Trump enters the market to seize market share! Polymarket returns to the U.S. in November, the battle of the encryption prediction markets begins.

Polymarket plans to launch limited trading aimed at U.S. residents at the end of November, focusing on sports betting rather than the politically controversial event contracts previously. More notably, Trump’s media technology group (TMTG), co-founded by Trump, announced on Tuesday that it will collaborate with the encryption exchange to launch prediction market features through the Truth Social platform, intensifying market competition.

Polymarket's Return to the US Strategy: Sports Betting First

(Source: Polymarket)

According to a report by Bloomberg on October 28 citing informed sources, Polymarket plans to launch limited trading aimed at U.S. residents by the end of November, focusing on sports betting. This strategic choice is extremely cautious and meaningful. Sports betting has been legalized in many states in the U.S., with a relatively clear regulatory framework and higher market acceptance. In contrast, political event prediction markets are still in a legal gray area, and it is these types of contracts that led Polymarket to reach a settlement with the CFTC in 2022, paying a $1.4 million fine and exiting the U.S. market.

Choosing to enter the U.S. market through sports betting demonstrates the strategic wisdom of Polymarket's management. The U.S. sports betting market is large and continues to grow, with the American Gaming Association estimating that the legal sports betting market will exceed $10 billion in 2024. Polymarket's blockchain technology and decentralized architecture can provide a more transparent odds mechanism and faster settlement speed than traditional betting platforms, making these advantages significantly competitive in the sports betting field.

From a user experience perspective, Polymarket has accumulated considerable experience in sports betting. Although users in the United States are excluded, the prediction markets for sporting events offered by the platform operate well globally, covering mainstream sports such as football, basketball, and tennis. These existing technical foundations and market data enable Polymarket to quickly launch competitive sports betting products in the United States.

However, returning to the US market is not a simple task. According to informed sources, Polymarket will adopt a “limited trading” approach, meaning that initial trading scales, user numbers, or types of available markets may be restricted. This gradual strategy is both a response to regulatory requirements and a necessity for risk management. Only after ensuring compliance and system stability will Polymarket likely gradually expand its range of services, and even reintroduce political event prediction markets in the future.

CFTC's Non-Action Letter Becomes a Key Turning Point

About two months ago, the U.S. Commodity Futures Trading Commission (CFTC) stated that it had issued a letter of no action to Polymarket, an encryption derivatives exchange and clearinghouse it acquired. Polymarket CEO Shayne Coplan stated that this move lays the groundwork for the company to “go live in the U.S.” The significance of this letter cannot be overstated, as it marks a substantial recognition of Polymarket's business model by regulators.

A “No-Action Letter” is a regulatory tool of the CFTC, meaning that under specific conditions, the regulatory agency will not take enforcement action against a certain business. This is not an official permit or approval, but it has a similar effect in practice. For Polymarket, this letter provides a legal shield for operating in a gray area, significantly reducing the risk of facing enforcement action in the future.

The acquisition of this letter was not accidental. After Polymarket reached a settlement with the CFTC in 2022, it invested significant resources to improve its compliance framework. The company acquired a regulated cryptocurrency derivatives exchange and clearinghouse, a move that demonstrates its determination to operate within a compliance framework. By acquiring an existing regulated entity, Polymarket was able to quickly obtain the necessary licenses and infrastructure without having to start from scratch in applying for regulatory approval.

The CFTC's change in attitude also reflects a broader shift in the regulatory environment. The Trump administration has taken a friendlier stance towards encryption and innovative financial products, creating a more favorable regulatory environment for platforms like Polymarket. In addition, Kalshi's victory in its legal dispute with the CFTC has provided precedent support for the legitimacy of prediction markets.

As of Tuesday, Polymarket's website displayed a waiting list and stated that it would “soon be open to U.S. traders.” This public market forecast shows Polymarket's confidence in regulatory approval. Cointelegraph reached out to the company for comment, but as of the publication of this article, no response has been received. This low-key handling may be to avoid unnecessary regulatory attention before the official launch.

Valuation surges 10 times, market expectations are skyrocketing

The report in September indicated that if Polymarket re-enters the U.S. market, the company's valuation could reach as high as $10 billion. This figure is staggering, as the prediction market was valued at around $1 billion after completing a round of $200 million in financing as of June. In just a few months, the market's valuation expectation for Polymarket skyrocketed 10 times, a leap in valuation that is extremely rare in the technology and fintech sectors.

This surge in valuation reflects the market's immense expectations for Polymarket's return to the United States. The United States is the largest financial market in the world and the core area for cryptocurrency and fintech innovation. For any company aspiring to be a global platform, entering the U.S. market is a threshold that must be crossed. After being forced to exit the U.S. market, Polymarket has achieved success in other regions around the world, but the lack of the U.S. market has always been a ceiling on its growth.

A valuation of 10 billion USD means that investors believe Polymarket can replicate or even surpass its success in the global market within the US market. The following factors support this optimistic expectation:

Market Size Potential: The total size of the sports betting market in the United States and the potential political prediction market could reach tens of billions of dollars. If Polymarket can capture 10% to 20% of the market share, it will generate significant revenue.

Technical Advantages: Based on the transparency and decentralized architecture of blockchain, it has a significant trust advantage in the context of frequent manipulation scandals in traditional betting platforms.

User Base: Polymarket has accumulated millions of users worldwide, a significant proportion of whom are Americans accessing through VPNs. Once it is legally available, this demand will quickly convert into actual users.

First-mover advantage: Although Kalshi already offers prediction market services in the United States, the brand recognition and product maturity of Polymarket may allow it to quickly take a leading position.

However, the valuation of 10 billion USD is also facing skepticism. Critics point out that the liquidity and trading volume of the prediction market are far lower than those of traditional financial markets, and whether Polymarket can sustain such a high valuation depends on its ability to achieve explosive growth in the U.S. market. In addition, regulatory risks still exist, and the CFTC's no-action letter may come with strict conditions that limit Polymarket's scope of business and growth rate.

Trump Joins the Battle: Competition in the Prediction Market Heats Up

The sudden change in the market landscape comes from an unexpected competitor. On Tuesday, the Trump Media & Technology Group, co-founded by U.S. President Trump, announced plans to implement prediction market features through its social media platform Truth Social. The social media company stated that it will collaborate with cryptocurrency exchanges to join the ranks of platforms like Kalshi and Polymarket to provide users with prediction market services.

Trump's entry adds an unprecedented political color and market attention to the prediction market. Although Truth Social has a user base much smaller than Twitter or Facebook, it has a highly loyal user base that is highly concerned about political issues, making them ideal customers for the prediction market. The collaboration with encryption exchanges shows that Trump Media Technology Group aims to quickly enter the market rather than build technological infrastructure from scratch.

This poses both a threat and an opportunity for Polymarket. The threat lies in the huge influence of the Trump brand, which may divert potential users, especially in the political prediction market where Trump's Truth Social platform has a natural user affinity. The opportunity is that Trump's high-profile entry will significantly enhance the mainstream awareness of the prediction market, expanding the overall market size, and this “growing the pie” effect may benefit all participants.

Kalshi's legal dispute with the CFTC may have paved the way for the entire industry. In 2023, regulators ordered Kalshi to cease offering political event contracts, after which the company filed an appeal and ultimately won. The court ruling confirmed that the CFTC has no authority to unilaterally prohibit political prediction markets, as long as these markets do not involve gambling or election manipulation. This precedent provides a legal basis for platforms like Polymarket and Truth Social, significantly reducing regulatory risks.