“leveraged prediction markets break because binary contracts have no price path to liquidate against”
Surveys the landscape of teams trying to add leverage to prediction markets and explains why most are converging on 1x to 1.5x rather than the 10x or 20x they advertise. The core problem is gap risk: binary outcomes resolve instantly, skipping the intermediate prices that liquidation engines need to function. Uses dYdX's TRUMPWIN perp on election night 2024 as a case study where sophisticated safeguards still broke under real conditions, then categorizes current approaches into three camps: constrain leverage, engineer around it with dynamic fees and circuit breakers, or ship and iterate.
Some technical background helpful
Platforms mentioned: Polymarket, Kalshi, Hyperliquid, NEW: dYdX, NEW: Drift