The derivatives market is once again welcoming disruptors. Yesterday, prediction market giant Polymarket announced the upcoming launch of perpetual futures trading, where users will be able to trade the prices of various assets with at least 10x leverage, including real-world assets such as gold and silver, stocks of companies such as Nvidia and Coinbase, and digital assets such as Bitcoin.
A few days ago, The Information reported that Kalshi, another leading prediction market project, plans to support perpetual futures on its platform, a move that will allow U.S. customers to trade derivatives contracts without expiration dates and trade around the clock using so-called funding rates. The successive announcements by the two giants of the prediction market to expand perpetual contract products in the short term are both to expand their product and revenue boundaries and provide support for the continued rise in financing and valuation, and to respond to the potential threat of some cross-border competitors.
I. High Overlap of User Profiles
The user profiles of prediction markets and perpetual contracts have extremely homogeneous characteristics: both attract speculative investors with high risk preferences and extreme sensitivity to macro events, and both have a huge risk of users’ investments going to zero in a short period of time. In fact, a large amount of trading volume in the prediction market itself comes directly from predictions of cryptocurrency prices. When a user predicts on Polymarket whether “Bitcoin can break through $90,000 by the end of the month,” the underlying motivation is essentially no different from opening a long position in the contract market.
By integrating perpetual contracts, prediction market platforms can fully tap the commercialization space of existing users. In addition, prediction markets, as a true aggregation of user sentiment and opinions, have become an important reference for many users to trade cryptocurrencies. Going from viewing predictions to conducting contract trading is also becoming a regular trading path for these users. For the platform, this is not only an increase in functionality, but also the completion of a trading closed loop: users can observe macro events (such as the Fed’s interest rate meeting, geopolitical conflicts) and participate in predictions, and at the same time, they can directly use leverage to hedge or amplify returns on related assets (such as gold, U.S. stocks), thereby minimizing traffic loss.
At the same time, this superposition of functions can raise the “low-frequency, big event-driven” model of the prediction market to the “high-frequency, 24/7-driven” dimension of the derivatives market, completely locking in users’ attention.
II. The Temptation of the Trillion-Dollar Market
The direct driving force attracting prediction market platforms to enter the battlefield is the huge capital volume of the derivatives market. Although the prediction market has ushered in explosive growth since 2025 – according to Dune data, the total transaction volume of the prediction market has exceeded $20.00Billion each month since this year, and the average daily transaction volume has exceeded $700.00 Million. In comparison, the scale of the perpetual contract market is completely at another level. The daily trading volume of top decentralized perpetual contract platforms (such as Hyperliquid, dYdX) usually remains in the billions of dollars, while the daily trading volume of perpetual contracts on centralized exchanges (CEX) is in the hundreds of billions of dollars. This potential commercial prospect is irresistible for Polymarket and Kalshi, which are pursuing high valuations.
In the context of the prediction market possibly experiencing a decline in traffic due to event periodicity (such as after elections), perpetual contracts, a “high-frequency, rigid demand, long-term” financial product, will become the core pillar supporting the continued rise in its valuation. Moreover, Polymarket and Kalshi’s actions are not blind attempts, but have solid compliance endorsements. As a designated contract market (DCM) regulated by the U.S. Commodity Futures Trading Commission (CFTC), Kalshi has a natural advantage in providing futures and options trading within a compliant framework. This means that it can provide compliant “long-term contracts” to U.S. retail and institutional investors within a regulated scope. Polymarket US was also designated as a DCM by the CFTC in July 2025.
III. Expansion of Trading Scenarios Becomes the Mainstream Trend
To some extent, the actions of the two prediction markets are also a response to derivatives giant Hyperliquid. In February of this year, Hyperliquid stated explicitly on X that it plans to support Outcome Trading, a feature that will allow users to directly create prediction markets and option-like tools on its platform. As the current leader in on-chain perpetual contracts, Hyperliquid is trying to cover more trading scenarios by integrating prediction functions. Now, Polymarket and Kalshi are reversely entering perpetual contracts, which is essentially a response to this threat: when an opponent tries to invade your borders, the most direct defense is to enter the opponent’s core territory.
On a more macro level, this change points to a clearer industry trend – all platforms are vying for a “trading closed loop.” In the past few years, more and more exchanges have begun to integrate prediction market functions, hoping to keep users’ “information trading needs” within their own systems; and now, prediction markets are reversely integrating perpetual contracts, trying to cover users’ “price trading needs.” Whether it is a centralized exchange, a decentralized derivatives platform, or a prediction market, they are essentially evolving in the same direction: from a single product provider to a comprehensive trading platform covering multiple assets, multiple tools, and multiple scenarios. In the final analysis, the core variables behind this integration are still revenue and valuation. When growth pressure and competitive pressure are superimposed, leaning towards diversified scenarios such as derivatives has become an inevitable choice for almost all trading platforms.
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Prediction Markets Meet Perpetual Futures: A New Era of Crypto Derivatives
The recent announcements from Polymarket and Kalshi regarding their entry into the perpetual futures market mark a significant paradigm shift in the digital asset landscape. For experienced investors, this convergence of prediction markets and high-leverage derivatives represents both a strategic evolution and a potential inflection point in the maturation of the crypto ecosystem.
Strategic Implications: Beyond Prediction Markets
Polymarket and Kalshi’s expansion into perpetual futures is not merely a product diversification strategy but a calculated response to market pressures and competitive threats. The derivative market’s daily volume—ranging from billions in decentralized platforms to hundreds of billions in centralized exchanges—presents an irresistible commercial opportunity compared to the prediction market’s $700 million daily average.
What makes this move particularly compelling is the inherent synergy between the two platforms’ user bases. Both attract sophisticated traders with high risk tolerance and acute sensitivity to macroeconomic events. The overlap is so substantial that a large portion of prediction market volume already consists of crypto price predictions, essentially creating primitive derivatives trading without formal infrastructure. By integrating perpetual contracts, these platforms can transform their “low-frequency, event-driven” model into a “high-frequency, 24/7” trading ecosystem, effectively creating a closed-loop system where users can observe sentiment and act on it simultaneously.
Market Impact and Opportunities
The immediate implications for the crypto market are multifaceted:
First, we’re likely to see increased capital inflows as institutional and retail traders gain access to more sophisticated trading products through regulated entities. The CFTC designation of both platforms as Designated Contract Markets (DCM) provides a compliance framework that could attract capital from traditional finance institutions previously hesitant to engage with crypto derivatives.
Second, the fusion of prediction markets and perpetual futures creates a powerful analytical tool. Prediction markets aggregate sentiment with remarkable efficiency, often serving as leading indicators for market movements. When combined with leveraged perpetual futures, traders can implement strategies that capitalize on both sentiment shifts and momentum, potentially creating more efficient price discovery mechanisms.
For specific tokens, this trend could benefit:
– Exchange tokens from platforms that successfully integrate these features
– Infrastructure providers capable of handling high-frequency derivatives trading
– Oracles and data providers that power prediction markets
– Regulatory-compliant DeFi protocols positioned to bridge traditional and crypto derivatives
Risks and Concerns
Despite the opportunities, several significant risks demand attention:
The most pressing concern is regulatory arbitrage. While both Polymarket and Kalshi operate under CFTC oversight, the intersection of prediction markets, crypto assets, and high-leverage derivatives creates a complex regulatory landscape that could evolve unexpectedly. Any regulatory crackdown on crypto derivatives would directly impact these platforms’ value propositions.
Systemic risk also increases substantially with the introduction of 10x leverage on a diverse range of assets. The combination of prediction-driven speculation and leveraged positions could create dangerous feedback loops, particularly during periods of high market volatility. The 2022 crypto winter demonstrated how excessive leverage can amplify market downturns, and this integration could exacerbate such effects.
Furthermore, the move may accelerate the centralization of crypto derivatives, potentially contradicting the decentralized ethos that originally drove innovation in this space. As traditional finance players enter through regulated channels, we could witness a bifurcation between compliant, centralized derivatives and more experimental decentralized alternatives.
Broader Industry Implications
This development reflects a broader industry trend toward “trading closed loops,” where platforms compete to capture users’ entire trading journey within their ecosystem. We’ve seen exchanges integrate prediction features, and now prediction markets are expanding into derivatives—a classic example of competitive convergence.
The response from decentralized derivatives leader Hyperliquid, which announced plans for “Outcome Trading” earlier this year, highlights the competitive nature of this evolution. As platforms invade each other’s core territories, we can expect accelerated innovation but also increased market consolidation.
For investors, this trend suggests that platforms capable of successfully integrating multiple trading paradigms—while maintaining compliance—will likely capture disproportionate market share and valuation. The race is on to build the definitive “all-in-one” trading platform that bridges prediction markets, derivatives, and spot trading.
Investment Thesis
For sophisticated crypto investors, the key takeaway is not to view this development in isolation but as part of a larger maturation process of the digital asset markets. The convergence of prediction markets and derivatives represents:
- A validation of crypto’s evolution toward more sophisticated financial products
- An opportunity to identify platforms with first-mover advantage in this hybrid space
- A potential catalyst for increased institutional participation
- A warning about the dangers of excessive leverage combined with sentiment-driven speculation
Investors should focus on platforms that can balance innovation with regulatory compliance, while maintaining a clear value proposition beyond merely offering leverage. Those that successfully integrate prediction analytics with derivatives trading may unlock new revenue streams and capture market share from both traditional prediction markets and established derivatives exchanges.
As these platforms expand their offerings, we’re likely to see increased volatility but also enhanced market efficiency. The ultimate winners will be those that can provide sophisticated trading tools while managing the inherent risks of high-leverage products in an increasingly regulated environment.