oil trading. Hyperliquid dismisses these as "baseless concerns," arguing that public blockchains will expose rather than enable manipulation. On Bloomberg’s report day, HYPE’s price fell sharply.

Broader regulatory shifts are ongoing. On May 14, the Senate Banking Committee passed the bipartisan CLARITY Act, sending it to the full Senate. The bill would create a federal framework classifying most digital assets as commodities under the CFTC, extending its derivatives authority to crypto spot markets. It also provides safe harbors for non-custodial developers (Section 604, "BRCA"). Originally aimed at prosecuting Tornado Cash and Samourai, Hyperliquid’s active on-chain operation makes it different. If developers are deemed "non-control persons" under Section 604