The crypto industry and prediction markets share a mission of disruption—but it’s not clear where crypto fits in

Polymarket and Kalshi exploded on the scene just before the 2024 Presidential election. Since then, the firms have notched respective valuations of $15 billion and $22 billion, and prediction markets have emerged as a major new player in finance, gaming, and media. The upstart industry also has deep roots in crypto.

Crypto and prediction markets have a lot in common: Both industries operate at the regulatory frontier, and are looking to disrupt deeply entrenched incumbents. There is also a spiritual connection. Polymarket founder Shayne Coplan took part in Ethereum’s pre-sale when he was just 15, and he built his platform on blockchain rails. Kalshi is not crypto native but has spent the last two years trying to acquire bona fides in the industry.

All of this suggests crypto is a large and growing part of the prediction market landscape. Big blockchain players, including Coinbase and Robinhood, certainly view events contracts as their home turf. “The crypto world feels it is on their land,” Dustin Gouker, who writes a newsletter on prediction markets, recently told me.

The question now is where exactly crypto fits into this new industry. Kalshi is dabbling in USDC and Solana products, but crypto has mostly remained a sideshow for the company, especially while it is waging a legal fight across the country to preserve the sports betting that is its golden goose.

Polymarket, meanwhile, is facing regulatory and social media heat over the shadowy, crypto-based system it uses to address disputes related to the outcome of bets on its platform. But that hasn’t stopped the company from doubling down on its crypto-first approach.

Polymarket is moving ahead with its own version of Ethereum’s blockchain, and also plans to do an airdrop later this year—an event that would reward longtime customers with a chunk of crypto cash. The market is currently down on alt-coins, and rightfully so, but a POLY token could find decent traction as an in-house currency on Polymarket, similar to how Binance uses BNB.

Polymarket’s crypto calculations seem shrewd, and could give the company a financial and technological boost as it prepares to re-enter the U.S. market. History, however, shows that crypto-based initiatives are prone to over-promising and under-delivering, so it may be years until blockchain becomes an integral part of prediction markets. What are your thoughts? I am curious to know whether most readers view prediction markets, at least in part, as a crypto story.

Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts

This story was originally featured on Fortune.com