The Problem: Liquidity Fragmentation

The rapid growth of prediction markets has led to a fractured ecosystem. While the sector is expanding, capital and data are trapped in isolated silos. This phenomenon is known as Liquidity Fragmentation, and it presents three critical challenges for traders.

1. The Venue Trilemma

Liquidity is currently split across three distinct technological and regulatory environments that do not communicate with each other:

• Polymarket: Operates on the Polygon blockchain using USDC. It dominates global volume but suffers from withdrawal delays and blockchain complexity for non-native users.

• Kalshi: Operates under US federal regulation (CFTC) using Fiat USD. It offers institutional security but requires traditional banking connections and is legally separated from DeFi liquidity.

• Limitless: Operates on the Base (L2) blockchain. It offers high-speed execution for short-term markets but has a smaller liquidity pool compared to the giants.

2. Capital Inefficiency

To trade effectively in this environment, a user must fracture their capital. A trader needs to hold USDC on Polygon for Polymarket, USD in a bank account for Kalshi, and USDC on Base for Limitless. Moving funds between these venues is slow, costly, and technically risky. This results in "lazy capital" that sits idle in wallets instead of being deployed actively.

3. Information Asymmetry

Because these markets are disconnected, they often price the same event differently. A user trading on only one platform is essentially trading with incomplete data, often buying positions at a premium when a better price exists elsewhere.