Introduction

Prediction markets have moved from niche financial tools to mainstream platforms. In 2025 alone, trading volumes across the two largest players, Polymarket and Kalshi, exceeded $12 billion, driven by markets on elections, sports, and macroeconomic events.

If you’re choosing between them, the core primary difference is infrastructure, but even that is converging. Kalshi runs on traditional financial rails, with USD deposits and a brokerage-style interface. Polymarket is crypto-native, built on blockchain and settled in USDC. Both are now CFTC-regulated and allow trading on real-world outcomes, but they arrived there through very different paths, and those differences still shape fees, access, and user experience.

By late 2025, Kalshi accounted for roughly 60% of total prediction market volume, a sharp reversal from a year earlier when Polymarket held about 90%+. The shift reflects Kalshi’s rapid expansion into sports contracts and Polymarket’s delayed U.S. relaunch after years of regulatory uncertainty.

What Are Prediction Markets?

Before comparing platforms, it helps to understand how prediction markets work.

How Event Contracts Work

Prediction markets let users trade contracts tied to future events. Each contract is binary (“yes” or “no”), and priced between $0.01 and $0.99.

Prices reflect the market’s collective estimate of probability. A contract trading at $0.65 implies a 65% chance of that outcome. If you buy a “yes” contract at $0.65 and the event occurs, it settles at $1.00, giving you a $0.35 profit. If the event doesn’t occur, the contract settles at $0 and the full amount is lost.

Unlike sportsbooks, prediction markets don’t bet against users. They match buyers and sellers, more like a stock exchange than a casino. There’s no built-in house edge, though platforms charge fees for facilitating trades.

Why Prediction Markets Matter

Prediction markets are valued as information tools. Because participants risk real money, prices can reflect collective beliefs more efficiently than polls or commentary. When Polymarket odds on Joe Biden withdrawing from the 2024 presidential race jumped weeks before the announcement, it highlighted how markets can surface signals ahead of news cycles.

Institutions have started to pay attention. Kalshi provides probability data to CNN and CNBC, and Google has announced plans to integrate prediction market data into Google Finance. The NHL has partnered with both Kalshi and Polymarket. By late 2025, both companies had valuations above $9 billion, with Kalshi reaching $11 billion.

However, prediction markets are not infallible. A 2025 Vanderbilt University study found accuracy varied widely across platforms, and markets can exhibit herd behavior. They are best viewed as informative signals, not definitive forecasts.

Learn more about how prediction markets work.

Polymarket Overview

Polymarket launched in 2020 as a crypto-native prediction market built on Ethereum, later migrating to Polygon to reduce costs and latency. All trades use USDC, a dollar-pegged stablecoin. After a 2022 regulatory settlement forced it to block U.S. users, Polymarket operated internationally until re-entering the U.S. in late 2025 by acquiring a CFTC-licensed exchange.

Platform History and Growth

Polymarket’s growth has been uneven. In January 2022, the CFTC fined the platform $1.4 million for operating as an unregistered derivatives exchange, forcing it to exit the U.S.

International expansion followed. Trading volume rose from $73 million in 2023 to roughly $9 billion in 2024, driven largely by the U.S. presidential election. The Trump vs Harris race alone drew more than $3.3 billion in wagers.

In July 2025, the DOJ and CFTC closed investigations without new charges. That month, Polymarket announced its $112 million acquisition of QCEX, enabling a U.S. return. In October 2025, Intercontinental Exchange invested up to $2 billion, valuing Polymarket at about $9 billion.

U.S. Regulatory Status

Rather than pursue licensing from scratch, Polymarket acquired QCEX, which already held CFTC approvals as a Designated Contract Market and Derivatives Clearing Organization. In November 2025, the CFTC granted Polymarket an Amended Order of Designation, allowing it to operate the exchange under federal oversight.

Public access has been slow. As of January 2026, the U.S. platform remains invite-only, and the company missed its goal of launching broadly before the end of the 2025 NFL season.

Key Features

Polymarket’s global platform charges no trading fees, with costs limited to blockchain gas fees and market spreads. The planned U.S. platform will charge a flat 0.01% per contract.

The platform is known for rapid market creation, often listing markets within hours of breaking news. Categories include politics, crypto, sports, economics, and pop culture, with especially deep liquidity in political markets.

Market resolution uses the UMA decentralized oracle system, where token holders vote on outcomes. While transparent, this process has occasionally produced disputed resolutions, including a December 2025 market tied to Polymarket’s own U.S. launch.

Kalshi Overview

Kalshi took a compliance-first approach. Founded in 2018, it spent two years working with the CFTC before launching in 2021 as the first prediction market approved as a Designated Contract Market from inception.

Platform History and Regulatory Framework

Kalshi operates under direct CFTC oversight, with every market reviewed before listing. In 2024, its clearing affiliate, Kalshi Klear LLC, became a registered Derivatives Clearing Organization.

That structure proved decisive in court. When the CFTC tried to block Kalshi’s political markets in 2024, a federal judge ruled the agency had exceeded its authority, allowing election contracts to proceed.

In December 2025, Kalshi raised a $1 billion Series E at an $11 billion valuation. The company reported sixfold volume growth over six months and annualized revenue between $600 million and $700 million.

Key Features

Kalshi’s interface resembles a traditional brokerage, with market and limit orders, order books, and historical charts. Users can fund accounts with USD via ACH, debit card, wire transfer, or USDC through Coinbase, without needing a crypto wallet.

The platform lists more than 3,500 markets across sports, economics, weather, politics, and corporate earnings. Sports now account for over 75% of volume, particularly NFL, NBA, and college football.

Kalshi also pays interest tracking treasury rates on uninvested cash balances, and relies on institutional market makers, which generally results in tighter spreads and better execution.

Head-to-Head Comparison

With both platforms now under CFTC oversight, differences center on infrastructure, fees, access, and user experience.

Regulatory History and Approach

Kalshi built compliance from the ground up and has never faced federal enforcement action. Polymarket, by contrast, re-entered the U.S. by acquiring an already-licensed exchange, accelerating compliance but delaying broad access. As of early 2026, most U.S. users still cannot trade on Polymarket.

State-level challenges affect both. Several states argue that sports-related event contracts constitute gambling under state law. Courts have issued conflicting rulings, and the legal landscape remains unsettled heading into 2026.

Fee Structures

Fees are one of the clearest differences.

Kalshi charges about 1% in effective fees: $0.01 per contract traded and $0.01 per winning contract settled. A $100 position costs roughly $1.20.

Polymarket’s global platform charges no trading fees and takes 2% of net profits. The U.S. platform will charge 0.01% per contract, making the same $100 position cost about $0.01.

For infrequent traders, the difference is modest but for active, it is material.

Funding and Deposits

Kalshi primarily uses standard banking rails but also enabled stablecoin funding via Zero Hash. Deposits and withdrawals resemble a typical brokerage experience, with ACH transfers settling in one to five business days.

Polymarket’s global platform requires USDC in a crypto wallet, which adds friction for non-crypto users. Fiat on-ramps exist but include additional fees. The U.S. platform offers a more conventional fiat flow, though details are not fully clear.

Market Selection and Variety

Kalshi dominates sports and calendar-driven economic markets. Polymarket has historically led in politics and moves faster on breaking news and niche topics, particularly in crypto-related markets.

All U.S. markets on both platforms must now meet CFTC approval standards, which may narrow Polymarket’s historical speed advantage domestically.

User Experience

Both interfaces are intuitive and very similar to each other. Kalshi feels familiar to traditional traders, with list-based dashboards, charts, and native mobile apps. Polymarket follows Web3 conventions, using wallet connections and on-chain transaction records. Each appeals to different user backgrounds.

Trading Considerations

Getting Started

Opening a Kalshi account typically takes about ten minutes, including identity verification and bank linking. Polymarket’s global platform requires a wallet, USDC, and basic crypto knowledge. The U.S. Polymarket onboarding process will likely resemble the Kalshi onboarding process.

Risk Management

Event contracts are all or nothing. A single incorrect outcome results in a total loss for that position. Many experienced traders limit exposure to 1-5% of capital per market and diversify across unrelated events.

Understanding Resolution

Kalshi resolves markets centrally using predefined sources. Polymarket’s global platform relies on decentralized oracle voting. The U.S. Polymarket platform uses resolution standards aligned with CFTC requirements. Reviewing resolution criteria before trading is essential.

Tax Implications

Current Treatment

The IRS has not issued specific guidance. Most practitioners recommend reporting net profits as “Other Income” on Schedule 1 of Form 1040. Kalshi issues 1099-MISC forms for users with more than $600 in winnings; Polymarket does not.

Key Considerations

Whether prediction market losses are treated as gambling or investment losses remains unclear. The One Big Beautiful Bill Act, effective in 2026, limits gambling loss deductions to 90% of winnings, but its applicability to prediction markets is unresolved. Recordkeeping is important.

Legal Landscape and State Restrictions

Federal vs. State Authority

Platforms argue that CFTC oversight preempts state gambling laws. States counter that sports-related contracts are functionally indistinguishable from sports betting. Courts have issued mixed rulings, and appeals are ongoing.

Current Restrictions

Kalshi is restricted or challenged in multiple states, including New Jersey, Nevada, New York (sports), and Alabama. Polymarket has not yet faced the same level of enforcement, but similar challenges are likely as access expands and volume grows.

How Prediction Markets Differ from Sports Betting

Structural Differences

Sportsbooks set odds and bet against users, earning a margin. Prediction markets match users peer-to-peer and charge transaction fees, with prices reflecting market sentiment rather than house calculations.

Legal Implications

This structural distinction underpins claims of federal preemption, but courts have yet to settle the issue definitively.

Integrity Concerns

Leagues have raised concerns about manipulation, particularly in player or broadcast-related markets. Responses vary, with some leagues opposing prediction markets and others partnering with them.

What Platform Should You Choose?

Kalshi Makes Sense If You:

• Prefer traditional bank funding

• Want immediate U.S. access

• Favor a brokerage-style interface

• Trade sports, economics, or weather markets

• Value interest on idle cash

Polymarket Makes Sense If You:

• Are comfortable with crypto wallets

• Prioritize very low fees

• Prefer crypto rails and being on-chain

• Focus on political or niche markets

• Can wait for broader U.S. access or trade internationally

Many active traders use both platforms, choosing based on pricing and liquidity. As probabilities often diverge between platforms, many traders now engage in arbitrage to capture these discrepancies.

Crypto Holdings and Prediction Markets

Using Polymarket requires USDC, which can trigger taxable events when converting from other crypto assets. Some traders use Bitcoin and crypto-backed loans to access liquidity without selling holdings, though this introduces interest costs and liquidation risk. Secure platforms like Arch allow users to do this quickly at leading rates.

Future of Prediction Markets

Industry Trajectory

Weekly volumes are now in the billions. Projections of trillion-dollar markets exist but should be treated cautiously.

Regulatory Outlook

State-level litigation will likely accelerate in 2026. IRS guidance could clarify tax treatment, but timelines are uncertain.

Platform Competition

Polymarket’s fee advantage could reshape the market if U.S. access scales. Kalshi’s established user base and sports dominance provide counterweights. New entrants will continue to come and add pressure. Expect incumbents to launch their own prediction market platforms, alongside many highly specialized, category-specific virtualized markets.

Conclusion

Both Polymarket and Kalshi are now CFTC-regulated. Kalshi offers immediate U.S. access, traditional funding, and a familiar trading experience, with strength in sports markets. Polymarket offers lower fees, crypto-native infrastructure, and strong international liquidity, but limited U.S. access which is coming soon. State-level legality and tax treatment remain unresolved for both. Recordkeeping and risk discipline matter more than platform choice.

Frequently Asked Questions

Is Polymarket legal in the United States?

Yes, but public access remains limited to an invite-only waitlist as of January 2026.

Is Kalshi available in all 50 states?

Kalshi operates under federal CFTC regulation, but faces restrictions in several states due to ongoing legal disputes over whether federal law preempts state gambling regulations. The platform is explicitly unavailable in New Jersey, Nevada, New York (for sports markets), and Alabama. Additional states have issued cease-and-desist orders or filed lawsuits challenging Kalshi's operations.

Which platform has lower fees?

Polymarket charges significantly lower fees. The global platform has zero trading fees, and the U.S. platform charges 0.01%. Kalshi charges approximately 1% in effective fees. On a $100 position, this translates to roughly $0.01 (Polymarket) versus $1.20 (Kalshi)—a 100x difference that matters significantly for active traders.

How are prediction market winnings taxed?

The IRS has not issued specific guidance on prediction markets. Most tax professionals recommend reporting net profits as "Other Income" on Schedule 1 of Form 1040. Kalshi issues 1099-MISC forms for winnings over $600. Polymarket does not issue tax forms, requiring users to track their own transactions. The tax treatment is the same regardless of which regulated platform you use.

What's the difference between prediction markets and sports betting?

Prediction markets are peer-to-peer exchanges under CFTC oversight. Sportsbooks are state-regulated and bet against users.

Can I use both Polymarket and Kalshi?

Yes. Many traders do.

What happens if I'm in a state where the platform is restricted?

Circumventing restrictions usually violates terms and can carry legal risk.

About Arch

Arch is building a next-gen wealth management platform for individuals holding alternative assets. Our flagship product is the crypto-backed loan, which allows you to securely and affordably borrow against your crypto. We also offer access to bank-grade custody, trading and staking services.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrency investments are volatile and risky. Always conduct your own research before making investment decisions.