Is Polymarket Really Worth $8 Billion?
Valuations get wild when finance and gambling share the same playbook
Two guys were on a panel last week…
If we told you it was prediction markets-related and asked you to guess who we’re talking about, you’d probably say Shayne Coplan, CEO of Polymarket, and Tarek Mansour, CEO of Kalshi. These two companies are locked in a fierce battle to capture the next generation of traders… uhm, gamblers.
Coplan and Mansour don’t like each other. Okay, maybe, it’s not Kobe and Shaq, there was at least a handshake and eye contact, after all.
But it’s not exactly buddy-buddy either. The best way to describe their current relationship, perhaps, is that they don’t like each other–but they may need each other.
Back to our guessing game: Coplan and Mansour sitting together on a panel is newsworthy, so it would’ve been a good guess–just not the best one. What were the two doing on an SEC/CFTC harmonization panel anyway?
Turns out the real headline was Coplan and Jeff Sprecher, Founder, Chair and CEO of Intercontinental Exchange, Inc. (NYSE: ICE), sitting in a panel together. And not just together–right next to each other.
Was that a coincidence? Knowing what we know now, perhaps not.
Here’s the ICE press release.
Andrew Kim nailed it with his comment–trying to get prediction markets into the mainstream, or shall we say, onto Main Street, seems to be the real objective here.
So, the deal values Polymarket at $8 billion pre-money. Just a few months ago, they raised $200 million at a $1 billion valuation. Did we mention prediction markets are moving fast?
We’d Love To Be A Fly on the Due Diligence Wall
A deal of this caliber generally takes months. Okay, prediction markets move fast, so maybe deal timelines get compressed when the company being invested in is itself a prediction market. But still, months, right? We doubt it was weeks and certainly not days.
There’s financial due diligence, there’s tax due diligence, and there’s legal due diligence. These lanes matter in every deal–small or large, public or private. This is a massive deal: A public company taking a meaningful stake in a private one; those lanes become even more consequential.
Put all of that together, and a reasonable inference is that somebody out there looked at Polymarket’s legal positions and got comfortable. Perhaps it was a red flag, but not a dealbreaker. Perhaps it was assessed as medium risk with a bit of a price concession. Or maybe–just maybe–it was a non-issue. This is prediction markets and the lines are blurring anyway. It’s not out of the question that it wasn’t even flagged.
We don’t know, and unless the due diligence deck surfaces one day in a court proceeding or elsewhere, we likely never will. What we do know is that the prediction market theater is going strong.
One could argue that Kalshi and Polymarket have similar risk profiles. To be sure, their paths to existence diverged: Kalshi took the CFTC head-on in court, while Polymarket settled with the CFTC first–and Coplan survived an FBI raid later. But today, both companies find themselves in roughly the same spot: Heavy reliance on sports, then elections, then everything else.
To be clear, we don’t think Mansour’s hand is as strong as he thinks it is. His company emerged on this side of the law only because the CFTC had a sudden change of heart, and then dropped the appeal right when it looked like the Court of Appeals was leaning toward the resurrection of the economic purpose test (if it was ever dead), and away from both parties. It’s difficult to say the issue was fully litigated. This was… half a case, at best. We believe Kalshi’s story is far from over.
Coplan’s stance is similarly problematic but he went further, deciding to play the provocateur. We’re having an SEC/CFTC harmonization meeting, and a prediction market entrepreneur elicits a middle finger from the head of a revered financial institution? This is not the country we used to know.
One wonders whether all of that is just a calculated wager on Coplan’s part. When he agitated Duffy and got flipped off, he immediately turned that into an advertising opportunity:
Or maybe it was cockiness on display. Hard to resist the temptation–if an $8 billion dollar deal was signed off on (or really close), just waiting to be announced to the world in a few days.
Whether that confidence is warranted is a different question altogether. Our take is simple: The boundaries between finance and gambling are blurring so quickly, the legal risks are likely not being priced correctly. Multiple scenarios could play out, but at least three could leave Polymarket with a fraction of the markets it operates today–turning the business into a shadow of its former self. (This post is not legal advice, please do your own due diligence and consult your own attorney)
When Coplan took the mic at the panel around the 30-min mark, one of the first things he said was:
You may be seeing the odds.
We have seen them, Shayne. And they don’t look good for you.