Betting on Perpetual Contracts: Predicting the Market’s Attempt to Escape the “Weather-Dependent” Dilemma
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Betting on Perpetual Contracts: Predicting the Market’s Attempt to Escape the “Weather-Dependent” Dilemma
Prediction platforms go head-to-head with crypto exchanges.
Navigating Web3 tides with focused insightsBy Oluwapelumi Adejumo
Translated by Luffy, Foresight News
Leading prediction market platforms Kalshi and Polymarket are rushing to launch high-leverage crypto derivatives—while federal and state regulators in the U.S. clash fiercely in court over whether such products constitute illegal gambling or legitimate financial instruments.
Over the past year, these prediction market platforms have gained notoriety for allowing users to wager on real-world events. Now, they are preparing to roll out perpetual contracts—a sophisticated instrument with no expiration date that enables traders to amplify their exposure using borrowed funds—blurring the line between niche prediction platforms and full-featured crypto asset exchanges.
This transformation significantly expands their potential user base—but also magnifies their legal risks.
Perpetual Contracts Drive Prediction Platforms Toward 24/7 Trading
Historically, platforms like Kalshi operated on an event-driven model: traffic and trading volume spiked during major events—such as presidential debates or championship sports finals—and rapidly declined once outcomes were determined.
In such markets, users buy binary “Yes/No” shares, and contracts settle upon resolution of the underlying event. Perpetual contracts fundamentally alter this business model. With no fixed expiration, traders can hold positions indefinitely—as long as they meet ongoing margin requirements.
These instruments typically allow up to 50x leverage, attracting aggressive speculators seeking rapid returns from minor price fluctuations. By launching such derivatives, Polymarket and Kalshi are abandoning their singular focus on event-based contracts and directly competing with centralized exchanges. Both platforms’ core strategy is clear: convert occasional political bettors into daily, high-frequency traders.
Kalshi has explicitly announced its entry into the perpetual contract space, while Polymarket’s specific roadmap—including which assets will be listed and whether access will be restricted for U.S. users—remains undisclosed.
Why Are Prediction Platforms Turning to Perpetual Contracts?
The primary driver behind this shift lies in fundamental market structure.
Traditional spot trading has retreated from the frenzied peaks of prior cycles—reaching $18.6 trillion in volume last year—while perpetual contract volume exceeded that figure by more than threefold. According to CryptoQuant, global crypto perpetual contract trading volume hit $61.7 trillion last year.
This massive disparity in volume shapes corporate strategy. Platforms recognize that sustaining user engagement during low-volatility periods requires offering tools that support short selling, portfolio hedging, and leveraged trading.
Although prediction markets currently attract substantial capital—with nominal total trading volume surpassing $150 billion—the intermittent nature of event-based contracts cannot match the continuous fee revenue generated by highly active derivatives markets.
Moreover, boundaries across the broader fintech industry are rapidly dissolving: centralized platforms including Robinhood, Coinbase, and Gemini have all launched event-based contract products.
Mo Shaikh, co-founder of the Aptos blockchain, notes that financial applications have historically trended toward integration—citing PayPal’s expansion as a traditional example. Yet he cautions that forcing disparate user groups into a single application rarely succeeds.
“Traders, gamblers, long-term investors, and payment users have entirely different needs,” says Shaikh. “Real value lies in controlling the underlying infrastructure—clearing, liquidity, identity, settlement, and data—even if frontends remain fragmented, these layers can be unified.”
Meanwhile, prediction platforms’ pivot also carries defensive motivations.
Hyperliquid, a leading decentralized exchange in the perpetual contract space, recently announced plans to launch its own event contracts—entering the prediction market arena head-on.
As a result, opinions diverge on which side holds greater strategic advantage in this turf war.
Jiani Chen, Head of Growth at the Solana Foundation, argues from a technical-difference perspective that adding prediction market functionality to decentralized derivatives exchanges is far easier than building complex futures trading engines for prediction platforms. Kyle Samani, Chairman of Forward Industries, however, downplays technical barriers, asserting that user acquisition—not engineering—is the true bottleneck for digital asset platforms. He states: “It’s far harder for trading platforms to bootstrap liquidity and onboard mainstream users for prediction markets. Kalshi’s perpetual contracts will dominate.”
Legal Controversy: Is It Gambling—or Not?
This aggressive product expansion coincides with an existential legal threat: state regulators are coordinating efforts to classify prediction platforms as unlicensed casinos—and refuse to acknowledge event contracts as sophisticated financial instruments.
On April 21, New York Attorney General Letitia James filed sweeping lawsuits against Coinbase and Gemini, seeking combined penalties and damages totaling $3.4 billion. James alleges these firms offered prediction markets to retail investors—including minors—bypassing state taxes and consumer protection laws.
State officials cite research from the U.S. National Institutes of Health linking early mobile betting exposure to increased risks of anxiety and financial distress; they also reference data from the American Psychological Association highlighting severe mental health risks associated with gambling addiction.
James stated: “Gambling under a different name remains gambling—and does not thereby escape regulation under state law or the Constitution.”
The industry firmly rejects the “gambling” label, countering that such contracts serve as critical tools for hedging geopolitical and economic risk.
The U.S. Commodity Futures Trading Commission (CFTC) supports this view, asserting exclusive federal regulatory authority over the sector. To block state interference, federal agencies have recently sued regulators in Arizona, Connecticut, and Illinois.
The judiciary has begun untangling jurisdictional conflicts. Earlier this year, a federal appeals court in Philadelphia ruled against New Jersey’s gaming regulator, affirming the CFTC’s sole regulatory authority over Kalshi’s election- and sports-related contracts.
A cascade of litigation underscores how companies launching new derivatives must navigate an exceptionally fractured regulatory landscape.
Bigger Markets, Bigger Regulatory Targets
Entering the perpetual contract space will further integrate prediction markets into mainstream financial infrastructure—not merely confine them to a niche corner of online speculation. This shift has already drawn attention from traditional finance: Intercontinental Exchange (ICE), parent company of the New York Stock Exchange, recently invested $2 billion in Polymarket—signaling large institutions’ confidence in the commercial viability of event pricing platforms.
Proponents of this model argue prediction markets function both as forecasting tools and trading venues. In highly liquid markets, the Brier score—a standard metric measuring probabilistic accuracy—can fall as low as 0.0247 before settlement, indicating that pricing errors narrow significantly as capital and participation increase. Industry estimates also suggest roughly 10% of proprietary trading firms actively participate in event contract markets—some using them to hedge macroeconomic and policy risks.
The convergence of data value and trading activity explains why platforms are urgently expanding their product suites.
Rob Hadick, Managing Partner at Dragonfly, bluntly articulates the underlying business logic: “In this newly fully financialized world, owning users is the only path to long-term survival.”
Yet not everyone views perpetual contracts as the natural next step.
Alex Momot, CEO and Co-Founder of Peanut Trade, told CryptoSlate that current trends appear more like responses to tightening regulatory pressure than sustainable product strategies. He notes that regulators in certain jurisdictions are cracking down on prediction markets—prompting operators to gravitate toward the crypto exchange model, where rules are clearer and the risk of being classified as gambling is lower.
Momot believes this strategy offers limited buffering effect. In his view, the deeper issue is liquidity. Without sufficient depth—even the most promising use cases, such as hedging real-world event risk, struggle to scale.
He suggests a more robust long-term path lies in index-based products, market aggregation, and cross-event liquidity pools—bringing prediction markets closer to traditional derivatives or synthetic exposures.
This perspective reflects the industry’s central tension: one camp sees perpetual contracts as the fastest way to boost trading volume and retain users between major events; another views them as a tactical detour—while the real challenge remains building deeper, more resilient liquidity.
Either way, legal risk is rising. Dyma Budorin, Founder and CEO of CORE3, warns that the convergence of prediction and derivatives markets will likely trigger intensified regulatory scrutiny.
“What we’re truly seeing is markets drifting toward perpetual-contract-like behavior—without commensurate risk controls. If this trend continues, regulators will stop treating prediction markets as harmless forecasting tools—and instead view them as rogue derivatives platforms operating in violation of the law.”
The New York litigation ensures jurisdictional disputes will become a defining issue for the industry’s future. This battle may ultimately reach the U.S. Supreme Court—or compel Congress to establish a clearer legal framework.
Until then, prediction platform operators appear willing to expand amid uncertainty—betting that the commercial upside of perpetual futures justifies bearing elevated legal risk.
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