Over the past six months, Kalshi spent $990,000 on lobbying. That’s almost as much as they spent in all of 2025. Polymarket, its closest competitor, spent $180,000—roughly ten percent of that figure. The casino industry, by contrast, increased its own lobbying budget by thirty percent.
I’ve been in this space since 2017, auditing ICO whitepapers in a Vienna apartment. Back then, you measured a project’s survival by its code audits and token reserves. Today, for prediction markets, survival is measured by the depth of connections to K Street and Capitol Hill. The numbers above aren’t just expense line items. They are a map of the battlefield.
Context: The Regulatory Tug-of-War
Kalshi and Polymarket sit at the intersection of two regulatory regimes: the CFTC, which has blessed Kalshi as a designated contract market for event contracts, and the state-level gambling commissions, backed by a century-old casino industry with entrenched lobbying power. The core legal question is simple: are event contracts a form of futures trading (CFTC jurisdiction) or a form of gambling (state jurisdiction)?
Rep. Patrick McHenry, former chair of the House Financial Services Committee, put it bluntly: casinos have a “structural first-mover advantage” in this fight. They’ve been lobbying state legislators and federal lawmakers for decades. Prediction markets are newcomers, and their high-tech veneer doesn’t change the fact that they are competing for the same betting dollar—as evidenced by data showing user migration from sportsbooks to platforms like Polymarket.
The battlefield extends beyond lobbying. Insider trading scandals have emerged, with users allegedly trading on non-public information about events like sports outcomes or political primaries. These incidents give regulators a moral argument for tightening controls. Kalshi has responded not just by hiring compliance staff, but by recruiting former Obama and Biden administration officials, and—most controversially—naming Donald Trump Jr. as an advisor.
Core: The Cost of Legitimacy
When a startup spends $1.8 million in a single half-year on lobbying, that’s not a marketing budget. It’s a survival tax. Kalshi’s total revenue is not public, but as a relatively young exchange, it’s likely in the single-digit millions. This spending represents a high-leverage bet: either they secure a regulatory framework that allows event contracts to flourish, or they burn through capital fighting a losing war.
From my work analyzing DeFi summer liquidity traps in 2020, I learned to watch where smart money allocates to “non-productive” expenses. Lobbying is a signal of existential pressure. It tells you that the core business model—charging fees on event trading—is not viable unless the rules of the game are changed. It’s analogous to a startup spending 40% of its revenue on legal fees while its product stagnates.
Polymarket’s lighter lobbying spend (just $180,000) is a double-edged sword. It suggests operational discipline or a bet that Kalshi will pave the regulatory road for everyone. But if Kalshi fails, Polymarket stands alone against a united casino lobby. The asymmetry in spending mirrors the asymmetry in risk exposure.
The casino industry’s 30% increase in lobbying expenditure is a response to a real threat. They see prediction markets as a direct competitor for sports betting dollars, but with lower take rates and a more tech-savvy user base. Casinos are fighting a rearguard action—trying to get state lawmakers to ban sports event contracts entirely. This is classic rent-seeking: use the state to suppress a more efficient competitor.
Contrarian View: Lobbying as a Strategic Trap
The conventional wisdom is that Kalshi’s lobbying blitz is smart—buy friends in high places. I see a different risk: the over-politicization of a company. By linking itself so closely to the Trump family and former government officials, Kalshi has made its fate contingent on the next election cycle. I experienced this firsthand during the Terra collapse: projects that tie their narrative to political figures (like Do Kwon’s ties to Korean regulators) amplify downside risk when those figures become liabilities.
What happens if Donald Trump Jr. faces a scandal? What if a Democratic administration takes a harder line on crypto? Kalshi’s cozy relationship with Republicans becomes a liability. The company has painted itself into a corner where its survival depends on a single party’s election outcomes.
Furthermore, heavy lobbying can appear desperate. It signals to regulators that you are willing to spend billions to bend the rules—exactly the kind of behavior that invites more scrutiny. The casino industry knows this playbook; they’ve been using it for decades to maintain their own monopolies.
Takeaway: The Inefficiency of Political Capital
The crypto ethos was built on the idea that code, not politics, should determine value. Prediction markets are exposing the limits of that philosophy. Kalshi is spending millions to buy a seat at a table it was never invited to. The money could have been spent on oracle security, AI-driven market making, or reducing latency—things that actually improve the product. Instead, it’s going to lawyers and former officials.
Liquidity doesn’t lie—it flows where the returns are highest. Right now, the returns for prediction markets depend entirely on having the right congressmen in your pocket. That is a brittle foundation.
I can’t predict whether Kalshi’s bet will pay off. But I know from auditing 40+ ICO whitepapers that the projects that spent the most on marketing and legal were often the ones with the weakest technical moats. When a team prioritizes political connections over product, you have to ask: what else are they hiding?
The auditor blinked; the market didn’t. Prediction markets will survive or die not on the strength of their lobbying, but on whether they can prove—technically and economically—that they are futures, not gambling. Until then, every dollar spent on lobbyists is a dollar that should have been spent on code.
I’ll be watching the midterm elections, not the protocol upgrades. That’s where the real action is.