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Kalshi, a US-regulated prediction market, will offer crypto price outcomes. The traders’ bets will be settled in dollars.
CFTC-regulated Kalshi is planning to introduce prediction markets for crypto price outcomes. The bets will be settled in U.S. dollars, similar to all existing markets on Kalshi. According to a company spokesperson, clients can bet on five cryptocurrency price outcomes.
Meanwhile, the rival platform Polymarket has around 40 markets for crypto-related outcomes. Still, it is not authorized to trade in the U.S. Kalshi is the only regulated prediction market platform in the U.S. and is now looking to tap into the cryptocurrency market, which has rebounded after a two-year slump.
What is Kalshi Inc?
Kalshi Inc. is a U.S.based financial exchange that offers event contracts on market outcomes. Kalshi uses market prices to determine probabilities about the state of the world. Moreover, In comparison to traditional futures or commodities markets, prediction markets tend to have a broader scope.
When looking at the broader horizon, prediction markets like Kalshi derive more of their value from the informational component of their prices. In addition, unlike traditional markets, some prediction markets phrase their markets as questions. Prediction markets usually settle using cash rather than physical product delivery or ownership of a company’s share.
Furthermore, prediction markets can answer various political questions, from electoral results to presidential appointments, treaty signings, bill passages, and even questions of war and peace.
Predicting economic indicators such as monthly or annual inflation, GDP growth rates, unemployment rates, and recession probabilities is another everyday use of prediction markets. In addition, prediction markets can predict various outcomes, including awards show results, scientific discoveries, and corporate policy outcomes. However, studies have found that the crowd’s wisdom outperforms individual experts due to market incentives and the ability of groups to counteract individual biases.
Kalshi’s Move Regarding Crypto
The move by Kalshi coincides with renewed investor interest in prediction markets, which for decades were relegated to a niche activity and academic hobbyhorse. Moreover, in December, Bitwise Investments researchers predicted that more than $100 million would be staked in prediction markets as they emerge as a new ‘killer app’ for crypto in 2024.
Furthermore, former U.S. President Donald Trump has shared screenshots of his favorable odds for retaking the White House on Polymarket, a crypto-based prediction market.
Kalshi’s decision to allow clients to bet on crypto follows the steps of its rival platform, Polymarket, which already lists nearly 40 markets on crypto-related outcomes. However, Polymarket is prohibited from doing business in the U.S. under a settlement with the Commodity Futures Trading Commission.
This leaves an opening for Kalshi, licensed by the CFTC, to gain business from U.S. traders who want to speculate on crypto price movements or hedge positions without buying or selling crypto. However, the CFTC ordered Kalshi to shut down after it attempted to list markets and asked which party would control each house of the U.S. Congress. Kalshi is currently fighting this order in court.
Summary
Kalshi, a CFTC-regulated financial exchange, plans to introduce prediction markets for crypto prices in the U.S. Clients can bet on five different cryptocurrency price outcomes settled in U.S. dollars. Kalshi’s rival platform, Polymarket, has already listed nearly 40 markets on crypto-related outcomes but is prohibited from doing business in the U.S. under a settlement with the Commodity Futures Trading Commission.
Disclaimer
The views and opinions stated by the author or any people named in this article are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading in stocks, cryptos, or other related indexes comes with a risk of monetary loss.
Adarsh Singh is a true connoisseur of Defi and Blockchain technologies, who left his job at a “Big 4” multinational finance firm to pursue crypto and NFT trading full-time. He has a strong background in finance, with MBA from a prestigious B-school. He delves deep into these innovative fields, unraveling their intricacies. Uncovering hidden gems, be it coins, tokens or NFTs, is his expertise. NFTs drive deep interest for him, and his creative analysis of NFTs opens up engaging narratives. He strives to bring decentralized digital assets accessible to the masses.
