Prediction Market in the Post Election Era: Polymarket Defends the Long Tail, Kalshi Seizes Institutions The outbreak of the prediction market in recent years is not just about the popularity of on chain gaming, but more like the formation of a social information infrastructure for producing "group consensus and instant truth". The problem is that this infrastructure has not matured along a single path, but has been pulled by both external compliance regulation and internal clearing trust. 1、 The industry is forming a 'dual route liquidity mismatch' The outbreak of the prediction market in recent years is not just about the popularity of on chain gaming, but more like the formation of a social information infrastructure for producing "group consensus and instant truth". The problem is that this infrastructure has not matured along a single path, but has been pulled by both external compliance regulation and internal clearing trust. Kalshi represents an institutionalized approach: centered around the CFTC Designated Contract Market (DCM) license, bank custody, fiat clearing, and standardized APIs, attracting traditional institutions and compliant market makers. Polymarket represents the on chain native route: with USDC settlement, non custodial experience, global long tail traffic, market making rebates, and position rewards as the core, it quickly captures consensus trading needs in political, crypto, and cultural events. The real watershed is not whose CLOB is more advanced. Both companies use continuous central limit order books at the bottom level, with highly similar technical trajectories; What truly widens the gap are liquidity incentives, capital accumulation returns, judicial access boundaries, and the question of "who will judge and whether the judgment is credible" in the final settlement. 2、 CLOB is not the point of difference, liquidity incentives are There is no fundamental difference in the microstructure of Polymarket and Kalshi's order books, as both choose continuous central limit order books (CLOBs). This mechanism has extremely high price immediacy when liquidity is sufficient, and is suitable for quickly mapping sudden news, poll changes, macro data, and sports events into probability prices. The difference lies in 'who is willing to put funds on the books'. Polymarket uses 0 Maker transaction fees, 15% -25% Maker Rebates, Quadratic Scoring Rule daily settlement liquidity incentives, and up to 50% Taker transaction fee refunds to reduce inventory risk and transaction fee losses for algorithmic market makers who continuously quote on the chain. The result is that the bid ask spread in the core market can be compressed to 1-3 cents. The appeal of Kalshi lies not in subsidies, but in institutional certainty. As a DCM regulated by CFTC, it provides compliant order books, fiat dollar channels, bank custody frameworks, and institutional auditable trading interfaces. This type of arrangement is more crucial for traditional hedge funds that cannot touch cryptocurrencies but need to hedge macro or event risks. 3、 Changes in the willingness to hold long-term contracts due to changes in financial returns Polymarket's Web3 USDC settlement allows the platform to provide Holding Rewards to eligible positions. According to official sources, the current official execution rate is about 3.25% variable annualized yield, which has been lowered from the 4.00% APY when it was launched in September 2025. The platform also reserves the right to continue adjusting. This mechanism takes random snapshots every hour and settles payments daily. This is important for long-term event contracts. Political elections, macro paths, long-term technological or regulatory events can all occupy funds for weeks or even months. Holding rewards can partially offset the cost of capital accumulation and increase the willingness of retail investors and arbitrageurs to hold until settlement. Kalshi, on the other hand, is constrained by customer segregated funds, bank custody, and traditional clearing rules, and cannot provide interest rates similar to on chain positions. But this is not a risk-free dividend. As the total trading volume of Polymarket expands, the fixed budget or underlying yield capacity needs to cover a larger pool of funds, and the 3.25% variable APY itself means that the future profit space may be further compressed. 4、 Liquidity cannot be measured by total volume, it should be broken down by market category Simply comparing the total platform volume between Polymarket and Kalshi will lead to a misjudgment of the pattern. The participant structure, compliance requirements, deposit channels, and information sources of sports, politics, encryption, and macroeconomic data are completely different, so the effective depth also shows obvious stratification. The annual data also supports this hierarchical judgment. According to official records, Kalshi's annual trading volume reached 22.88 billion US dollars in 2025 and exploded to 33 billion US dollars in Q1 2026, including institutional hedging and arbitrage activities by specific large players. At the same time, during the 2024 US presidential election, Polymarket's cumulative bets on the main contract (excluding sub markets) alone reached $3.2 billion, indicating a high concentration of attention and funds on political events. Therefore, predicting the market is not a single liquidity pool, but a collection of event risk markets. Kalshi is more like an institutional level, compliant, macro and sports risk concentration field; Polymarket is more like an on chain traffic field for global politics, encryption, and long tail consensus. 5、 Who is making money: Professional arbitrageurs connect prices, retail investors bear the wear and tear Professional arbitrageurs and quantitative agencies have become the core participants in predicting the market. They quickly converged the price deviation between USDC on the Polymarket chain and USD off the Kalshi chain for the same event through cross platform arbitrage, poll bias arbitrage, time decay arbitrage, and event driven statistical arbitrage. The official cross platform basis arbitrage daily yield is usually in the range of 0.1% -0.5%. This opportunity arises from friction between jurisdictions, KYC thresholds, deposit channels, and settlement systems. Similar contracts on two platforms will experience price divergence in a short period of time. High frequency market makers monitor limit order books through automated APIs and use Polymarket's Maker/Taker rebates to reduce transaction fee wear and tear. The situation of individual investors is the opposite. Empirical statistics show that the predicted loss rate of ordinary retail investors in the market is in the range of 69% -70%, and about 70% of users will eventually be eliminated with losses. The losses on Polymarket mainly come from information asymmetry and algorithmic market making capture; The losses on Kalshi are mainly due to the wide bid ask spread in the long tail market and the principal wear and tear caused by excessive high-frequency trading. This indicates that predicting the market is not suitable for being packaged as a low threshold wealth management tool for the general public. It is closer to a highly specialized event risk and consensus hedging market. The opponent faced by retail investors is not a single banker in traditional gambling, but a professional institution that continuously withdraws orders, models news, tracks polls, and automatically executes them in CLOB. 6、 The primary risk of Polymarket is not regulation, but the credibility of clearing External regulation is certainly important, but for the decentralized forecasting market, the endogenous crisis of oracle trust is more likely to become the first veto for long-term capital entry. Polymarket's contract clearing relies on UMA optimistic oracle, and the basic process includes proposal, 48 hour challenge, and token voting settlement. UMA will launch Managed Optimistic Oracle V2 on June 25, 2026, introducing a white name single machine mechanism consisting of 37 addresses to prevent vote manipulation. This is an important repair, but it also exposes a paradox: the more whitelist and custodial governance are needed as a fallback, the more it shows that pure decentralized settlement is difficult to independently carry institutional level trust. Large hedge firms would rather accept that Kalshi has no interest on their holdings than deposit long-term large funds in a chain clearing system with oracle disputes, conflicts of interest, and no unified insurance backing. 7、 Compliance dual track system: Kalshi is surrounded by local authorities, Polymarket is sucked back by the United States Kalshi's path is to first enter the regulatory framework and then continue to engage with local judicial authorities. It has obtained approval from the CFTC to operate a nationwide forecasting market as DCM and was fined $2246.36 in February 2026 for minor compliance breaches. But state-level regulation did not withdraw as a result. Washington State Attorney General sues Kalshi, and a federal judge issues a temporary injunction on July 21, 2026 to prevent the operation of his specific contract; Illinois is also attempting to classify it as sports betting and impose punitive gambling taxes, and Kalshi is currently suing to resist. Behind this is the federal state dual track system of financial and gambling regulation in the United States. Even if the CFTC grants a federal pass, states may still engage in secondary containment based on gambling laws, local taxes, and existing interest patterns. Kalshi is pushing Congress to pass the Clarity Act to establish federal exclusive jurisdiction; Officially, the contract on Polymarket regarding whether the bill can be signed has generated a transaction volume of $2.3 million. Polymarket takes the opposite route: first gaining global traffic through offshore and on chain native experiences, and then attempting to return to the compliant mainstream market. It reached a $1.4 million settlement with the CFTC in 2022, promising to shut down its US operations and implement US IP geo blocking. At present, the main platform has implemented strict lockdowns and enforced high-intensity VPN bans on 37 countries and regions, including the United States. In order to return to the US market, Polymarket has submitted a DCM registration application to the CFTC, and its US market maker program has also been filed with the CFTC, valid until November 15, 2029. But in June 2026, the CFTC launched a new investigation into Polymarket involving false trading and misleading social media marketing. The challenge for Polymarket is that once US entities introduce KYC/AML, SSN verification, and bank clearing similar to Kalshi, it may lose the core frictionless, non custodial, and interest bearing advantages of the Web3 native platform. 8、 Limitations and key reversal variables Liquidity depth caliber: The depth ratio of sports and cryptocurrency markets belongs to directional judgment based on public trading volume, rather than real-time snapshot of pending orders. Due to platform API and historical snapshot limitations, it is not possible to accurately restore the real-time number of pending orders classified. Policy variables: The ultimate direction of the Clarity Act in the US Congress, as well as the progress of the CFTC's approval of Polymarket DCM licenses, are key external variables that change the pattern of division between the two giants. Incentive variables: If Polymarket's 3.25% variable position return and Maker/Taker commission continue to decrease, both long-term capital locking and cross platform arbitrage ROI will be repriced. Liquidation variable: Whether UMA Managed Optimal Oracle V2 can truly reduce the number of disputed markets, conflicts of interest, and voting manipulation risks will determine whether institutional funds are willing to further enter Polymarket. 9、 Final judgment: The prediction market in the post election era will continue to diverge The prediction market has bid farewell to the early qualitative "gambling" or "entertainment" and begun to possess dual attributes of event derivatives and social consensus infrastructure. But it will not be unified through a single path. In the future, the industry will continue to diverge on two axes: external compliance regulation determines whether the platform can accommodate US institutions and fiat currency traffic, and internal oracle trust determines whether the on chain market can accommodate long-term large funds. Kalshi will continue to rely on DCM licenses, fiat clearing, bank custody, and institutional APIs to gain an advantage in sports, macroeconomic data, and US compliant trading. Polymarket will continue to rely on globalization, unmanaged experience, political long tail, and native encrypted users to maintain depth in high volatility, high sensitivity, and high attention events.