‍In 2026, major institutions will launch new prediction markets one after another.

From the competition between NFT and perpetual contract exchanges in the past five years, we have learned that differentiated products can quickly capture market share.

Although existing leading platforms have liquidity and regulatory advantages, they are burdened with heavy product and technical debt, making it difficult to flexibly respond to the impact of new players.

So how should new entrants compete? In my opinion, the core of differentiated competition in the prediction market revolves around seven dimensions:

1. Product quality

The founding team can create differentiation in front-end user experience, API stability, development documentation, market structure, rate mechanism and other dimensions.

Most of the current established platforms have obvious shortcomings: unreasonable gear settings, opaque rate rules, slow and unstable APIs, and a single order type.

High-quality product experience, especially services for API programmatic traders, is itself a lasting core advantage, allowing it to gain a firm foothold even in the face of opponents with stronger channel capabilities.

2. Asset category and market selection

The current trading volume in the prediction market is mainly concentrated in the sports betting and crypto native markets.

New exchanges can launch exclusive markets that other platforms cannot provide. This advantage will be further amplified if paired with a vertical field strategy (point 7).

3. Fund efficiency

Fund efficiency determines the effectiveness of traders' collateral use. There are currently two core areas:

First, interest-bearing collateral: instead of letting idle funds earn only treasury bond returns, it provides higher returns, similar to Lighter's support of using LP deposits as collateral and HyENA's USDE margin perpetual contract model.

Second, the margin mechanism. Due to gap risks, the market generally underestimates the leverage value of prediction markets, but the platform can provide limited leverage for continuous markets, or implement combined margins for hedging positions.

Exchanges can also subsidize lending pools or act as market-making counterparties to internalize gap risk rather than letting users share losses.

4. Oracle and market settlement

The reliability of oracles is still a systemic shortcoming in the industry. Delayed settlement and incorrect results will greatly amplify transaction risks.

In addition to improving stability, the platform can implement innovative oracle mechanisms: human-machine hybrid systems, solutions based on zero-knowledge proofs, contextual AI-driven oracles, etc., unlocking new markets that traditional oracles cannot support.

5. Liquidity supply

Exchanges cannot survive without liquidity. Possible paths include: paying to introduce professional market makers, using tokens to incentivize ordinary users to provide liquidity, and adopting Hyperliquid's HLP aggregation liquidity model.

Some platforms can also fully internalize liquidity, following the model of FTX relying on Alameda as an internal trading team.

6. Regulatory Compliance

Kalshi has achieved embedded distribution with Robinhood and coinbase by virtue of its US compliance qualifications, and captured retail traffic that Polymarket cannot reach.

There are still a large number of jurisdictions and regulatory frameworks available for deployment, and compliance prediction markets can unlock similar channels, such as adapting to US state gambling regulatory rules.

7. Vertical strategy vs horizontal strategy

Horizontal strategy: Similar to Hyperliquid in the field of perpetual contracts, it focuses on building top-level underlying trading infrastructure, invites third parties to build front-end and vertical scenarios, and encourages ecological builders to create new markets and develop revenue-generating front-ends (such as phantom) through proposals.

Vertical strategy: Represented by Lighter, it independently controls the front-end, launches mobile applications, and creates a full-process user experience, focusing on integrating experience and directly connecting users.

Polymarket's resistance to deeply embedded cooperation and Kalshi's open attitude are an intuitive reflection of the trade-off between the two strategies.