The Clearing Company makes its debut, are the "big three" of the prediction market here?

2025-09-04 08:49:33

Collection

The prediction market is set to welcome significant financing again.

Since the U.S. elections, prediction markets have gained popularity due to the results that "defeat the polls." Compared to traditional news, it requires participants to bet real money, thus being hailed as a higher quality and more authentic source of information, gradually replacing media and institutional surveys as a new barometer of public opinion. Capital is also rapidly following suit: Polymarket not only secured a multi-million dollar investment from Donald Trump Jr., but he will also join Polymarket's advisory board; meanwhile, Kalshi completed a $185 million Series C funding round led by Paradigm in June, with its valuation soaring to $2 billion, becoming synonymous with institutional trust.

Against this backdrop, on August 27, The Clearing Company announced the completion of a $15 million seed round financing, led by USV, with well-known institutions like Coinbase Ventures participating. More notably, its core team members come from Kalshi and Polymarket—CEO Toni Gemayel has served as the growth lead for both "rival" platforms. The goal of The Clearing Company is to merge decentralization's openness with compliance regulation's credibility, creating a new generation of prediction markets that can be accepted by retail investors while also gaining regulatory favor.

Polymarket vs. Kalshi: Decentralized "Gray Players" vs. Institutional "Gold Standard"

In the prediction market arena, Polymarket and Kalshi almost represent two completely opposing paths.

Polymarket is the most striking contradiction in the prediction market: it is both the industry leader and the "gray player" with the deepest compliance dilemmas. In terms of scale and popularity, it is undoubtedly a phenomenal platform in the industry. The platform's TVL has reached $140 million, surpassing the total of the top ten platforms in the space; during the 2024 U.S. election, Polymarket's cumulative trading volume reached $3 billion, with betting amounts exceeding $4 billion, far ahead of Kalshi. Even in daily trading data, it remains at the top: over the past three months, Polymarket's average daily trading volume was about $40 million, while Kalshi only had $20 million. Although the gap has narrowed, Polymarket's leading position remains solid. With its highly open architecture and global expansion pace (such as in Singapore, UAE, etc.), Polymarket has already formed a significant lead in user scale and market depth.

However, its biggest shortcoming is the shadow of regulation. As early as 2022, Polymarket was sued by the CFTC for offering unregistered over-the-counter binary options, paying a $1.4 million fine, and "promising" to exit the U.S. market. However, on-chain data shows that about 25% of its traffic still comes from U.S. users, and bypassing restrictions has become the norm. After the 2024 elections, troubles escalated further, with the U.S. Department of Justice and FBI directly investigating, even raiding the home of founder Shayne Coplan, suspecting him of manipulating market results and guiding U.S. users to bet. Even after acquiring QCEX, a derivatives exchange holding a CFTC license, and attempting to return to the U.S. with a compliant identity, it still faces regulatory friction at the state level (such as in Nevada and New Jersey). Additionally, while the DAO governance model ensures democracy, it can lead to institutional instability, causing widespread concerns among institutional investors.

In stark contrast is Kalshi. It chose a completely different path—directly breaking through regulatory barriers. In 2023, Kalshi was targeted by the CFTC for launching election contracts. In just a few months, it went from "self-certification" to being "suspected of illegal gambling," facing denial at every turn. However, it did not stop there but chose to engage in a protracted legal battle with regulators. Ultimately, in October 2024, it won a ruling from the Washington D.C. Circuit Court, becoming the first prediction market in the U.S. to gain legalization for election contracts. This victory not only granted Kalshi a compliant "entry ticket" but also earned it the trust of institutions and mainstream opinion in the U.S. domestic market.

With this breakthrough, Kalshi became a CFTC-approved prediction platform and partnered with Nasdaq for market monitoring, ensuring transaction transparency and compliance. Its operational model leans towards centralization: all contract creation and rule adjustments are decided by the core team. This model sacrifices some flexibility of decentralization but provides reassurance to institutional investors. The platform uses USD as its primary trading currency, lowering the entry barrier for traditional investors and further solidifying its "gold standard" position on Wall Street.

However, this highly compliant and centralized path also presents Kalshi with another challenge: how to attract crypto-native users while maintaining stability. To this end, it recently appointed crypto KOL John Wang as "Head of Crypto," attempting to bridge the gap with the Web3 community. Whether this attempt will succeed remains to be seen. In a sense, Kalshi represents the "institutional faction," with compliance and institutional trust as its core advantages, but it still lags behind Polymarket in flexible innovation and decentralized community building.

The Clearing Company: A Hybrid Between Compliance and Decentralization

If Polymarket represents the ultimate attempt at decentralization and Kalshi represents the "gold standard" of the institutional faction, then The Clearing Company has found a "hybrid path" between the two.

This company was co-founded by core members who previously worked at Polymarket and Kalshi, making them well aware of the strengths and weaknesses of both. Therefore, its core strategy is "compliance-by-design"—not patching loopholes afterward, but embedding compliance requirements from the protocol architecture level. While users create prediction markets on-chain without permission, smart contracts automatically run KYC/AML processes, ensuring that all fund flows are auditable and comply with anti-money laundering regulations. While ensuring transparency, it also leaves interfaces for regulators. For example, in terms of result verification, Polymarket relies on UMA's Optimistic Oracle to verify prediction results, while The Clearing Company directly binds the oracle to the compliance framework, incorporating result verification into audit and regulatory interfaces, thus reducing friction costs for institutional entry. Compared to Polymarket's approach of "doing first and negotiating with regulators later," The Clearing Company actively mitigates legal risks from the outset; and unlike Kalshi's high centralization, it still retains the openness and user innovation space of the blockchain.

In terms of liquidity mechanisms, The Clearing Company also chooses a middle path. It does not adopt a purely order book model nor a fully AMM approach, but introduces algorithmic market-making to enhance liquidity. This method allows institutional investors to enter more easily while maintaining the liquidity flexibility required by decentralized markets. In other words, it considers the compliance market's need for stability while preserving the flexibility of the crypto-native ecosystem.

More critically, it was born at a pivotal moment in the regulatory landscape. In 2025, the U.S. passed the CLARITY Act, classifying cryptocurrencies as commodities, laying the legal foundation for the legalization of prediction markets; simultaneously, the GENIUS Act provided a clear payment and settlement framework for stablecoins, allowing The Clearing Company to settle directly with compliant stablecoins. This "regulatory dividend," combined with its own design, enables it to attract institutional capital, lower retail entry barriers, and provide standardized templates for market creation.

This is the true value of The Clearing Company: it meets institutional compliance demands without sacrificing the openness of decentralization. For prediction markets, this may be the "hybrid solution" needed for the next phase of expansion—finding a balance between compliance and innovation, thereby driving the entire industry into a new development cycle.

Conclusion

The prediction market arena is entering a heated stage. In addition to the established Polymarket and Kalshi, new players are emerging at a rapid pace. Novig, after completing an $18 million Series A funding round, is branding itself as "America's first sports prediction market" and is circumventing gambling regulations through a lottery format to capture the sports market; FanDuel has teamed up with the Chicago Mercantile Exchange (CME) to make a strong entry, bringing about a crossover between traditional finance and prediction markets; while on-chain projects like Flipr and Hedgemony are also emerging, with the former embedding prediction trading directly into X (Twitter) timelines, attempting to create "socialized predictions," and the latter focusing on global news and political sentiment with AI-driven algorithms, carving out a differentiated path.

With more capital, regulatory dividends, and innovative models being injected, prediction markets stand at a turning point: they must win regulatory trust in competition while firmly capturing the minds of crypto-native users and continuously expanding into mainstream markets. The next round of competition may determine who can truly cross the boundary of "niche products" and grow into a new infrastructure for the global financial market.

Click to learn about job openings at ChainCatcher