Crypto-based prediction markets set to explode as regulators narrow their focus on Polymarket

Prediction markets are about to get all shook up. 

A new entrant to the world of US-election betting is launching next week, and its design may challenge Polymarket’s dominant position.  

For the unaware, Polymarket is a crypto-based prediction market that lets traders bet on the outcome of a wide variety of real-world events. The topics range from who’ll win November’s US presidential election, to the length of former FTX exec Caroline Ellison’s prison sentence (her sentencing’s set for Tuesday), to whether a new “Grand Theft Auto” trailer will be released before October 4. 

Polymarket’s been on a rollercoaster of a year, seeing a record $473 million in trading volume in August as its number of active traders grew more than 40% month over month. And while Polymarket has non-crypto competitors like Kalshi and PredictIt, up until now it’s dominated the broader market overall and crypto-based prediction markets specifically.  

That’s about to be challenged. 

Wintermute, a crypto-focused algorithmic trading firm, said yesterday that it plans to launch its own elections betting market next week. While it will be limited (at least at first) to the outcome of November’s Trump-vs.-Harris matchup, the company looks to have more then one ace up its sleeve. 

Unlike Polymarket, which lives on the ethereum layer-2 polygon, Wintermute said its market will be accessible across ethereum, as well as the layer-2 blockchains base and arbitrum. That could supercharge Wintermute’s effort to attract liquidity to the new market, as traders will be more easily able to bet on their chain of choice. Plus, Wintermute said its events-contract tokens can be listed on both centralized and decentralized exchanges — “a feature not seen in other existing prediction markets which often restrict token usage in DeFi applications or limit listings on trading venues.” 

Wintermute’s a major player in the world of crypto, and its importance as a market maker has only grown since the 2022 collapse of FTX. According to reporting from The Information, that year the firm booked $1.05 billion in revenue and $582 million in profit. Still profitable, Wintermute was considering a $100 million share sale in July. 

Wintermute’s timing comes at a pivotal moment in the world of prediction markets. Regulators at the Commodity Futures Trading Commission have moved to crack down on markets that cover US elections, arguing that they threaten voters’ confidence in election results. 

Despite an initial win, Kalshi, a US-based prediction market serving US customers, was just forced back to court over its right to list election-related contracts. Now, according to Bloomberg, the CFTC may be fixing its regulatory gaze back on Polymarket. 

“If anyone, Polymarket or otherwise, conducts themselves in a way that breaks the law, we will use our civil enforcement authority to make sure that conduct stops,” Bloomberg reported CFTC Chair Rostin Behnam as saying this week.

And, notably, just as Wintermute swoops in with its own market.