Welcome back to The Breakdown. Today we’ve called in David Canellis from the Empire newsletter to give us the latest on the prediction market battle between Kalshi and Polymarket.

Notwithstanding the dominance of bitcoin, crypto has proven itself to be the exact opposite of a winner-takes-all space. In fact, the question needs to be: Can you imagine if FTX was the only CEX in crypto? Let’s get into it.

Breeding competition

I’m not here to tell you that crypto only has room for one prediction market app. 

But that’s what both Polymarket and Kalshi are projecting, even subconsciously.

It’s not facetious to point out that both platforms essentially look exactly the same, with the UX designs of the individual markets effectively mirror images of one another.

While Polymarket has arguably the best feature — a forum under every market — you can find pretty much the same markets on either platform, even if with slightly different wording. 

Still, there are exceptions: There are no markets on Kalshi for whether Taylor Swift is due for an impending pregnancy, for example, whereas on Polymarket there are two (Will Taylor become pregnant this year (10%), or pregnant before she’s married (21%).

Meanwhile, Polymarket bettors give the platform a 95% chance to relaunch for US users before the end of December. Unsurprisingly, the same market doesn’t appear on Kalshi. 

“I think in five to 10 years, we’re probably both going to look back at this and think that we’re going to be grateful for this dynamic,” Tarek Mansour, Kalshi co-founder and CEO, told Yano on the Empire podcast this week.

“I think it’s a bit like when Tom Brady talked about Manning, and he would talk a lot about how at the time it was so intense, but in retrospect both of them achieved significantly greater heights because they existed.”

So, it’s like how Messi and Ronaldo might never have reached their pinnacles had they not had a rivalry that pushed them to their limits. 

Which, in the case of Polymarket vs. Kalshi, has so far amounted to Mansour copping to Kalshi employees “ask[ing] some of our longstanding affiliates to post some of the memes” suggesting Polymarket and CEO Shayne Coplan had engaged in dodgy illegal behavior around the time of their FBI raid last November. 

“It pushes you, like, we do something and they have to one-up us, and they do something and we have to one-up them, that sort of thing,” Mansour said. 

He added that the net result is that prediction markets are legal in the US now. And with that, more mainstream awareness, more markets, more liquidity, more volume.

“So if you’re a customer and you’re sitting around, you’re like, ‘This is great, these two gladiators in the arena are making this way better, way bigger, way more fun, and so on. In some ways, I think it’s interesting, I think it's net good overall.”

Here’s the thing. If you were to directly compare the stated missions of both Mansour and Coplan, both would simply boil down to “make markets for everything and find the truth in the outcomes.”

For that, Kalshi currently has the lead on Polymarket in terms of open interest and some other metrics, even if anecdotally I seem to see more Polymarket data out in the wild.

But if Kalshi’s headstart on serving US users means anything at all, there’s almost no question that when Polymarket does roll out stateside, that the gap will close significantly. Add in ICE’s $2 billion investment ($1 billion liquid) and it's clearly Polymarket’s game to lose.

This doesn’t account for clear discrepancies in the types of markets that users of both apps gravitate towards right now.

So far, Kalshi seems to be the prediction market venue for sports betting, with about half of its $218-million open interest tied to sports markets (twice that of politics), according to Dune’s dashboard. 

Sports markets otherwise make up only around 5% of Polymarket’s $170-odd open interest, with politics historically attracting the most for the platform, per Blockworks Research data. I would expect that to change, considering how popular sports betting is in the US (10% of US adults have bet on sports online, equivalent to around 26 million persons).

What happens to the user experience when both Polymarket and Kalshi exist at the same time, on the same playing field? Kalshi may have had regulatory approval earlier, but using Mansour’s metaphor, either or both platforms risk stagnanting without actual competition, outside of the battle for influencer attention.

Here’s my pitch: Lean into something. We don’t need two “everything apps” for prediction markets. We just need one button-down venue for serious bets on sports and elections, and another on more absurd wagers like celebrity pregnancies, deadly submarine accidents, and modern warfare. 

Gambling is all about finding your edge. Kalshi and Polymarket still need to decide what theirs is going to be.

— David Canellis 

_{Brought to you by:}

Stake Solana Directly from Your BitGo Wallet — Now with Marinade Native!

Good news, BitGo users — you can now stake Solana (SOL) directly from your BitGo wallet with Marinade Native, a non-custodial staking solution designed for both security and maximum rewards. No extra steps, no compromises — just seamless staking while keeping full control of your assets.

Marinade Native offers unique advantages: its Stake Auction Marketplace lets top validators bid for your stake, optimizing for higher rewards, while Protected Staking Rewards help safeguard your earnings from validator underperformance. Secure, automated, and built for both individuals and institutional customers.

Learn more about staking Solana with BitGo & Marinade.

_{Brought to you by:}

Build your crypto portfolio with Kraken and earn a bonus while you do it.

Kraken is rewarding all eligible deposits of $1,000 or more made in October with a tiered USDG reward — starting at 1%, rising to 2% if the full deposit pool of $500M is reached.

There’s no cap on your deposit. No fee to participate. And no limit on the reward you can earn.