Surge in prediction markets leads to the establishment of a new venture capital fund supported by the CEOs of Polymarket and Kalshi.

The fund, known as 5c(c) Capital, seeks to secure $35 million to support startups associated with the swift expansion of event-driven trading markets.

What to know:

• A new venture capital firm, 5c(c) Capital, is being established to specifically invest in companies centered around prediction markets, backed by the CEOs of Polymarket and Kalshi.
• The fund’s objective is to raise up to $35 million and support approximately 20 early-stage startups over a two-year period, concentrating on infrastructure and services such as data tools, liquidity provision, and compliance systems instead of solely exchanges.
• This launch occurs during a period of rapid expansion in prediction markets, characterized by increasing trading volumes, new participants, and heightened interest from significant crypto and retail trading platforms, and has drawn over 20 initial investors including a portfolio manager from Millennium Management and other founders of prediction market platforms.

A new venture capital firm concentrating on prediction markets is being established with support from Polymarket founder and CEO Shayne Coplan and Kalshi co-founder and CEO Tarek Mansour, as reported by Bloomberg.

The firm, known as 5c(c) Capital (named after a section of the Commodity Exchange Act that regulates prediction markets), may represent the first venture fund specifically designed to invest in companies influenced by that regulatory and market framework.

“We intend to leverage the secondary, tertiary, and quaternary effects of what we have developed ourselves,” the founders wrote in a document reviewed by Bloomberg.

The launch coincides with the transformation of prediction markets from a niche segment of finance to a more prominent aspect of how individuals monitor events. Following the U.S. presidential election, trading volumes have surged, and new users have entered the sector. Platforms like Polymarket and Kalshi now offer contracts related to politics, economic indicators, and cultural happenings, converting public sentiment into tradable signals. Polymarket’s transactions are conducted on the blockchain. Many crypto-centric companies, including Coinbase (COIN) and Kraken, along with Robinhood (HOOD), have also ventured into this space in recent months.

This growth has led to new business opportunities beyond the platforms themselves. Startups are emerging to create data tools, liquidity services, and compliance systems that bolster these markets.

5c(c) Capital aims to raise a maximum of $35 million and invest in around 20 portfolio companies over the next two years, as outlined in the document. The strategy focuses on initial-stage investments related to infrastructure and services surrounding prediction markets rather than the exchanges by themselves.

Early support includes over twenty investors, comprising a portfolio manager from Millennium Management, various crypto-oriented venture firms, and founders of other prediction market platforms such as PredictIt.

Polymarket declined to provide comments. Kalshi did not respond in time for publication.