Two of the biggest competitors in the prediction market space have reached an agreement on one thing. On March 23, Fortune magazine reported that Adhi Rajaprabhakaran and Noah Zingler-Sternig, early employees of Kalshi, are launching a venture capital fund called 5c(c)Capital, aiming to raise up to $35 million to focus on investing in prediction market startups. The fund is expected to complete its first round of funding next month. This fund has already secured investment from Kalshi CEO Tarek Mansour and Polymarket CEO Shayne Coplan, a rare collaboration between the CEOs of these two leading platforms, making it a landmark event in the prediction market space. In addition to the CEOs of Kalshi and Polymarket, early backers of the fund include venture capital giant Marc Andreessen (through the Moneta Luna fund), Ribbit Capital founder Micky Malka, and former Multicoin Capital co-founder Kyle Samani. Marc Andreessen, co-founder of a16z, and Kyle Samani, who announced his resignation from Multicoin Capital on February 5th, highlight the fund's uniqueness and importance. Elena Silenok, founder and managing partner of Moneta Luna, expressed confidence in Adhi's investment capabilities. Kyle stated that the next few years are crucial for building infrastructure around prediction markets. The competition between Kalshi and Polymarket is no secret. The former follows a CFTC-compliant path, while the latter adopts a crypto-native model. The two platforms have long been at odds over user acquisition, market share, and even regulatory competition. However, when Klashi's early employees sought funding, both CEOs appeared on the investor list together. The logic behind this move is not complicated. The explosive growth of the prediction market has exceeded everyone's expectations: Kalshi's valuation has soared from $2 billion in June 2025 to $22 billion in March, and Polymarket received a $2 billion strategic investment from Intercontinental Exchange in October 2025, now valued at $20 billion. However, the industry's growth bottlenecks are becoming increasingly apparent, such as insufficient market maker depth, a lack of index products, and fragmented infrastructure, none of which can be solved by a single platform. Perhaps, in the eyes of the two CEOs, supporting a fund focused on ecosystem infrastructure is more valuable than continuing to cannibalize each other in the existing arena. Rather than fighting alone, it's better to work together to expand the pie. The name 5c(c)Capital comes from Section 5c(c) of the Commodity Exchange Act, which is titled "New Contracts, New Rules".The fund's official website explains that this name reflects its core philosophy: sustained innovation stems from the combination of new ideas and standardized regulation. Multiple media outlets have described this fund as the first dedicated VC fund in the history of prediction markets. According to its fundraising documents, the fund plans to invest in approximately 20 companies over the next two years, covering market makers, index design tools, and other infrastructure projects surrounding the event contract ecosystem. Market makers are the core of liquidity in prediction markets. Currently, the open interest in prediction markets has reached $924 million, but most contracts still face problems such as excessive bid-ask spreads and insufficient market depth. Professional market makers can provide continuous quotes for various event contracts, reducing user transaction costs and improving market efficiency. Index design tools are key to upgrading prediction markets from "single-event betting" to composable financial products. Just as traditional financial markets have indices such as the S&P 500 and Nasdaq 100, prediction markets also need standardized index products to help users track the overall performance of a particular type of event contract. The infrastructure layer encompasses a series of supporting systems, from order book design and clearing mechanisms to compliance frameworks. These elements together constitute the "upstream and downstream" of the prediction market, a complete ecosystem, not just a few trading platforms. 5c(c)Capital was co-founded by two early Kalshi employees. Adhi Rajaprabhakaran serves as the founding managing partner. He joined Kalshi's affiliated market maker in 2022, becoming the team's second professional trader, and has over five years of experience in prediction market trading. He also runs a Substack column called "50¢ Dollars," focusing on regulatory and business analysis of the prediction market, and hosts related podcasts. Noah Zingler-Sternig serves as the founding general partner. He previously served as Head of Operations at Kalshi, responsible for projects such as market support, trader services, and Robinhood integration. Fund advisor Ella Papanek also has a strong prediction market background. She worked as a quantitative sports trader at Susquehanna International Group (SIG) for approximately three years and was an early tester and active participant in several prediction markets. The rapid expansion of prediction markets has also attracted regulatory attention. As Kalshi and Polymarket expand their platforms into the sports events market, U.S. Senators Adam Schiff and John Curtis will introduce a bipartisan bill this week aimed at prohibiting entities regulated by the U.S. Commodity Futures Trading Commission (CFTC) from offering contracts related to sports events.In mid-March, Arizona Attorney General Kris Mayes filed a criminal complaint against Kalshi, alleging that while Kalshi may have touted itself as a "prediction market," it actually operated an illegal gambling operation and accepted bets on the Arizona election, both of which violated Arizona law. Despite the legal challenges, 5c(c)Capital's fundraising documents still describe prediction markets as an "intergenerational investment opportunity." The two founders hope to leverage their industry experience and network to provide capital and operational support for this emerging ecosystem. The fund's website states, "We believe that event contracts and prediction markets will revolutionize the way we know risk-taking." This view is also reflected in the data and capital levels. According to Dune data, as of March 24, the prediction market had accumulated over 2.8 million unique users, with open interest reaching $924 million, notional trading volume reaching $152.4 billion, and total transactions reaching 672 million. In the past week, notional trading volume exceeded $6.4 billion. Kalshi is currently raising over $1 billion in a new funding round, led by Coatue Management, at a valuation of $22 billion; its competitor Polymarket is in talks with potential investors for funding at a valuation of approximately $20 billion. [Foresight News]
5c(c)Capital: A Paradigm Shift in Prediction Markets
The launch of 5c(c)Capital represents a watershed moment in the prediction market landscape, signaling a rare truce between fierce competitors Kalshi and Polymarket. This $35 million venture fund, co-founded by former Kalshi employees Adhi Rajaprabhakaran and Noah Zingler-Sternig, has secured backing from both Kalshi CEO Tarek Mansour and Polymarket CEO Shayne Coplan—a collaboration that would have been unthinkable just months ago.
Strategic Significance: From Competition to Ecosystem Building
The fund’s genesis reflects a critical realization: the explosive growth of prediction markets has exposed fundamental bottlenecks that no single platform can solve alone. With Kalshi’s valuation skyrocketing from $2 billion to $22 billion and Polymarket securing a $2 billion ICE investment, both platforms recognize that continuing to cannibalize each other in existing markets is less valuable than collectively building the infrastructure needed to expand the entire pie.
This “coopetition” model aligns with the fund’s philosophy, drawn from Section 5c(c) of the Commodity Exchange Act: “New Contracts, New Rules.” The name reflects a belief that sustained innovation requires the combination of novel ideas with standardized regulation—a particularly relevant perspective given the current regulatory landscape.
Market Context and Growth Trajectory
Prediction markets have demonstrated remarkable metrics:
– Open interest reaching $924 million
– Over 2.8 million unique users
– Notional trading volume at $152.4 billion
– 672 million total transactions
– $6.4 billion in notional volume just in the past week
These figures underscore why established venture capitalists like Marc Andreessen (through Moneta Luna), Ribbit Capital’s Micky Malka, and former Multicoin Capital co-founder Kyle Samani have committed to the fund.
Investment Thesis: Infrastructure Over Platforms
5c(c)Capital’s focus on three critical areas reveals a sophisticated understanding of prediction markets’ structural limitations:
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Market Makers: Despite significant growth, prediction markets still suffer from excessive bid-ask spreads and insufficient depth. Professional market makers are essential for reducing transaction costs and improving market efficiency.
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Index Design Tools: The current market is fragmented around single-event betting. True financialization requires standardized index products similar to traditional markets’ S&P 500 or Nasdaq 100.
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Infrastructure Layer: From order book design to compliance frameworks, the fund recognizes that prediction markets need a complete ecosystem, not just trading platforms.
Implications for Crypto Markets
This development carries several implications for the broader crypto ecosystem:
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DeFi Integration: Improved prediction market infrastructure could accelerate the convergence of traditional financial derivatives and DeFi, particularly through oracle systems and liquidity provision mechanisms.
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Regulatory Pathways: By emphasizing the combination of innovation with regulation (as reflected in its name), the fund may establish a template for other crypto verticals seeking regulatory clarity.
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Token Valuations: If prediction platforms have native tokens, the infrastructure investments could significantly enhance their utility and value proposition, potentially driving upward price momentum.
Regulatory Headwinds
The fund launches amid significant regulatory challenges:
- A bipartisan bill from Senators Adam Schiff and John Curtis aims to prohibit CFTC-regulated entities from offering sports event contracts.
- Arizona’s Attorney General has filed a criminal complaint against Kalshi, alleging it operated an illegal gambling operation.
These regulatory risks represent the most significant threat to prediction markets and, by extension, to 5c(c)Capital’s thesis. The fund’s success will depend heavily on navigating this complex regulatory environment.
Risks and Opportunities for Investors
Risks:
1. Regulatory Crackdown: Increasing regulatory scrutiny could significantly impact the entire prediction market ecosystem.
2. Execution Risk: Building robust infrastructure for prediction markets presents unique technical and operational challenges.
3. Market Saturation: As institutional capital flows in, diminishing returns could materialize if infrastructure doesn’t keep pace with growth.
4. Platform Competition: Despite the collaboration, underlying tensions between Kalshi and Polymarket could create conflicts of interest.
Opportunities:
1. First-Mover Advantage: As the first dedicated VC fund for prediction markets, 5c(c)Capital is well-positioned to establish early relationships with promising startups.
2. Network Effects: Backing from crypto’s most influential investors provides portfolio companies with strategic advantages beyond capital.
3. Cross-Industry Applications: Prediction market technology has applications in AI, governance, and research beyond pure financial markets.
4. Innovation Catalyst: By addressing fundamental infrastructure needs, the fund could accelerate the development of entirely new financial products and services.
Conclusion
5c(c)Capital represents more than just another venture fund—it embodies a strategic pivot in the prediction market landscape from zero-sum competition to ecosystem building. For crypto investors, this development signals both maturation and opportunity. The fund’s focus on infrastructure rather than platforms aligns with a broader trend in crypto where value increasingly accrues to those building foundational layers rather than just applications.
However, investors must remain cognizant of the significant regulatory risks facing prediction markets. The success of this fund and its portfolio companies will ultimately depend on their ability to innovate within increasingly defined regulatory boundaries—a challenge that will determine whether prediction markets fulfill their potential as a transformative financial technology.