Two of the fiercest rivals in prediction markets are quietly joining forces as investors. The CEOs of Kalshi and Polymarket are backing 5(c) Capital, a new venture fund targeting the prediction markets ecosystem with a planned $35 million debut vehicle, according to reports from Fortune and Bloomberg. The move signals a pragmatic détente in a red-hot category where shared infrastructure could determine who wins the next phase of growth.
Inside the New Prediction Markets Venture Fund 5(c) Capital
5(c) Capital is led by Adhi Rajaprabhakaran, a former trader at Kalshi, and Noah Zingler-Sternig, Kalshi’s former head of operations. The name nods to Section 5c(c)(5)(C) of the Commodity Exchange Act, the provision the CFTC uses to scrutinize event contracts deemed contrary to the public interest—a reminder that regulation is not a sideshow in this industry but its central stage.
The fund plans to invest in roughly 20 startups building the category’s plumbing—market makers, data and index providers, risk engines, and tooling for compliance, identity, and pricing. Beyond Kalshi CEO Tarek Mansour and Polymarket CEO Shayne Coplan, backers reportedly include Marc Andreessen via Moneta Luna and Ribbit Capital founder Micky Malka. Kalshi confirmed Mansour’s participation; Polymarket has not publicly commented.
Why Bitter Rivals Are Aligned as LPs on Shared Infrastructure
Kalshi and Polymarket compete head-to-head yet occupy distinct lanes: Kalshi operates as a CFTC-regulated exchange offering dollar-settled event contracts to U.S. users, while Polymarket runs crypto-native, on-chain markets with global liquidity and a more permissive product set outside the U.S. Those differences make shared infrastructure—liquidity provision, standardized event definitions, robust data feeds—mutually beneficial.
Backing a specialized fund is a way to accelerate “second- and third-order effects” of prediction markets without picking sides on product. Think of the early days of crypto exchanges: rivals competed fiercely on listings and fees but often co-invested in custody, market data, and wallet security because the rising-tide infrastructure was too costly to build alone and too important to ignore.
A Market Surging On Volume And Visibility
Prediction markets have moved from curiosity to consequential in just a few cycles. Public dashboards for major on-chain venues showed unprecedented open interest during the last U.S. election cycle, while regulated event contracts on macro indicators, weather, and sports-related outcomes drew new classes of hedgers. Banks and corporates increasingly discuss event risk hedging alongside FX and rates exposures, a sign the category is entering mainstream risk management conversations.
Investor enthusiasm is matching that trajectory. The Wall Street Journal reported that Kalshi is raising $1 billion at a $22 billion valuation, roughly doubling in a matter of months, while Polymarket is said to be in talks for new financing that could value it near $20 billion. Those figures underscore how quickly the market is scaling—and how urgently it needs backbone services that reduce friction and regulatory uncertainty.
Regulation Remains the Hard Gate for Market Growth
Regulatory clarity will continue to shape winners. Kalshi has sparred with the CFTC over election-related contracts, highlighting the agency’s broad public-interest test under 5c(c)(5)(C). Polymarket, for its part, settled with the CFTC in 2022, paid a civil penalty, and implemented U.S. access restrictions while expanding internationally. Building compliance-grade identity, reporting, and surveillance tools—likely core areas for 5(c) Capital—could unlock institutional liquidity and smoother U.S. participation.
Expect the fund to back startups that make markets safer and easier to use:
- Standardized event taxonomies
- Oracle and data integrity solutions with audit trails
- Market-making systems that reduce spreads during volatility
- Index designers that package event risk into benchmarks akin to VIX or sector-specific gauges
What to Watch Next for Prediction Markets, Liquidity, and Policy
Three signposts will show whether this cross-aisle bet pays off.
- Institutional demand: look for corporates and funds to hedge earnings events, regulatory decisions, and geopolitical timelines with standardized contracts.
- Interoperability: bridges that let capital move between regulated dollars and on-chain liquidity without compliance gaps.
- Policy momentum: clear, consistent rules on what constitutes permissible events and how exchanges supervise markets.
The symbolism is hard to miss. Two archrivals are effectively underwriting the neutral layer their platforms need to scale. If 5(c) Capital can seed the right builders in market structure and compliance, the next wave of prediction markets may look less like a scrappy experiment and more like a durable asset class.
