Lack of Oversight Limits Institutional Participation
Kalshi
The real advantage of regulation is not just legality, it is that regulation turns a niche trading app into infrastructure other financial firms can actually plug into. Kalshi can offer institutions a venue with KYC, surveillance, participant rules, market maker programs, and a known regulator, while an offshore crypto market without that framework leaves firms exposed to compliance, custody, and counterparty risk even if liquidity is strong.
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Polymarket’s offshore posture came out of direct enforcement. In January 2022, the CFTC ordered Blockratize, the operator of Polymarket, to stop offering non compliant markets and wind them down, which is the clearest example of why institutions view unregulated event markets as legally fragile.
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Institutional participation needs more than volume. It needs participant eligibility rules, authorized users, market maker obligations, conflict controls, and surveillance. Polymarket US now has that rulebook structure, but the earlier offshore model did not, which limited the kind of broker, fund, and market maker that could participate at scale.
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That difference shapes distribution. Robinhood, Coinbase, and sportsbooks can route order flow into a regulated venue more easily than into a crypto native offshore exchange. In practice, the platform with accepted compliance plumbing becomes the liquidity hub that others build on top of.
Going forward, event contracts should look less like a crypto side market and more like a regulated market structure battle. As more brokers, sportsbooks, and exchanges enter, the winners will be the venues that combine deep liquidity with enough oversight for institutions to commit capital and route customer flow confidently.