Prediction Markets Surge: Polymarket and Kalshi’s U.S. Re-Entry, Valuations Soar, and the Regulatory Crossroads

Main Points :

• Polymarket has secured regulatory clearance from the U.S. Commodity Futures Trading Commission (CFTC) and acquired QCEX, enabling its relaunch in the U.S. after a multi-year hiatus.
• It’s seeking a valuation around US$9–10 billion, up sharply from ~US$1 billion just months ago.
• Kalshi is also in a new funding round aiming toward US$5 billion valuation, up from US$2 billion earlier in 2025.
• Trading volumes in August 2025 dropped for both platforms (to ~US$1 billion for Polymarket, ~US$875 million for Kalshi), even as investor interest and competition intensify.
• Legal and regulatory challenges are mounting: Kalshi faces lawsuits in states accusing it of unlicensed sports wagering; prediction markets in general are under debate over whether they are legitimate derivatives or disguised gambling.

Regulatory Re-Entry: Polymarket Comes Back to the U.S.

After having to restrict U.S. users in 2022 following regulatory scrutiny by the CFTC for offering unregistered event-based contracts, Polymarket has now obtained signals from regulators to relaunch in the U.S.

A critical step in this process was its acquisition, in July 2025, of QCEX (QCX + QC Clearing), a Florida-based derivatives exchange and clearinghouse that is CFTC-licensed. That gives Polymarket a regulated entity in the U.S. framework.

Additionally, the CFTC issued a “no-action” letter for certain reporting and record-keeping obligations related to event contracts, easing operational burdens that might otherwise slow or limit the U.S. re-entry.

Explosive Valuations: Polymarket & Kalshi

Polymarket is currently involved in funding discussions that could push its valuation between US$9 billion and US$10 billion. This is a dramatic leap from its valuation of around US$1 billion during its funding round in summer 2025.

Kalshi, which earlier this year raised US$185 million at a US$2 billion valuation, is now approaching a new funding round that could value it at about US$5 billion.

Market Activity: Volume Slump Despite Investor Hype

Even as the valuations rise and regulatory obstacles are being cleared, trading volumes in August 2025 tell a more mixed story. Polymarket’s trading volume dropped to around US$1 billion for the month, while Kalshi saw about US$875 million in volume.

This decline may stem from seasonal effects (summer), regulatory uncertainty, or cautious behavior among traders awaiting clearer rules and more stable offerings. Still, the slide has not dampened investor enthusiasm. The perception is that regulatory clearance will unlock much larger U.S. demand.

Competitive and Legal Landscape

Polymarket and Kalshi are no longer niche experiments—they are staking claims to become mainstream financial platforms or exchanges in the U.S.

• Polymarket’s backers include Founders Fund (led by Peter Thiel) and 1789 Capital (Donald Trump Jr.’s VC firm), which also joined as an advisor. These investors add not just capital but political/regulatory visibility.
• Kalshi has positioned itself as more fully compliant with U.S. regulation, being a CFTC-regulated exchange, focusing on event contracts, political outcomes, economic events, etc. Its collaborations (e.g. with Robinhood) give it access to retail investor base.

On the legal side:

• Massachusetts (and several other U.S. states) has filed lawsuits against Kalshi, alleging that some of its “event contracts” are, in effect, unauthorized sports wagering, lacking proper licensing, age restrictions, or consumer protections.
• The broader debate continues: on one side, supporters argue prediction markets are powerful tools to aggregate public sentiment and forecast real-world outcomes more accurately than polls; on the other, detractors view them as gambling by another name, especially if oversight, consumer protection, and transparency are weak.

Context and Recent Trends

To place this in broader perspective, several trends are crucial for readers building strategy or considering investments:

• Post-2024 U.S. election momentum: Prediction markets surged in attention during the 2024 U.S. presidential election, when Polymarket in particular made accurate forecasts during a time when many polls were off. This has attracted interest from both investors and regulators.
• Increasing regulatory clarity: The acquisition of regulated entities (QCEX, etc.), no-action letters from CFTC, and court rulings allowing certain contracts (e.g. political ones by Kalshi) are helping carve out a legal framework.
• Competition heating up: As Polymarket and Kalshi push forward, other players are entering or prepping to enter prediction markets: Coinbase is reportedly exploring its own prediction markets platform; others like Crypto.com, Underdog, etc., are either launching or expanding offerings.
• Valuation inflation tied to growth and legal risk: The dramatic increases in valuation reflect not just user growth but also perceived value of obtaining regulatory “permission to operate” in the U.S., which has been the biggest hurdle. But those valuations carry risk: legal threats, state-level restrictions, regulatory shifts, and possibly public backlash if prediction markets are seen as gambling.

Where Blockchain Comes In

For people interested practically in blockchain and crypto:

• Polymarket uses blockchain-based settlement systems (e.g. USDC, smart contracts), which allow pseudonymous participation globally (outside U.S. regulated regions). But its U.S. re-entry strategy involves acquiring regulated entities, so there is a hybrid model: blockchain for global and non-U.S. parts, regulated infrastructure for U.S. operations.
• Prediction markets are one of the more direct crypto/blockchain use-cases combining finance, data, and decentralized information aggregation. They can function as “signals markets” potentially useful for forecasting—not just in politics, but also markets, climate, policy, business trends.
• The need for compliance (KYC, AML, licensing) is strong in regulated jurisdictions. So while blockchain allows “permissionless” or decentralized design, to scale and monetize legally (especially in the U.S.), compliance plus hybrid models (part blockchain, part regulated entity) seem necessary.

Risks and Uncertainties

• Regulatory risk remains high. State laws may differ (licensing, gambling laws); court cases may change what is allowed. For Kalshi especially, state lawsuits are already underway.
• Consumer protection / ethical concerns: issues around whether people understand risks, whether contracts are being used responsibly, whether there are addiction risks (gambling-style).
• Volume fluctuations show that investor interest alone doesn’t guarantee sustained use. If volumes stay low or decline, monetization may lag.
• Competition: As more players enter (traditional financial firms, exchanges), differentiation will matter (e.g. trust, legality, UX, regulatory clarity).

Graph / Figure Suggestion

This graph would show Polymarket’s valuation rising from ~US$1B in June → seeking US$9-10B by September, while its monthly volume dropped to ~US$1B in August; similarly, Kalshi’s valuation rising from ~US$2B → ~US$5B, but its volume falling to ~US$875M in August.

Conclusion

Polymarket and Kalshi are emblematic of a new frontier in the intersection of blockchain, finance, prediction, and regulatory policy. For those looking for opportunities in crypto or alternative revenue sources, prediction markets are becoming very interesting: they combine financial incentives, data forecasting, and crowd psychology. The biggest unlocked value seems to lie in U.S. regulatory permission—once platforms have cleared that hurdle, they may scale dramatically.

However, the path forward is not certainty. Legal, regulatory, ethical, and competitive risks are real. For investors, developers, or users, the advice would be:

1. Watch carefully how Polymarket rolls out its U.S. operations: which contracts are allowed, how compliance is managed, what fees and UX look like.
2. For blockchain applications, building tools or layers that help with regulation (e.g. compliance, identity, responsible usage) may offer product or service opportunities.
3. Be cautious about valuation hype: while investor terms suggest high valuations, sustaining them depends on both growth in volume and stable regulatory environment.
4. Keep an eye on state-level legal actions (for Kalshi and others), as U.S. is a patchwork of laws in gambling, derivatives, and fintech regulation.

For those searching for new crypto assets or projects: prediction market platforms or tokens connected to them (if any) might be interesting, but only if legal risk is well managed, transparency is high, and there is a path to monetization.