Crypto Integration Accelerates in Major Prediction Markets
In 2025, Kalshi and Polymarket are making headlines by pushing deeper crypto integration into the U.S. prediction market landscape. Kalshi Klear, the clearinghouse for Kalshi, recently filed with the Commodity Futures Trading Commission (CFTC) to allow its Self-Clearing Members to fund accounts directly with cryptocurrency. This move aims to remove the need for converting crypto deposits into U.S. dollars, which has been a source of friction and extra fees for institutional users. By enabling direct crypto funding, Kalshi expects to attract a new wave of crypto-centric participants and boost market liquidity.
Currently, about 10% of deposits on Kalshi’s platform are made with cryptocurrency, but most accounts still rely on U.S. dollars. The proposed amendment, set to take effect in early October unless the CFTC intervenes, is expected to save time and costs for institutional members. This change is seen as a strategic response to competition from Polymarket, which operates as a blockchain-based exchange and is inherently crypto-centric. Both companies are intent on increasing crypto involvement to enhance user experience, increase liquidity, and reduce costs.
Regulatory Developments Shape the Future of U.S. Prediction Markets
The regulatory environment for prediction markets is also evolving. The appointment of a new chair for the CFTC has become a focal point for the industry. Brian Quintenz, a former CFTC commissioner associated with Kalshi, supports federal jurisdiction over sports event contracts rather than state-level regulation. His nomination has faced delays, partly due to lobbying efforts by the Winklevoss Twins.
Another key figure, Josh Sterling, a partner at Milbank LLP and former CFTC director, is being considered for the chair position. Sterling has represented Kalshi in legal cases, including a recent court victory that allowed the platform to offer contracts on presidential elections and sports events. At a gaming legislation conference in July, Sterling argued that courts should not decide whether market participants use contracts for speculation or hedging, comparing sports contracts to commodity derivatives like WTI oil futures. His appointment would likely be favorable for prediction markets, given his regulatory experience and advocacy for broader acceptance of these platforms.
Other candidates for the CFTC chair position have stronger backgrounds in cryptocurrency regulation rather than prediction markets. Mike Selig, chief counsel of the SEC’s Crypto Task Force, is noted for his crypto regulatory work but has limited expertise in prediction market litigation. The outcome of this appointment remains uncertain, but the industry is watching closely, as the decision will impact the regulatory landscape for years to come.
New Platforms and Investment Signal Industry Growth
The prediction market sector is seeing significant investment and innovation in 2025. On September 24, the decentralized prediction market platform Melee announced the completion of a $3.5 million seed round led by Variant, with participation from notable investors such as Meltem Demirors of CoinShares and Anatoly Yakovenko of Solana Labs. Melee is built on the Solana blockchain and is currently in an open waitlist phase.
The founding team of Melee includes experienced figures from the crypto and tech industries, such as Zen Llama, Maximilian (former strategic head at Ava Labs), and Kai (a software developer from Microsoft and Amazon). The management team also features a core systems engineer from Solana and quantitative traders from Invesco and SIG.
Melee offers permissionless market creation, allowing users to create fact- or opinion-based prediction markets on topics like politics, pop culture, sports, or technology trends without centralized approval. The platform is deeply integrated with the creator economy, enabling media creators to combine content with markets and earn up to 20% of transaction fees. This model provides a sustainable way for creators to monetize influence without reputational risk, a feature that sets Melee apart from other speculative tools.
Viral Growth and Social Integration Drive User Engagement
Melee’s viral growth strategy is inspired by meme coin issuance models, with built-in one-click sharing to platforms such as X (formerly Twitter) and Discord. This approach targets young, crypto-native audiences and positions Melee as an internet-native belief valuation platform. The platform’s pricing mechanism rewards early accurate predictors, ensuring that market prices reflect true belief valuations rather than blind following.
In 2025, cumulative trading volume across prediction markets exceeded $17.5 billion, with Polymarket and Kalshi dominating the space. Newer projects like Myriad and Opinion Labs are also growing rapidly. Myriad focuses on creator-embedded markets, while Opinion Labs offers permissionless markets on the Monad chain. Fireplace provides socialized Polymarket information flow, and all these platforms share similarities in openness and socialization.
Liquidity and Market Thickness Remain Key Challenges
A major challenge for prediction markets remains liquidity. Kalshi’s move to allow direct crypto funding is expected to address this issue by attracting more participants and enabling larger trades with tighter spreads. Greater liquidity improves prediction quality by incorporating diverse local knowledge and insights. Limited market size or capped investment can reduce incentives for deep information gathering and impair accuracy.
The integration of cryptocurrency is seen as a way to bolster liquidity and reduce transactional friction. Polymarket is also preparing to launch its own token, as indicated by a recent SEC filing mentioning “other warrants” and “rights to acquire another security.” This move is interpreted as preparation for re-entering the U.S. market and further increasing crypto involvement.
Regulatory Uncertainty and Political Maneuvering
The regulatory environment for prediction markets is in flux, with political maneuvering affecting key appointments and policy decisions. The outcome of the CFTC chair appointment will have significant implications for the industry. Supporters of prediction markets favor candidates like Josh Sterling, who have actively defended these platforms in court and have experience overseeing derivatives firms. Opponents may prefer candidates with stronger ties to cryptocurrency regulation but less direct involvement with prediction markets.
The debate over federal versus state-level regulation continues, with some advocating for broader acceptance of prediction markets under federal oversight. The industry is also watching for potential regulatory pushback, but recent filings and court decisions suggest a more favorable environment for innovation and growth.
Creator Economy and B2B Opportunities Expand Market Reach
Prediction markets are increasingly integrated with the creator economy, offering new ways for media creators to monetize their influence. Melee plans to launch an API for exploring B2B revenue opportunities, further expanding its market reach. The platform’s deep integration with content creation allows for unique market offerings, such as predicting movie box office results or esports outcomes.
This integration reflects a broader trend of socialization and openness in prediction markets. Platforms are competing to attract users by offering permissionless market creation, viral growth strategies, and innovative pricing mechanisms. The success of these models will depend on their ability to balance entertaining markets with credible data output.
Market Competition and Investment Trends
The competitive landscape for prediction markets is segmented, with different platforms focusing on various aspects of the market. Myriad emphasizes creator-embedded markets, Opinion Labs offers permissionless markets, and Fireplace provides socialized information flow. Melee’s innovation lies in its “viral market” model, which enables rapid user acquisition but also presents challenges in maintaining data credibility.
Investment in the sector is strong, with recent funding rounds reflecting confidence in the growth potential of prediction markets. The Clearing Company recently raised $15 million, while Melee’s $3.5 million seed round highlights its early-stage technology and market expansion capabilities.
Looking Ahead: The Evolving Role of Prediction Markets
As prediction markets continue to grow, their role in aggregating public sentiment and providing actionable forecasts is becoming more prominent. The integration of cryptocurrency, regulatory developments, and new platform models are driving the industry forward. The success of these efforts will depend on the ability to attract diverse participants, ensure market liquidity, and navigate regulatory challenges.
The industry is poised for further growth, with platforms like Polymarket, Kalshi, and Melee leading the way. The outcome of regulatory decisions and the continued integration of crypto will shape the future of prediction markets in the U.S. and beyond. As new platforms emerge and investment continues to flow into the sector, prediction markets are set to play an increasingly important role in the digital economy.
