Prediction Market Kalshi to Supply Price Data for Crypto Oracle Stork

10/29/2024 01:31

Initially, Kalshi's feeds will power perpetual futures contracts on decentralized exchanges. Eventually, the centralized betting platform might referee on-chain prediction markets.

Prediction market platform Kalshi has agreed to supply price feeds to blockchain oracle service Stork.
Initially, the companies expect the data to power perpetual futures contracts tied to prediction markets.
Eventually, Kalshi believes it could act as a referee for decentralized prediction markets, making final calls on whether predictions came true.

Kalshi, a U.S.-regulated, centralized prediction market platform and late entrant to this year's election betting boom, is building further ties with the cryptocurrency industry.

The company has agreed to supply price feeds to Stork Labs' network of oracle services that send data from the outside world to blockchains and decentralized exchanges. This will let developers build crypto applications informed by Kalshi's markets, where traders bet dollars on everything from the presidential race to American students' average reading and math test scores.

Separately, Kalshi has started accepting deposits of USDC, a stablecoin, or cryptocurrency that trades 1:1 for U.S. dollars, Fortune reported.

The tie-up with Stork is another sign of growing enthusiasm, in crypto and adjacent circles, for prediction markets following the breakout success of Polymarket, whose crypto-based platform has seen billions in trading volume this year, largely on the election. On Monday, U.S. stock brokerage giant Robinhood introduced presidential election contracts.

Initially, the companies, both based in New York, expect Stork's "data consumers" to incorporate Kalshi's feeds into perpetual futures, a type of derivative contract that has no expiration date. Historically, "perps" have mostly been leveraged bets on cryptocurrency prices, but Kalshi's data will enable such derivatives on the probabilities of a wide range of real-world events.

"The first set of requests that we started to hear at Stork around getting data directly from prediction markets was specifically from perpetual exchanges," said Meredith Pitkoff, founder of Stork Labs (not to be confused with the biomedical robotics startup of the same name). "There's a new trend where these decentralized exchanges want to list perp contracts on these prediction markets."

dYdx and Vega are among the DEXs that have announced such plans in recent months.

Down the road, Kalshi envisions providing resolution services for decentralized prediction markets through Stork's network, making the final call on whether a prediction came true or not.

"There are a lot of problems with resolution and how that works on on-chain markets, not just the user experience with disputes and stuff like that," said Jack Such, Kalshi's head of market research. "If a prediction market protocol isn't sufficiently decentralized, it's vulnerable to capture."

If, for example, an oracle service settles disputes by a vote of token holders and a group of them collude, "they can just choose to resolve markets however they want and pay themselves out with everyone's money," Such said. "It's really, really difficult and a long process to achieve sufficient decentralization in that regard."

Being regulated by the U.S. Commodity Futures Trading Commission gives Kalshi "a unique advantage" as a resolution provider, he said, because it faces "legal consequences" if it does anything suspicious with its resolution criteria. The company has "an incentive" to adjudicate matters fairly.

At least to start, Kalshi is providing the data to Stork's network for free. Ultimately, Such said, the arrangement could be a way to sign up more traders for its own, centralized platform, which does business only in the U.S.

"We're kind of hoping that a lot of these protocols that try to spin a prediction market using our data will eventually realize that it might be easier, assuming they're Americans and allowed to trade on Kalshi, to just come trade on Kalshi," he said. Noting that Wall Street heavyweight Susquehanna is trading on the platform, Such added, "liquidity will never be an issue for us."

It remains an open question whether prediction markets can sustain their popularity after the election. Pitkoff said Stork is "talking to a lot of projects that are interested in making it a social experience" where small circles of friends could spin up prediction markets for themselves. Stork has also seen a lot of interest in prediction markets about sports, she said.

In March, Kalshi began listing prediction markets on the prices of bitcoin and ether – although, to date, the bets themselves have all been settled in old-fashioned fiat. That may change with the new USDC option.

Kalshi spent most of the year locked out of the election betting bonanza as it fought the CFTC in court for the right to list political event contracts. The company won the case last month and listed congressional and presidential contracts a few weeks ago.

UPDATE (Oct. 28, 17:03 UTC): Adds new information about Kalshi accepting USDC deposits.