Betting on perpetual contracts, prediction markets attempt to escape the "relying on luck" dilemma

By Oluwapelumi Adejumo

Translated by: Luffy, Foresight News

Leading prediction market platforms Kalshi and Polymarket are rushing to launch high-leverage crypto derivatives; meanwhile, U.S. federal and state regulators are engaged in fierce courtroom battles over whether these products are illegal gambling or legitimate financial instruments.

Over the past year, these prediction market platforms have become known for allowing users to bet on various real-world events. Now, they are preparing to launch perpetual contracts—complex derivatives without an expiration date that let traders amplify their exposure with borrowed funds—blurring the line between niche prediction platforms and full-featured crypto asset exchanges.

This shift significantly broadens their potential user base but also amplifies the platforms’ legal risks.

Perpetual Contracts Drive Prediction Platforms Toward 24/7 Trading

Previously, platforms like Kalshi operated on an event-driven model: traffic and trading volume surged around key moments like presidential debates and sports finals, then quickly declined once the event results were determined.

In such markets, users buy binary “Yes/No” shares, with contracts settling after the event concludes. Perpetual contracts fundamentally change this business model. Since they have no expiration date, traders can hold positions indefinitely as long as they meet margin requirements.

These tools typically allow users to leverage up to 50x, attracting aggressive speculators seeking quick gains from small price movements. By launching these derivatives, Polymarket and Kalshi are abandoning their single-event contract focus to directly compete with centralized exchanges. Their core strategy is to convert occasional political bettors into high-frequency daily traders.

Kalshi has explicitly announced its entry into the perpetual contract space, while Polymarket’s specific roadmap remains undisclosed, including which assets will be listed and whether access will be restricted for U.S. users.

Why Are Prediction Platforms Turning to Perpetual Contracts?

The main reason for this shift lies in the fundamental market structure.

Traditional spot trading has cooled from previous speculative peaks, with last year’s trading volume at $18.6 trillion, while perpetual contracts traded over three times that amount. Data from CryptoQuant shows that global crypto perpetual trading volume reached $61.7 trillion last year.

The huge volume gap influences corporate strategies. Platforms realize that to maintain user engagement during low volatility periods, they must offer tools that allow shorting, hedging, and leveraging.

Although prediction markets currently attract substantial funds, with nominal total trading volume surpassing $150 billion, the episodic nature of event contracts cannot match the nonstop fee income generated by high-activity derivatives markets.

Furthermore, the broader fintech industry boundaries are rapidly dissolving: centralized platforms like Robinhood, Coinbase, and Gemini are all entering event-based contract products.

Aptos blockchain co-founder Mo Shaikh notes that financial applications tend to integrate over time, citing the expansion of traditional platforms like PayPal. But he warns that forcing different user groups into a single app rarely succeeds.

“Traders, gamblers, long-term investors, payment users—they have completely different needs,” Shaikh said. “The real value lies in controlling the underlying infrastructure—clearing, liquidity, identity, settlement, data—even if the front end remains decentralized, these layers can be unified.”

Meanwhile, the prediction platform’s transformation also serves a defensive purpose.

Decentralized exchange Hyperliquid, a leader in the perpetual contract space, recently announced plans to launch its own event contracts, entering the prediction market arena.

As a result, market participants disagree on who holds the strategic advantage in this turf war.

Jiani Chen, Growth Lead at Solana Foundation, argues from a technical perspective that adding prediction market features to decentralized derivatives exchanges is much easier than building complex futures engines. But Kyle Samani, Chairman of Forward Industries, downplays technical barriers, emphasizing that customer acquisition is the real bottleneck for digital asset platforms. “Getting liquidity started and attracting regular users is much harder for trading platforms. Kalshi’s perpetual contracts will be a game-changer.”

Legal Disputes: Is It Gambling?

This aggressive product expansion coincides with a legal threat that could threaten their survival. State regulators are actively working to classify prediction platforms as unlicensed casinos, refusing to recognize event contracts as complex financial instruments.

On April 21, New York Attorney General Letitia James filed a massive lawsuit against Coinbase and Gemini, demanding a combined $3.4 billion in fines and restitution. James accused these companies of offering prediction markets to retail investors—including minors—sidestepping state taxes and consumer protection laws.

State officials cite research from the U.S. National Institutes of Health linking early exposure to mobile betting with increased anxiety and financial hardship risks; they also reference data from the American Psychological Association indicating that gambling addiction is associated with severe mental health issues.

James stated: “Renaming gambling doesn’t make it any less gambling, and it won’t exempt it from state laws and constitutional oversight.”

The industry strongly opposes the “gambling” label, arguing that these contracts are vital tools for hedging geopolitical and economic risks.

The U.S. Commodity Futures Trading Commission (CFTC) supports this stance, asserting exclusive federal jurisdiction over the industry. To prevent state interference, federal agencies have recently sued regulators in Arizona, Connecticut, and Illinois.

The courts have begun sorting jurisdiction conflicts. Earlier this year, a federal appellate court in Philadelphia ruled against New Jersey’s gambling regulator, affirming that the CFTC has sole authority over election and sports-related contracts on Kalshi.

These lawsuits reflect the complex regulatory environment that companies must navigate when launching new derivatives.

A Larger Market, a Bigger Regulatory Target

Expanding into perpetual contracts will further embed prediction markets into mainstream financial infrastructure rather than niche online speculation. This shift has attracted traditional finance attention: Intercontinental Exchange (ICE), parent company of the New York Stock Exchange, recently invested $2 billion in Polymarket, signaling major institutions’ confidence in the commercial value of event pricing platforms.

Proponents argue that prediction markets are both forecasting tools and trading venues. In highly liquid markets, the Blair score—an indicator of probability accuracy—can be as low as 0.0247 before settlement, meaning that as capital and participation grow, pricing errors narrow significantly. Industry estimates suggest about 10% of proprietary trading firms actively trade event contracts, partly to hedge macroeconomic and policy risks.

The combination of data value and trading activity explains why platforms are eager to expand their product offerings.

Rob Hadick, Managing Partner at Dragonfly, bluntly states the business logic: “In this fully financialized new world, having users is the only way to survive long-term.”

But not everyone sees perpetual contracts as the natural next step.

Alex Momot, CEO and co-founder of Peanut Trade, told CryptoSlate that current trends seem more like responses to tightening regulatory pressure than sustainable product strategies. He points out that some jurisdictions are cracking down on prediction markets, and operators appear to be shifting toward models that are more clearly regulated and less risky—like traditional gambling.

Momot believes this strategy offers limited buffer. In his view, the deeper issue is liquidity. Without sufficient depth—including the ability to hedge real-world event risks—scaling the most promising use cases remains difficult.

He suggests that a more robust long-term path might involve index-like products, market aggregation, and cross-event liquidity pools, making prediction markets more akin to traditional derivatives or synthetic exposure.

This perspective highlights the core contradiction in the industry: one camp sees perpetual contracts as the fastest way to boost trading volume and retain users between major events; the other views this as a tactical detour, with the real challenge being building deeper, more resilient liquidity.

In any case, legal risks are rising. Dyma Budorin, founder and CEO of CORE3, warns that the integration of prediction and derivatives markets could invite stricter regulatory scrutiny.

“What we’re really seeing is that markets are moving toward perpetual contract-like behaviors without adequate risk controls. If this trend continues, regulators won’t see prediction markets as harmless forecasting tools anymore—they’ll view them as non-compliant derivatives platforms.”

The lawsuits in New York are destined to make jurisdictional disputes a central issue for the industry’s future. The outcome may eventually escalate to the U.S. Supreme Court or push Congress to establish clearer legal frameworks.

Until then, prediction platform operators seem willing to continue expanding amid uncertainty, betting that the commercial gains from perpetual futures justify bearing certain legal risks.