Two of prediction markets’ biggest players — and biggest rivals — have come together to help launch a new venture capital fund aimed at supporting the growing industry. Polymarket’s Shayne Coplan and Kalshi’s Tarek Mansour are among the initial backers of 5c(c) Capital, per Bloomberg.
It’s a rare joint venture between Mansour and Coplan, who are known to be fierce rivals as they jockey for the top spot in the prediction market space.
Adhi Rajaprabhakaran and Noah Zingler-Sternig, both former Kalshi employees, founded 5c(c) Capital. The investment firm is named after the section of the Commodity Exchange Act that’s related to prediction markets. Fortune reports that the fund has raised $35 million. According to a pitch document, the founders are looking to “capitalize on the second-, third-, and fourth-order effects of what we built ourselves.”
First VC fund dedicated to prediction markets
According to the Bloomberg report, it’s the first VC fund dedicated solely to prediction markets.
“At the moment, prediction markets might appear to be just about sports, but that is only the latest chapter in what we believe to be a very long story,” wrote the founders.
Bloomberg reports that 5c(c) Capital positioned itself as a potential investor in analytics platforms that track the market, and even invests in trading firms that make markets on prediction markets.
“Adhi knows that the next few years are critical to build out infrastructure around prediction markets,” said Kyle Samani, former managing partner at the crypto VC fund Multicoin Capital (Samani also confirmed his involvement in 5c(c) Capital).
A “generational investment opportunity”
5c(c) Capital’s pitch document describes prediction markets as a “generational investment opportunity.” Others seem to agree: Kalshi is now approaching a $22 billion valuation, thanks to a $1 billion investment round led by Silicon Valley investor Coatue Management. Polymarket is eying a similar valuation of $20 billion, according to recent reports.
Rajaprabhakaran is a former full-time trader who worked in Kalshi’s internal market making arm, Kalshi Trading, for three years starting in 2022. Zingler-Sternig previously served as Kalshi’s head of operations and led the company’s integration with Robinhood Markets Inc.
Bloomberg also reported that the pitch document lists more than twenty prominent investors, including “a portfolio manager at Millennium Management, several crypto-focused venture capital funds, and the founders of other prediction market companies such as PredictIt.”
Venture capitalist Marc Andreesen invested via a separate fund, Moneta Luna, along with the firm’s leaders, Elena Silenok and Chris Dixon.
Both Jeremy Levine, CEO of gambling company Underdog Fantasy, and Jacob Fortinsky, CEO of sport-focused prediction market Novig, are on board as limited partners.
Sports markets future in flux
Thirty-five million dollars when both Kalshi and Polymarket are valued in the billions seems like a paltry amount. Perhaps, early investors might be waiting to see how these platforms weather the ongoing regulatory storm. On March 17, Arizona’s Attorney General Kris Mayes filed criminal charges against Kalshi, accusing the platform of operating an illegal gambling business.
Less than a week later, Nevada kicked Kalshi out of the state, a year after the Nevada Gaming Control Board issued a cease-and-desist against the platform (Polymarket, Coinbase and Robinhood also removed their markets from Nevada). And now a bipartisan bill is attempting to ban the very sports markets currently driving much of the event contract trading growth. Whether or not that growth continues to lean on sports will greatly depend on some key court and regulatory decisions coming down within the next year.
