Rival CEOs Back $35M Prediction Market Fund
Two early employees of Kalshi are launching 5c(c) Capital, a new venture fund aiming to raise up to $35 million to back startups in the prediction market ecosystem. The fund, led by former Kalshi trader Adhi Rajaprabhakaran and ex-head of operations Noah Zingler-Sternig, has secured significant endorsements from prominent figures, including the CEOs of the industry's two largest competing platforms: Tarek Mansour of Kalshi and Shayne Coplan of Polymarket. Venture capitalist Marc Andreessen is also among the notable backers.
The fund plans to invest in roughly 20 companies over the next two years, targeting critical infrastructure such as market making, prediction market indices, and other foundational technologies. The name 5c(c) Capital itself is a reference to a clause in federal commodities regulations, underscoring the founders' focus on navigating the sector's complex legal landscape. The first close for the fund is expected within the next month.
Fund Launches as Sector Valuations Top $20B
The creation of a dedicated fund highlights intense investor demand for prediction markets, which allow users to trade on the outcomes of real-world events. This interest is reflected in the soaring valuations of leading platforms. Kalshi is reportedly raising $1 billion at a valuation of $22 billion, doubling its valuation from December. Its rival, Polymarket, is targeting a valuation near $20 billion, demonstrating the massive capital inflow into the space.
These platforms have evolved into a distinct asset class, combining elements of financial forecasting and speculative trading. The growth has been rapid, with Kalshi's trading volume in February exceeding $10 billion, a twelve-fold increase from just six months prior. This momentum is attracting institutional capital seeking to build the infrastructure for what many see as a new frontier for information markets.
New Capital Arrives Despite Mounting Regulatory Pressure
This influx of investment capital occurs as the prediction market industry faces significant regulatory headwinds. State authorities are increasingly scrutinizing these platforms, with some arguing they operate as unregulated sports betting operations. Companies like Kalshi maintain they are financial exchanges subject to federal oversight by the Commodity Futures Trading Commission (CFTC).
This conflict has led to direct legal challenges. Kalshi was recently banned from operating in Nevada and faces 20 criminal counts in Arizona related to allegations of illegal gambling and election wagering. Despite these pressures, the backing of 5c(c) Capital by industry leaders suggests a strategic bet that the sector will overcome these hurdles and continue its growth trajectory.
