“As prediction markets begin to show promise, negative rhetoric undermines their growth.”

Kalshi, a U.S.-regulated prediction market, has stirred controversy following a report that revealed it allegedly paid social media influencers to target its competitor Polymarket and its CEO, Shayne Coplan. The incident surfaced after the FBI raided Coplan’s home, which was connected to an investigation into whether Polymarket operated an unlicensed commodities exchange. Kalshi, seemingly seeking to take advantage of its rival’s misfortune, reportedly enlisted influencers to disparage Coplan and associate him with criminal behavior. One influencer, for example, shared a post with a derogatory comment about Coplan, and others insinuated parallels with FTX’s disgraced founder, Sam Bankman-Fried.

These actions have prompted criticism of Kalshi’s ethics, especially as it has long touted itself as a reputable, regulated entity. Critics, including Jeff Park of Bitwise Investments, have accused Kalshi of moral hypocrisy, undermining its regulated status through such smear tactics.

In a curious turn of events, shortly after the report, rumors emerged alleging that Kalshi itself was under investigation by multiple agencies, including the Federal Trade Commission (FTC). However, these claims were vague, lacked sourcing, and were quickly debunked. Polymarket denied any involvement in spreading the rumors, maintaining that it had no ties to the situation.

This feud occurs at a pivotal moment for the prediction market industry. While prediction markets gained renewed attention following Donald Trump’s election victory, their future could be shaped by an evolving regulatory landscape, particularly with the incoming administration. Kalshi, for its part, has already faced regulatory scrutiny, including a legal battle with the U.S. Commodity Futures Trading Commission (CFTC) over election markets. As the political winds shift, the industry could see new opportunities—though, as this episode shows, competition in the space is far from friendly.