Polymarket Wants to Join Rival Kalshi in Offering Margin Trading

Polymarket wants to join rival Kalshi in offering margin trading to clients, a move that could help the prediction market operator improve its courtship of professional market participants.

Shayne Coplan’s company recently filed an application with the National Futures Association (NFA) to offer non-collateralized trading. Platforms seeking margin approval must first apply to the NFA due to the fact margin trading involves leveraged derivatives and that body oversees the handling of collateral and leverage. Assuming Polymarket clears the NFA, the final decision on the prediction market’s ability to offer margin trading rests with the Commodities Futures Trading Commission (CFTC), the federal regulator of yes/no exchanges.

Currently, Polymarket operates as a fully collateralized prediction market.

Translation: The buying power of Polymarket clients is currently determined by the cash on hand in their accounts. For example, if a trader has $5,000 in their Polymarket account, that’s the extent to which they can buy event contracts. With margin, traders can amplify their purchasing power.

Why Polymarket Margin Quest Matters

Polymarket’s efforts to procure margin trading approval arrive as the company is gradually working its way back into the U.S. market.

Related delays put the company far behind rival Kalshi in terms of U.S. market share. Speaking of Kalshi, that company won approval to offer margin trading in late March, underscoring the impetus for Polymarket to join the club.

Competition is part of Polymarket’s margin quest, but there’s more to the story. By offering leverage, prediction market operators can improve their appeal to professional trading desks — the very clientele these companies want to lure.

Professional traders widely deploy leverage because it reduces their upfront capital commitments. By bringing more of those market participants into the fold, prediction market operators such as Polymarket can boost volume while enhancing liquidity.

It’s not yet clear when the CFTC will approve the Polymarket application, but it could take several months.

Prediction Market Odds and Ends

In other prediction market news, Brian Quintenz, previously President Trump’s choice to lead the CFTC, joined the Coalition for Prediction Markets (CPM) as a senior advisor. The prediction market trade group announced his appointment earlier this week. He was initially nominated to the commission by President Obama and started his tenure at the regulator during Trump’s first term.

Separately, Kalshi is contending with scrutiny pertaining to event contracts tied to sporting event weather delays. The CFTC approved those derivatives last year with Kalshi rolling out the instruments to the trading public earlier this year.

Some experts are speculating that weather delay contracts may be at odds with CFTC efforts to address derivatives that may run counter to the public interest. Weather delays can be judgment calls by game officials and that’s on the commission’s radar.

“The risk of inappropriate contact between market participants and officiating personnel and the risk of selective officiating raises public interest concerns because that risk threatens the integrity of the game, which is, in turn, a matter of public interest,” noted the commission in a proposed rules change statement.