Key takeaways:
- Prediction markets and crypto derivatives are converging around perpetual-style trading, blurring the line between pricing probability and price direction.
- Hyperliquid and others are testing regulated paths for onchain exchanges incorporating perps and event trading.
- Perpetual mechanics are being explored as a way to extend liquidity and keep capital active across the full lifecycle of prediction markets.
- Despite growing overlap in trading behavior, experts say the two systems remain structurally distinct in logic, even as that distinction becomes harder to see in practice.
The line between prediction markets and crypto derivatives is starting to disappear as both converge around continuous trading of price and probability. Polymarket and Kalshi are both introducing perpetual-style mechanics that transform event contracts from fixed, binary bets into continuous, leveraged trading systems that behave more like crypto derivatives venues than traditional forecasting tools.
Speaking with DeFi Rate, Alvin Kan, the COO at Bitget Wallet, explained that both perpetuals and prediction markets are “ultimately mechanisms for expressing real-time conviction.”
“The introduction of perpetual-style contracts on events by platforms like Polymarket and Kalshi is beginning to blur that distinction, allowing users to move seamlessly between asset-based and outcome-based positioning.”
The shift is now being mirrored on the crypto side too. Hyperliquid is preparing to launch event trading and also just filed a comment letter with the Commodity Futures Trading Commission urging a regulatory path for decentralized prediction markets. Meanwhile, Solana-powered derivatives platform Backpack Exchange is working toward a CFTC-regulated perpetuals framework. Such moves further signal convergence around a shared market structure as well as regulatory oversight.
If that trajectory continues, the distinction between trading assets and trading outcomes may matter less than who sets the rules governing both. With firms like Hyperliquid already pressing for a decentralized path and others pursuing regulated frameworks, the next phase of competition is as much about regulatory design and access as market share.
Crypto and prediction markets converging on multiple fronts
In summer 2025, attention shifted toward real-world asset (RWA) tokenization with the introduction of tokenized equities. That coincided with the surge of prediction markets, led by platforms such as Kalshi and Polymarket and crypto exchanges integrating event contracts into their own products. Now, those two paths appear to be converging around the common product of perpetual futures.
The convergence is also happening on the regulatory front. In a comment letter to the CFTC filed on April 30, Hyperliquid’s policy arm argued that decentralized prediction markets should have an affirmative path under U.S. rules, positioning blockchain-based systems as a more transparent and resilient extension of the derivatives market structure.
At the same time, prediction markets’ push toward perpetual-style design reflects a core limitation of prediction markets: traditional prediction markets lose momentum as they approach resolution. Liquidity thins, positions become binary, and traders have limited flexibility to actively manage risk. This is where perpetual-style mechanics aim to remove that friction by keeping positions open, adjustable, and continuously tradable.
We price the future.
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Perps are coming to Polymarket.
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Bitget Wallet’s Kan explained that users are increasingly deploying perps for three core reasons: high-conviction directional exposure, hedging spot positions, and capital-efficient allocation across a broader set of asset classes including Bitcoin (BTC), Ethereum (ETH), as well as tokenized equities and commodities.
However, not all industry experts agree the convergence could mean the two systems are becoming identical.
“The convergence is in the rails and infrastructure, not the logic,” said Shai Novik, the executive chairman and co-founder of Enlivex.
This is because prediction markets were built to answer one question: Will a certain event happen, or not? Crypto perpetuals, on the other hand, were built to bet on which direction a price will move.
“Layering one on top of the other does not erase their distinctions, it just makes them harder to delineate. The risk is that products start to look identical before the regulatory frameworks can catch up to what is happening.”
Perps solve a key friction point for prediction markets
If convergence explains why prediction markets are starting to resemble derivatives, liquidity explains why the design is changing in the first place. Traditionally, prediction markets have struggled to sustain deep liquidity throughout the life of a contract. Activity tends to build early, then thin out as outcomes become clearer and positions turn increasingly binary.
That structure creates a persistent friction point. Traders are often reluctant to maintain exposure in markets that will eventually resolve to zero-sum outcomes with limited flexibility to adjust risk.
“Prediction markets lose liquidity near resolution because they are binary and terminal. Traders do not want to hold a position that can go to zero with no chance to adjust,” Enlivex’s Novik said.
Essentially this means that liquidity is often concentrated in shorter time windows, rather than sustained across the full lifecycle of a market. Perpetual-style mechanics are being explored as one potential way to extend that lifecycle. By removing expiry and allowing continuous position management, they keep capital engaged for longer periods, without fundamentally changing the fact that prediction markets ultimately resolve into a single outcome.
“Perpetual mechanics keep capital active for longer, which improves liquidity during the life of the market,” Novik added.
However, where the shift becomes more prominent is in how liquidity providers manage risk across such markets. Under their current design, prediction markets struggle to scale to institutional liquidity levels.
“Prediction markets are an exciting idea that are really difficult to get fully institution-scale because, as they’re currently constructed, it’s hard to pay market makers enough to take on the risk of taking the other side of informed trades,” said Chris Boulos, the president of Dromos Labs.
The core issue comes from asymmetric information risk. According to Boulos, if one participant has early knowledge of an event outcome, market makers are exposed to potentially large losses on positions that cannot be easily hedged within the same system.
“A key benefit of perpetuals here is that they could reinforce liquidity for a key subset of hot markets related to events specifically relating to asset prices,” he said.
This also means that liquidity providers are no longer forced to take isolated directional exposure within prediction markets alone. Instead, they may be able to offset risk externally within related perpetual markets, effectively creating a hedging loop between the two systems.
A new market structure for expressing belief
Taken together, the convergence between crypto derivatives and prediction markets is representing the emergence of a shared trading language built around continuous expression of probability, price, and sentiment. Across both systems, the shift centers around more leverage, more flexibility, and more continuous participation in markets that were previously defined by fixed outcomes or discrete pricing windows.
Yet even as distinctions remain, the functional overlap is becoming harder to ignore. Traders are increasingly positioning not only on price, but on narrative, expectations, and event probability, whether through crypto prediction markets or perpetual futures. Such a shift could begin to reshape how market participants think about exposure itself.
“Ultimately, the great use case of prediction markets is the ability to add a new dimension to express expectations about the future as part of an integrated portfolio strategy, and they will grow to the extent that they themselves can integrate with the broader financial system,” Dromos Labs’ Boulos said.
If that trajectory continues, the distinction between trading assets and trading outcomes may become less relevant than the system they now appear to share: a continuous, leveraged infrastructure for pricing belief in real time.
