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SOL Polymarket launches perpetual contracts to expand the boundaries of the prediction market
Polymarket, a prediction market platform that became famous during the 2024 U.S. presidential election, officially opened its perpetual contract products to traders on September 3. The move marks the platform's expansion of its business model, originally built around "yes/no" elections and sports betting, into leveraged derivatives.
Product launch and market expansion
According to Polymarket's product page, this new product called "Perps" included 10 trading pairs when it was launched: Bitcoin, Ethereum, Solana, HYPE, gold, silver, WTI crude oil, S & P 500 Index, Nasdaq 100 Index, and contracts that track SpaceX's share price. Subsequently, the product's coverage quickly expanded to 67 targets within a few hours.
As early as April this year, Polymarket revealed that it would launch this feature and set a leverage limit of up to 10 times. However, the perpetual contract launched this time is fundamentally different from Polymarket's traditional settlement contracts. Traditional contracts are only settled at US$1 or US$0 after the outcome of the event is determined; while perpetual contracts have no expiration date and continue to track the price trend of the underlying asset. In order to anchor the contract price to the spot price, the system makes hourly payment adjustments between long and short traders through a funding rate, with an absolute limit of 4% per hour.
Leverage Limits and Risk Management
According to Polymarket documents, the maximum leverage multiple for cryptocurrencies, the S & P 500, crude oil, gold and silver is limited to 20 times; while the maximum leverage multiple for individual stocks and other real-world assets (36 listed stocks including Tesla, Nvidia, Apple and Coinbase) is 10 times.
Maintain the margin ratio at half of the maximum leverage ratio. This means that for a position with a full leverage of 20 times, the position will be forcibly liquidated when the loss reaches approximately 2.5% of the margin submitted.
Compliance isolation of global layout from the U.S. market
Polymarket promoted the release on social media X, encouraging users to pursue combined trading strategies, such as long Bitcoin in the same account, betting on the Federal Reserve's next move, and shorting the response of the S & P 500. The company also claims that its products have the deepest liquidity and lowest rates in the crypto perpetual contract market.
However, these services are not open to U.S. users. Polymarket's Frequently Asked Questions (FAQ) explicitly prohibits users from placing orders from the United States, Canada, Cuba, Iran, North Korea, Syria, Crimea, Donetsk and Luhansk regions. U.S. traders are directed to Polymarket US, an independent exchange regulated by the U.S. Commodity Futures Trading Commission (CFTC).
This market segmentation stems from the settlement agreement Polymarket reached with the CFTC in 2022. At the time, regulators found that the company was operating an unregistered swap facility, fined it $1.4 million and ordered it to stop non-compliant contract business. Since then, Polymarket has re-entered the U.S. market in a more restricted manner.
Intense market competition
In terms of competition, Kalshi entered the U.S. market more than three months earlier than Polymarket. The CFTC approved Kalshi's Bitcoin Perpetual Contract on May 29, making it the country's first local Perpetual Contract product approved for listing. Since then, Kalshi has submitted perpetual contract applications for more than ten types of altcoins and one copper futures contract.
The bigger competitive challenge comes from the decentralized exchange Hyperliquid. The platform has dominated the trading of perpetual contracts on the chain. According to U.S. President Donald Trump himself, Hyperliquid is working with the CFTC and is expected to be open to U.S. traders soon.
A recent Bloomberg report further exacerbated the rumor, saying that Hyperliquid had entered into talks with Kraken's parent company Payward to achieve the above goal.
