Polymarket and Kalshi are now considered the top crypto prediction markets, but the space was once led by other players taking very different approaches.
Intercontinental Exchange’s move to invest up to $2 billion into Polymarket and Kalshi’s $300 million financing have turned a once-niche corner of crypto into a mainstream trading category.
“The real prize for ICE is not just clearing contracts but monetizing the data, selling odds as sentiment factors alongside rates and credit where every rumor pays a fee,” said Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors, told Reuters.
But the prediction market boom is the culmination of years of technical experiments, regulatory fights, and product re-thinking, not a passing trend.
Where’s Augur and Gnosis?
Long before Polymarket and Kalshi arrived, the decentralized prediction market sector was already crowded with Gnosis, which at its peak in August 2020 had over $85 million in total value locked, followed by Augur with over $13 million, per data from DefiLlama.
Augur, unveiled during the ICO era and founded in 2014 by Joey Krug, Jack Peterson, and Jeremy Gardner, went live in 2018, promising decentralized prediction markets with a native reputation token (REP) and an oracle system for reporting outcomes.
While the idea was solid on paper, early users quickly ran into practical problems. Third-party node services were uneven, and blockchain sync issues and high Ethereum gas fees in those days slowed markets.
As Alchemy, a blockchain infrastructure firm that also offered services to Augur, explained in a blog post, initially Augur launched with a “free third-party node service that was slow, unreliable, and frequently provided incorrect blockchain data,” costing the project months of recovery work.
Mike Garland, head of product at Alchemy, explained to The Defiant that Augur and Gnosis “were pioneers when they started prediction markets built on crypto rails, testing the limits of what decentralized applications could do at a time when blockchains were still in their infancy.”
“Many of the technical hurdles they faced, like scalability, transaction costs, and wallet UX, reflected the broader state of Ethereum at the time,” he added.
Garland noted that Polymarket is now also using Alchemy’s products.
Some suggested that Augur jumped the gun on its token, raising hype and funds before the platform had real users or liquidity, and then struggled for years just to get a basic app working on Ethereum. Odyssey Finance CEO Zane Hauffman noted in an X post that back in the days, Augur was “really awful, and also was hyped up for many, many years before actually launching.”
“You needed to download a desktop app, which was an Ethereum full node you needed to maintain to use it. It took hours just to connect. Gnosis v1 (Omen) was at least usable,” Hauffman wrote.
As DefilLlama founder @0xngmi noted in an X post, the “craziest thing is that Augur was #1 at some point, if they had kept going, they could have gotten Polymarket’s 9bn valuation.”
The Defiant reached out to Krug, one of Augur’s co-founders, multiple times for comment, but didn’t receive a response.
Foundation for New Rivals
Gnosis, the biggest prediction platform before Polymarket stepped into the game, took quite a different path.
Unlike Augur, which rushed its token and struggled to attract users, Gnosis, founded in 2015, focused on building the tools first: its Conditional Tokens Framework let anyone create markets and turn event outcomes into tradable tokens.
By July 2020, Gnosis had stopped running its consumer prediction site and focused on its core tech, while DXdao, a community-run collective, used that technology to build Omen, a decentralized platform for trading on event outcomes.
Ironically, Gnosis’s technology became a key ingredient for later winners like Polymarket, which runs outcome tokens as ERC-1155s on Polygon, while Gnosis itself shifted focus to other projects like Safe, CoW Exchange, and Gnosis Chain, dialing back its consumer-facing prediction market efforts.
Gnosis did not respond to The Defiant’s request for comment.
What Makes Polymarket and Kalshi Different
Polymarket and Kalshi tried to solve two basic questions: “Where does the liquidity come from?” and “Is the product legal and reliable for customers I care about?”
Polymarket’s edge came from a low betting threshold, clean UI, low-cost rails, and a strong on-chain ethos. Leveraging Gnosis’s conditional-token primitives, it mints outcome positions as ERC-1155 tokens on Polygon, keeping per-trade fees minimal. A hybrid off-chain/on-chain order book enables near-instant fills and familiar order types for retail users.
Yet, despite these advantages, Polymarket has still struggled with the reliability of its resolution mechanism as Universal Market Access oracles have frequentlysparked controversy, often favoring whales over average traders.
Kalshi took a different path, prioritizing legal certainty and institutional distribution with off-chain order matching, custody, and clearing, rather than building markets that run natively on blockchains.
This model keeps settlement, client custody, and compliance within traditional financial rails and regulators’ oversight. And it paid off in November 2020 as Kalshi secured approval from the Commodity Futures Trading Commission, becoming the first federally regulated prediction market of its kind in the U.S.
To begin bridging the gap, Kalshi hired John Wang, a crypto influencer, as it seeks to deepen its ties to the crypto community.
Polymarket, by contrast, operates offshore. However, recent developments show it also plans to enter the U.S. market, as in July, the company acquired QCEX, a regulated derivatives exchange and clearinghouse, for $112 million, providing Polymarket with the necessary regulatory approvals.
The company is also said to be planning to launch its native token, POLY, though details and timing have yet to be disclosed.
