Since the US election, prediction markets have gained popularity for their ability to "beat the polls." Compared to traditional news, prediction markets require participants to wager real money, earning them a reputation as a superior and more authentic source of information. They are gradually replacing media and institutional surveys as the new barometer of public opinion. Capital is also rapidly catching on: Polymarket not only secured tens of millions of dollars in investment from Donald Trump Jr., the eldest son of President Trump, but he will also join Polymarket's advisory board. Meanwhile, Kalshi completed a $185 million Series C funding round led by Paradigm in June, surging its valuation to $2 billion and becoming synonymous with institutional trust.
Against this backdrop, on August 27th, The Clearing Company announced the completion of a $15 million seed funding round, led by USV and participated by prominent institutions such as Coinbase Ventures. Even more striking is the fact that its core team members hail from both Kalshi and Polymarket—CEO Toni Gemayel previously served as Head of Growth for both of these rival platforms. The Clearing Company's goal is to combine the openness of decentralization with the credibility of regulatory compliance to create a next-generation prediction market that is both accessible to retail investors and favored by regulators.
Polymarket and Kalshi: Decentralized "gray players" vs. institutional "gold standard"
In the prediction market, Polymarket and Kalshi represent almost two completely opposite paths.
Polymarket is the most glaring contradiction in the prediction market: it is both the leader in the field and the "gray player" with the deepest compliance difficulties. In terms of scale and popularity, it is undoubtedly a phenomenal platform in the industry. The platform's TVL has reached 140 million US dollars, exceeding the total of the top ten platforms in the field; during the 2024 US election, Polymarket's cumulative trading volume reached 3 billion US dollars, and the amount of bets exceeded 4 billion US dollars, far surpassing Kalshi. Even in daily trading data, it ranks first: in the past three months, Polymarket's average daily trading volume was about 40 million US dollars, while Kalshi was only 20 million US dollars. Although the gap has narrowed, its leading position remains solid. With its highly open architecture and global expansion pace (such as Singapore, UAE and other markets), Polymarket has formed a huge lead in user scale and market depth.
However, its biggest weakness is its regulatory shadow. As early as 2022, Polymarket was sued by the CFTC for offering unregistered over-the-counter binary options. The company paid a $1.4 million fine and "promised" to withdraw from the US market. However, on-chain data shows that approximately 25% of its traffic still comes from US users, and circumventing restrictions has become commonplace. Troubles intensified after the 2024 election, when the US Department of Justice and the FBI launched a direct investigation, even raiding the home of founder Shayne Coplan, suspecting him of manipulating market results and misleading US users. Even after acquiring the CFTC-licensed derivatives exchange QCEX and attempting to re-enter the US market as a compliant entity, it still faced regulatory friction at the state level (such as in Nevada and New Jersey). Furthermore, while the DAO governance model guarantees democracy, it can also lead to institutional instability, raising concerns among institutional investors.
In stark contrast, Kalshi chose a completely different path—breaking through regulatory barriers head-on. In 2023, Kalshi was targeted by the U.S. Commodity Futures Trading Commission (CFTC) for launching election contracts. Within a few months, its approval process went from "self-certification" to "determination of suspected illegal gambling," and everything in between. However, it didn't stop there, instead engaging in a protracted legal battle with regulators. Ultimately, in October 2024, it won a ruling from the D.C. Circuit Court of Appeals, becoming the first prediction market in the United States to be granted legal status for election contracts. This victory not only secured Kalshi a compliant "entry ticket" but also earned the trust of institutions and mainstream media in the domestic U.S. market.
With this breakthrough, Kalshi became an officially approved prediction platform by the CFTC and collaborated with Nasdaq on market monitoring to ensure transparent and compliant trading. Its operating model is relatively centralized: all contract creation and rule adjustments are determined by the core team. This model sacrifices some of the flexibility of decentralization but provides greater peace of mind for institutional investors. The platform uses the US dollar as its primary trading currency, lowering the barrier to entry for traditional investors and further solidifying its position as the "gold standard" on Wall Street.
However, this highly compliant and centralized approach also presents Kalshi with another challenge: how to maintain stability while attracting crypto-native users. To this end, it recently appointed crypto influencer John Wang as "Head of Crypto" in an attempt to build bridges with the Web3 community. However, the success of this initiative remains uncertain. In a sense, Kalshi represents the "institutionalist" side, emphasizing compliance and institutional trust as its core strengths. However, it currently lags behind Polymarket in terms of flexible innovation and decentralized community building.
The Clearing Company: A hybrid between compliance and decentralization
If Polymarket represents the ultimate attempt at decentralization and Kalshi represents the institutional "gold standard", then The Clearing Company has found a "hybrid path" between the two.
Co-founded by core members who previously worked at both Polymarket and Kalshi, the company is well-versed in the strengths, weaknesses, and pain points of both. Therefore, its core strategy is "compliance by design"—rather than patching vulnerabilities afterward, compliance requirements are embedded into the protocol architecture. When users create permissionless prediction markets on-chain, smart contracts automatically run KYC/AML processes, ensuring that all fund flows are auditable and compliant with anti-money laundering regulations. This ensures transparency while also providing regulatory interfaces. For example, Polymarket relies on UMA's Optimistic Oracle to verify prediction results, while The Clearing Company directly integrates its oracle into its compliance framework, integrating verification into audit and regulatory interfaces, thereby reducing friction for institutional market entry. Compared to Polymarket's "do it first, talk it over later" approach and engaging with regulators later, The Clearing Company proactively mitigates legal risks from the outset. Unlike Kalshi's highly centralized approach, The Clearing Company maintains on-chain openness and room for user innovation.
The Clearing Company also chooses a middle path when it comes to liquidity mechanisms. Rather than relying on a pure order book model or a full-fledged AMM, it incorporates algorithmic market making to enhance liquidity. This approach makes it easier for institutional investors to enter while maintaining the liquidity flexibility required by decentralized markets. In other words, it addresses the stability requirements of regulated markets while preserving the flexibility of the crypto-native ecosystem.
More crucially, it emerged at a critical institutional turning point. In 2025, the United States passed the CLARITY Act, which uniformly classified cryptocurrencies as commodities, laying the legal foundation for the legalization of prediction markets. Simultaneously, the GENIUS Act provided a clear payment and settlement framework for stablecoins, enabling The Clearing Company to directly clear using compliant stablecoins. This "institutional dividend," combined with its inherent design, enabled it to attract institutional capital, lower the barrier to entry for retail investors, and provide a standardized template for market creation.
This is the true value of The Clearing Company: it meets the compliance needs of institutions without sacrificing decentralized openness. For prediction markets, this may be the hybrid solution needed for the next phase of expansion—strike a balance between compliance and innovation, thereby propelling the entire industry into a new cycle of development.
Summarize
The prediction market is entering a fiercely competitive phase. Beyond established players like Polymarket and Kalshi, new players are popping up at a rapid pace. After securing $18 million in Series A funding, Novig touted itself as "America's leading sports prediction market," circumventing gambling regulations through raffles to capture the sports market. FanDuel, in partnership with the Chicago Mercantile Exchange (CME), has aggressively entered the market, ushering in a cross-border integration between traditional finance and prediction markets. On-chain projects like Flipr and Hedgemony are also emerging. The former embeds prediction transactions directly into the X (Twitter) timeline, attempting to create "socialized prediction," while the latter uses AI-driven algorithms to focus on global news and political sentiment, forging a differentiated approach.
With the influx of more capital, compliance incentives, and innovative models, the prediction market stands at a turning point: it must not only win the trust of regulators in the face of competition, but also firmly grasp the hearts and minds of crypto-native users while continuously expanding into the mainstream market. The next round of competition may determine who can truly transcend the boundaries of "niche products" and grow into the new infrastructure of the global financial market.
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