Kalshi, the prediction market company, has announced the introduction of tokenized versions of its wagers on the Solana blockchain. This exclusive update was shared with CNBC on Monday and marks a strategic effort to capture the interest of cryptocurrency holders who have favored its competitor, Polymarket, by investing substantial sums of digital assets into it.
Tokenization involves the digital representation of real-world financial assets, such as stocks or bonds, on a blockchain like Solana or Bitcoin. These tokens can be traded just like traditional assets, providing users with additional anonymity compared to conventional contracts. This new feature aligns Kalshi more closely with Polymarket, known for enabling direct on-chain trading.
Kalshi's support for tokenized event contract wagers is now operational on Solana. The decentralized finance protocols, DFlow and Jupiter, are set to act as institutional clients, connecting the exchange's off-chain order book to the liquidity on Solana.
The push to engage crypto holders comes amid a surge in demand for event contracts. Prediction markets have seen a significant rise in trading volume, nearly hitting $28 billion this year alone, with a peak weekly volume of $2.3 billion in late October, as per Crypto.com's research arm.
By tapping into the $3 trillion digital asset market, Kalshi aims to boost the liquidity required to expand its offerings. John Wang, head of crypto at Kalshi, emphasized the importance of engaging crypto power users to access the billions of dollars of liquidity available in the crypto realm. This also paves the way for developers to create third-party front ends leveraging Kalshi's liquidity.
Kalshi, established in 2018, was the first to launch federally regulated event contracts on U.S. congressional races in late 2024, following a significant legal victory over the Commodity Futures Trading Commission. The platform has since grown to offer around 3,500 markets and extended its presence to over 140 countries. It has secured more than $300 million in funding, attaining a $5 billion valuation, supported by major investors like Andreessen Horowitz and Sequoia Capital.
Kalshi's early market presence might not guarantee continued competitive advantage, especially with Polymarket's relaunch in the U.S. To maintain its edge, Kalshi needs substantial liquidity, which the crypto-native traders' funds can offer, according to Wang.
Digital asset holders are notably active traders in prediction markets, often trading at higher volumes than their non-crypto counterparts. Their involvement is expected to significantly enhance liquidity across Kalshi's markets, facilitating competitive pricing. Wang commented, "If you have a market with no liquidity, then you don't really have a market. People can't really trade size or get the prices that they want."