The crypto-exchange playbook, again

If you watched crypto exchanges grow up, the last two years of prediction markets will feel like a rerun. A product lives for years in a grey zone — clever, faintly disreputable, run mostly offshore. Then a U.S. regulator draws a line and says what the thing legally is. The moment it becomes legitimate, the rest of the world stops ignoring it and starts licensing it — country by country, one regulator at a time. And in each market that opens, the first venue to show up with a license tends to capture most of the volume and then prove almost impossible to dislodge.

That is not a story about prediction markets. It is the story of crypto exchanges, and before that of regulated derivatives, and of stock exchanges before that. Prediction markets are just the newest asset class to run it. This piece is about why the pattern repeats — and why, if it holds, the thing worth owning is not the matching engine. It's the license.

The playbook, in five moves

Strip the specifics away and the pattern is mechanical. It runs in the same order every time.

One: a new asset class appears in a grey zone. Something genuinely new starts trading before anyone has decided what it is. Bitcoin traded for years before a regulator would call it anything. Event contracts traded on Intrade and offshore books long before they were legal at scale in the U.S. The product works; its legal status is a question mark; serious capital stays on the sidelines because you cannot build on a question mark.

Two: the US legitimizes it first. A U.S. regulator is usually the one that ends the ambiguity, because the U.S. has the deepest capital markets and the most-watched rulebook. Crypto spent the 2010s being slowly defined by the SEC and CFTC — what's a security, what's a commodity, who may list it. For event contracts the moment was cleaner and earlier: in 2020 the CFTC recognized them as a regulated asset class,¹ turning a grey-zone wager into a licensed financial product. (I traced that decision in detail in The CFTC and the birth of an asset class.) Legitimacy doesn't make the product better. It makes it bankable.

Three: once legitimized, every country regulates it — one at a time. A U.S. green light is a starting gun, not a global rulebook. Every other jurisdiction still has to decide for itself: its own statute, its own licensing regime, its own supervisor. This is the slow part, and it never happens all at once. It took years for crypto exchanges to assemble the patchwork — a BitLicense in New York, a payments license in Singapore, registration in Japan, MiCA across the EU. Each market opens on its own clock.

Four: exchanges are winner-take-most. An exchange is not a normal business — it's a liquidity network, and liquidity is reflexive. Traders go where the order book is deepest because depth means tight spreads and reliable fills; and the book is deepest where the traders already are. The advantage compounds on itself.² Volume begets tighter spreads begets more volume. In a market with that structure, leads don't erode — they widen, and second place is a long way back.

Five: the first licensed venue in each market wins, and stays won. Put moves three and four together and the conclusion is forced. In each jurisdiction, the venue that arrives first with a license starts the liquidity flywheel before anyone else is legally allowed to spin one. By the time a competitor clears the same regulator, the incumbent's book is already the deepest in the country — and the network effect that made it deep now defends it. First-and-licensed is a very hard position to take from.

We have run this script before

The cleanest precedent is the one most people lived through: crypto exchanges. Bitcoin began as the ultimate grey-zone asset — borderless, permissionless, regulated by no one. Then the U.S. started drawing lines, and a telling thing happened. The venue that won the American market was not the most permissionless or the cheapest. It was Coinbase — the one that chose, early and deliberately, to operate inside the U.S. regulatory perimeter, collecting money-transmitter licenses state by state and courting oversight that its offshore rivals treated as a threat. Being regulated-first was slower and more expensive. It also made Coinbase the exchange American institutions and ordinary users trusted, and it became the U.S. leader and the first crypto company in the S&P 500.³ Compliance wasn't a tax on the business. It was the moat.

Now zoom out from the U.S., because the global picture is where the playbook really shows its hand. Crypto did not consolidate into one planetary exchange. It fractured along regulatory borders. There was a global, lightly-regulated venue — Binance — that chased volume everywhere at once. But inside individual regulated markets, local licensed champions emerged and dominated their home turf. The textbook case is Korea: a tightly-regulated market where domestic rules pushed trading onshore, and a single licensed exchange, Upbit, came to handle the overwhelming majority of the country's volume — a share offshore venues simply could not contest from outside the perimeter.⁴ One asset class, but the map of winners was drawn by who held which license where.

That is the shape to keep in mind: a regulated-first leader in the anchor market, a global lightly-regulated alternative, and a patchwork of per-country licensed champions underneath. It is not unique to crypto. Regulated derivatives consolidated onto a handful of licensed exchanges; national stock markets each have their dominant venue. Whenever a tradable asset class becomes regulated, the market organizes itself around licenses, and the network effects of liquidity make each licensed incumbent hard to move. Prediction markets are simply the next entry in a long list.

The same map, redrawn for event contracts

Hold the crypto template up against prediction markets today and the correspondence is almost uncomfortable.

The regulator that legitimized the asset class is, once again, an American one — the CFTC, which has supervised event contracts as a recognized class since 2020. The regulated-first U.S. leader is Kalshi, the first federally-licensed event exchange, which chose the slow path of operating inside CFTC oversight rather than offshore — and is now valued around $22B.⁵ The global, on-chain, lighter-touch alternative is Polymarket — the Binance-shaped role in this analogy: bigger reach, looser perimeter, and now wired into traditional finance through the Intercontinental Exchange, owner of the NYSE, which has committed up to $2B — not to gamble, but to become the global distributor of Polymarket's event data.⁶ And the per-country licensed champions — the Upbits of prediction markets — mostly do not exist yet. That is the part of the map that is still blank.

Crypto exchanges

The script, last time

• Regulator that legitimized itSEC / CFTC (US)
• Regulated-first US leaderCoinbase
• Global / lighter-touch venueBinance
• Per-country licensed championUpbit — Korea

Prediction markets

The script, again

• Regulator that legitimized itCFTC (US) — 2020
• Regulated-first US leaderKalshi — ~$22B
• Global / on-chain venuePolymarket — ICE-backed for data
• Per-country licensed champion— still unclaimed —

That blank row is the entire thesis. The U.S. moves of the playbook have already happened — the asset class is legitimate, the regulated-first leader is built, the global alternative is funded by the people who own the New York Stock Exchange. What has not happened is stages three and four playing out across the rest of the world: every other market deciding to license event contracts, and a first licensed venue claiming each one. If the pattern holds, those seats get filled the same way they did in crypto — by whoever shows up first with the compliance to operate inside the local rules.

Why the moat is the license, not the tech

It's worth being blunt about what this implies, because it cuts against startup instinct. The matching engine, the order book, the market-maker, the resolution pipeline — all of it is well-understood and, frankly, copyable. Nothing in the mechanism of a prediction market is a durable secret; I've spent most of this series explaining exactly how it works, in public. If the technology were the moat, the category would be a commodity race to the lowest fee.

But the binding constraint isn't technical. In most countries, a venue that pays out real money on real-world events is a licensed financial product, and the right to operate one is granted one jurisdiction at a time — slowly, with capital requirements, surveillance obligations, and someone accountable for the integrity of the book. That right does not transfer across borders, it can't be forked, and it can't be shipped in a sprint. It is the one input a competitor cannot simply clone. Which is why, in every prior run of this playbook, the durable winners were the ones who treated regulation as the product surface — and why I'd bet the same is true here.

The map, country by country

If the moat is the license and the license is won one country at a time, then the whole contest stops being a product question and becomes a geography one. Whoever is first to be legal and liquid inside a given market tends to keep that market — and "a given market" means a country, with its own regulator, its own politics, its own idea of what an event contract even is. The real game in this category is not a better order book. It is a race across a map, fought regulator by regulator, and most of the map is still blank.

Before the regions, the logic that governs all of them. Start from a fact that is true almost everywhere: the demand already exists. People want to take positions on elections, sports, rates, weather, and whatever else has a clean answer — and if no licensed venue will let them, they go to an offshore one that will. That is the status quo in most of the world right now: real money, real volume, sitting on platforms a national regulator cannot see, supervise, or tax.

Given that, a regulator has essentially two end-states to choose between. Offshore and invisible: the activity happens anyway, on platforms beyond reach, with no surveillance, no consumer protection, and no record. Onshore and surveilled: the activity happens on a licensed venue with position limits, audited settlement, identity checks, and a regulator who can pick up the phone. Stated that way, the long-run preference of most serious regulators is not mysterious. Banning the demand does not remove it; it exports it. Licensing it — carefully, with conditions — is how you get jurisdiction back. Onshore beats offshore is not a prediction that every country welcomes event contracts; plenty will not, and some will ban them outright and mean it. It's a claim about direction: where these markets have moved from grey to legal, it has usually been because a regulator decided that supervising the thing beat pretending it wasn't happening.

So here is the map as it stands — four broad zones, from the most settled to the most open. The honest caveat up front: regulatory status ranges from "decided in court" to "genuinely nobody knows yet," and I've tried to label which is which. Where a country's posture is unclear, I say so rather than inventing a license that doesn't exist. Treat every line as a snapshot of a moving picture, not a finished atlas.

United States — the most advanced

The US is the furthest along, and it's the reason this category exists in its current form. The CFTC — the federal derivatives regulator — treats event contracts as derivatives, the same legal family as a futures contract on oil or wheat, a framing that dates to its 2020 recognition of the asset class. That's the hinge the whole market turns on: once these were derivatives rather than wagers, a federally-regulated exchange could list them, and Kalshi is exactly that. But "advanced" does not mean "uncontested." The sharpest fight was over election markets: whether a CFTC-regulated venue could list contracts on US election outcomes was litigated, hard, before it resolved in favor of the exchange being allowed to offer them.⁷ That episode is the template for what every market goes through — a real legal argument about whether this specific product is allowed, settled in a specific venue, with a specific answer. The US has more of those answers on the books than anyone. It's the closest thing to a finished tile, and even it is still being colored in.

Europe — fragmented

Europe is where the single-market intuition breaks. The EU does have a unified crypto framework — MiCA, the Markets in Crypto-Assets regulation, which came into force across 2024–2025 and finally gave crypto-assets a common European rulebook.⁸ The trap is assuming MiCA covers prediction markets. Largely, it does not. An event contract is not obviously a crypto-asset, and in much of Europe it lands instead under national gambling regimes — which are not harmonized at the EU level and differ sharply country to country. The cleanest example is the United Kingdom, which regulates betting through the Gambling Commission.⁹ Whether a given event contract is a financial instrument (one regulator, one rulebook) or a bet (a different regulator, a different rulebook) is precisely the kind of line that varies by jurisdiction — and the answer determines who can offer it, to whom, and under what conditions. I won't pretend to a country-by-country license map for Europe, because an honest one does not exist yet. The reliable statement is structural: Europe is fragmented, the relevant authority is usually national rather than pan-European, and the financial-versus-gambling question is live in a lot of places at once.

Asia — highly varied

Asia is the widest spread on the map — the same continent contains both the hardest bans and some of the largest latent demand. Several jurisdictions prohibit most forms of betting and online wagering outright, and an event-contract venue would run straight into those prohibitions. Others are conservative but not closed: financial centers like Singapore and markets like Japan run tightly-regulated regimes where novel instruments are approached cautiously, through existing financial and gambling law, rather than waved in. I'm deliberately not assigning specific licenses to specific Asian countries here, because the regimes are varied, fast-moving, and in several cases unsettled enough that any precise claim would be a guess dressed up as a fact. What is safe to say is the shape: posture varies enormously — outright bans in some places, cautious frameworks in others — while the underlying demand across the region is large and, today, mostly served offshore. That gap, between heavy latent demand and little licensed supply, is the whole reason the region matters to anyone building here.

Emerging markets — the open field

This is where the map is most blank, and therefore most interesting. Across much of the emerging world there is no settled regime for event contracts at all — not a ban, not a license, just an absence. Demand is present (often large and young); supply is offshore; and over the coming years many of these markets will have to decide how to regulate the category, because the activity is already happening and a "no rule" state is unstable. That decision window is the opportunity. In a market that has not yet drawn its lines, a licensing-first operator — one that shows up early, builds surveillance and settlement in from the first trade, and works with the regulator to define the rules rather than around them — can win the position before the rules harden.

Here is the whole thing as one picture: four regions, the primary regulator or framework in each, and an honest posture label. The colors are deliberate — accent for where a licensed path clearly exists, amber for contested or gambling-framed, red for grey or banned. Note how little of the map is solid blue.

One honest reading of that figure: exactly one row is solid blue. The category's home market is settled; everywhere else ranges from "fragmented and contested" to "blank." That is not a weakness of the thesis — it is the thesis. A finished map has no land left to claim.

So combine the two forces. Winner-take-most says that within any single market, liquidity concentrates onto one venue. Per-country licensing says that "any single market" is a country with its own gate, and you have to be let through that gate to compete at all. Multiply them and you get the structure of the whole opportunity: a land grab, where the first venue to be both licensed and liquid in a given market is very hard to dislodge — because by the time a second venue clears the same regulator, the liquidity has already pooled with the first, and depth is the one advantage you cannot simply copy. The sequence is the same in every market: the asset class gets legitimized, an operator wins the license, liquidity concentrates onto the first credible licensed venue, and then that lead becomes durable. Legitimize → license → concentrate → hold. Run that loop once per country, and the map fills in one tile at a time.

First licensed venue Everyone else

That is the same loop crypto exchanges ran a decade ago, now laid over a globe. The network-effect engine that makes winner-takes-most the rule rather than the exception is a thread of its own; here it's enough to take it as given and watch what it does to a map. I'm confident about the shape — winner-take-most plus per-country licensing makes this a land grab, and the early, licensed, liquid venue in each market has a structural edge. I'm not confident about the schedule, the boundaries, or which specific tiles ever turn blue. The map is being drawn in real time, most of it is still blank, and the surest thing on the page is that the version a year from now will look different.

Bigger than prediction markets: perps come onshore

If the map is how the playbook spreads across geographies, the next move is how it spreads across products — and that move is coming into view. The CFTC looks set to do for crypto perpetual futures — "perps" — what it did for event contracts: open a door to offer them, regulated, onshore in the United States. And the venue best positioned to walk through it is not a crypto exchange. It is Kalshi, the company that built the leading federally regulated event-contract exchange, poised to list a regulated perpetual on Bitcoin.¹⁰ The day a prediction-market venue lists that perpetual, it becomes a crypto-derivatives venue, with the same regulator's blessing, in a single move. That is the moment this thesis stops being about prediction markets and becomes about something larger — a regulated-derivatives platform that happens to have started in event contracts.

What a perp actually is

Start with the product, because the name is doing a lot of work. A perpetual future is a derivative that tracks the price of an underlying asset — Bitcoin, say — with two features an ordinary futures contract doesn't have. First, no expiry: a normal future settles on a fixed date, but a perp never matures, so you can hold the position indefinitely. Second, a funding rate: a small payment that flows between longs and shorts at regular intervals to keep the perp's price tethered to the spot price.¹¹

The funding rate is the clever part. With no expiry date forcing convergence, what stops a perp's price from drifting away from spot? Money does. When the perp trades above spot, longs pay shorts; when it trades below, shorts pay longs. So holding the rich side costs you and holding the cheap side pays you, and that asymmetry pulls the contract back toward the underlying. Write the long's per-interval payment as the position size times the gap, and you get the mechanism in one line:¹¹

where \(N\) is the notional, \(f\) sets how hard the tether pulls, and the sign of \(P_{\text{perp}} - P_{\text{spot}}\) decides who pays whom. It's a price-keeping feedback loop, not a settlement date — the contract stays honest the same way a market does, by making the wrong side bleed. And here is the part to be blunt about: a perp is a leveraged instrument. Traders post a fraction of the notional as margin and control a much larger position, which means gains and losses are both magnified — and if the price moves against you past your margin, you're liquidated and the position is gone. Perps are the single most-traded product in all of crypto, and they are also where retail traders most reliably blow up. None of the playbook logic below changes that: a regulated perp is still a leveraged bet on a volatile asset, and a leveraged bet on a volatile asset is a fast way to lose money.

Why they've always traded offshore

Perps weren't invented last week. They have been the dominant instrument in crypto for years — the bulk of all crypto trading volume is perpetual futures, not spot — and almost all of it has happened on offshore venues like Binance, outside the US regulatory perimeter.¹² American traders who wanted leverage on Bitcoin either went without or routed around the rules to reach an exchange in a friendlier jurisdiction. Sound familiar? It's the exact shape event contracts had before 2020: a product that plainly worked, enormous demand for it, and no legal way to offer it onshore at scale. The CFTC could do to perps what it did to event contracts in 2020 — answer the question of what the thing legally is, and open a door to offer it onshore under supervision. The largest derivative in crypto, which has lived its whole life offshore, would finally have a regulated US address.

Lay the perps story on top of the prediction-market playbook and the tracks are parallel to the point of being eerie: a grey-zone derivative traded mostly offshore, the same CFTC poised to legitimize it, and then the race to be the first licensed venue to capture it onshore — where, as always in exchange businesses, liquidity compounds and the early licensed leader is hard to dislodge.

The move that should make you sit up is the one Kalshi is positioned to make. A company that built the first regulated event-contract exchange extending into a completely different derivative — leveraged crypto futures — under the same regulator, on the same rails, the moment the door opens. That would not be a prediction-market company adding a feature. It would be a prediction-market company revealing what it always was: a licensed-derivatives platform whose first product happened to be event contracts.

This reframes the whole thesis. The license was never a permission slip for one product. It's a standing relationship with a regulator and a piece of supervised infrastructure — and once you hold it, each new asset class the regulator blesses is a product you can add, not a venue someone else gets to build. Event contracts were the first thing through the door. Perps are poised to be the second. The interesting question is no longer "who wins prediction markets" but "who holds the licensed venue that the next several derivatives flow through."

Event contracts, perps, and whatever's next

Picture the endgame the playbook implies. A single CFTC-regulated exchange listing event contracts and perpetual futures and traditional dated futures — different products, different risk profiles, one license, one order-entry system, one surveillance stack, one pool of trust. That is not a prediction-market startup anymore. That is a broad regulated-derivatives exchange, which is exactly the shape the crypto-exchange playbook was always pointing at. Coinbase didn't stay a place to buy Bitcoin; it became a regulated venue for an expanding menu of products. The event-contract venues are walking the same path, and perps look like the first visible step.

This is also why the timing rhymes so well with the category's other milestones. Combined monthly volume across the leading event-contract venues has been climbing fast — past $13B a month by the end of 2025 and rising into early 2026; Kalshi, the regulated leader, was valued near the $22B mark after its March round; and ICE — the owner of the New York Stock Exchange — has committed up to $2B to Polymarket for its event data.¹³ A category this big, growing this fast, with that caliber of institution circling, is going to attract the next regulated product. Perps look like it. They won't be the last.

What's hard about this bet

I want to be honest about the ways this thesis can be wrong, because "it rhymes with crypto" is an argument, not a proof — and the bet has gotten wider, not narrower, with the map and the perps, so the caveats have to scale too.

Regulation is per-country and slow. The same fragmentation that creates the opportunity is the thing that makes it grueling. Every market is its own multi-year campaign — a fresh statute to read, a fresh supervisor to satisfy, fresh capital to lock up — and many jurisdictions will treat event contracts as gambling, or simply refuse to act for years. There is no continental shortcut and no single approval that unlocks a region; winning ten markets means running the gauntlet ten times. The same fact that makes a won market defensible — licenses don't transfer — is what makes the next one start from zero. A strategy built on this has to be comfortable compounding slowly, and many tiles on the map will simply stay red: some countries will ban the category and mean it. Onshore-beats-offshore is a tendency, not a law.

It is politically fraught — gambling and elections especially. Two flashpoints recur. The first is gambling: most of what trades on these venues today is sports — roughly 80% of Kalshi's volume since contracts launched in mid-2024¹³ — so a regulator who looks at an event contract and sees betting is not misreading what people actually trade. The argument that the mechanism is a forecasting tool, not a casino, is real and it's the one I believe; but it runs straight into the lived fact that most of the volume looks like a sportsbook, and an honest thesis has to hold both. The second is election markets, politically sensitive everywhere and contested even in the US before they resolved.⁷ A regulator nervous about either can slow a market to a crawl or shut the door.

The incumbents will fight for it — from both sides. These seats are not unguarded. The established derivatives exchanges — CME and Cboe — are rolling out their own event-contract products,⁵ and they already hold licenses, balance sheets, and regulator relationships in dozens of countries. Crypto-native venues will push in from the other side, armed with global liquidity and on-chain rails. A newcomer is racing both a well-capitalized traditional bloc and a fast crypto one for the same per-country licenses — and on perps specifically, the offshore books are vast: the licensed onshore venue starts from roughly zero against markets that have spent years building the deepest liquidity in all of crypto.

And on perps, the math doesn't care about the license. The whole appeal of a perp is magnified exposure, which means magnified losses and liquidations. Offshore, leveraged crypto trading has been an efficient machine for transferring money from inexperienced retail traders to the house and the sharks. Bringing it onshore adds segregation, surveillance, and disclosure — genuinely better guardrails — but it does not repeal the math: a regulated perp is still a leveraged bet on a volatile asset, and most people who use leverage on volatile assets lose. Legitimacy is not safety. And "the CFTC opened the door" is the start of a rulemaking, not the end of one — exactly which perps, at what leverage, for whom, under what margin regime, is still being worked out and can tighten. The license thesis does not depend on pretending any of this away. It rests on the claim that the mechanism — a crowd-priced, real-time probability, and the hedging and data layer built on it — is where the durable value sits, and that the trading volume is the on-ramp that funds getting there. ICE paid up to two billion dollars for the data feed, not for a sportsbook. But if you'd told me the category was pure forecasting infrastructure today, I'd tell you to look at the order book.

Why this is the bet I'm making

I'll keep this short, because the point of the piece is the pattern, not the pitch. This is the exact playbook we're running at Seeker: treat the license as the product, win it one market at a time, and build the surveillance and settlement in from the first trade rather than bolting them on after. We're starting with Vietnam — a launchpad, not the destination — for the same reason Upbit started in Korea: a single licensed venue inside a regulated perimeter is a position the offshore world can't contest from outside it. The MVP and demo are live; the license is the goal, not a thing we already hold.

What perps coming onshore clarified is that the moat is bigger than I first priced it. The licensed venue isn't just defensible across geographies — won market by market, where depth is the one advantage a rival can't clone — it's extensible across products: the same regulated rails that list event contracts can list the next derivative the regulator blesses, and the one after that. Two axes of compounding, not one. The durable asset, on both, is the same thing — the license — and the product is just whatever comes through the door next.

You don't have to care about any one company to find the pattern interesting. A grey-zone asset class became legitimate in the US; the rest of the world will spend the next several years deciding how to license it, country by country; and the venues that win turn out not to be product companies but regulated platforms that keep adding products. We watched it happen with crypto exchanges. We're watching it happen with event contracts. With perps, we are about to watch the two stories become one. We have seen this movie — and the only open questions are who plays the lead in each market, and what comes through the door next. Most of those parts haven't been cast.