After the World Cup, HIP-4 Awaits Its 'Election Day'

After a sharp decline of 90% from nearly half of the platform's trading volume, can Hyperliquid's prediction market regain its momentum with the midterm elections?

Written by: David Christopher

Compiled by: Saoirse, Foresight News

Hyperliquid's HIP-4 prediction market's biggest success to date has stemmed from World Cup-related trading.

I did not anticipate this situation. When HIP-4 was first launched, I suggested that Hyperliquid was not actually aiming to compete directly with Polymarket or Kalshi. These types of outcome prediction markets are more like extensions of its trading system: providing daily binary contracts in cryptocurrency to hedge perpetual contracts, build options-like risk exposures, while allowing traders to keep all their positions consolidated within the Hyperliquid platform.

However, the subsequent developments were unexpected. Hyperliquid successively launched trading markets for the NBA Finals, individual World Cup matches, and championship events. These three types of markets (with the latter two contributing the vast majority of trading volume) accounted for about 48% of HIP-4's total transaction volume to date.

After the peak trading enthusiasm for the World Cup, the scale of related open contracts has dropped by over 90%. However, objectively speaking, this does not mean that HIP-4 has failed; it simply lacks event subjects with trading enthusiasm at the moment.

Currently, the system is still in a permissioned mode, where all trading markets need to be manually created and launched by validators. Most of the remaining markets on the platform are related to cryptocurrency price trends, with dismal trading volumes that cannot compare to the trading volumes driven by sports events.

Hyperliquid now aims to break this limitation. On July 31, the permissionless HIP-4 deployment feature went live on the testnet, clearing the way for third-party teams to independently create and operate outcome prediction markets, while also clarifying the conditions that need to be met for operational implementation.

From May to August 2026, 47.8% of HIP-4's trading volume came from sports event markets, with the World Cup contributing the vast majority of sports transaction volume, highlighting the platform's heavy reliance on major hot events to attract trading traffic.

Operation Mechanism of HIP-4 in Permissionless Mode

It is important to note: permissionless deployment ≠ unrestricted and arbitrary market creation.

According to the preliminary plan for the mainnet: validators will first approve market templates, which are reusable standard frameworks that define the rules for market creation and settlement methods. Deployers will then select approved templates to create specific trading markets, filling in information such as trading topics, optional outcomes, expiration times, and settlement criteria.

For example, in a political context (which will be explained later as to why political markets are emphasized): an approved binary event template can be used to build markets related to candidates' election outcomes. However, Hyperliquid has not yet disclosed the applicability of the templates, so it is currently unclear whether a single template can cover scenarios such as Senate, House, and gubernatorial elections; or whether different templates need to be built for scenarios like party control, seat counts, and multiple candidates running.

One thing is certain: deployers only need to call upon templates that have already been approved by validators to generate markets, without needing to apply for approval for each individual market.

In line with the HIP-3 mechanism, deployers need to precisely define market rules and properly complete settlements. If significant errors occur, validators have the right to confiscate their staked assets.

The plan requires deployers to stake 500,000 HYPE (the same standard as HIP-3), with a staking lock-up period of 6 months; only after all markets under their name have been settled can deployers withdraw their staked assets. Initially, each deployer can create up to 100 outcome subjects; after market settlements are completed, the quota can be reused. The platform plans to expand additional quotas through auction methods. Deployers can ultimately earn up to 50% of the trading fees from the markets they create.

After the World Cup frenzy, where is the next core opportunity?

The most obvious target: the U.S. midterm elections.

Prediction markets initially gained public attention through political topics. Kalshi and Polymarket have already established comprehensive election trading panels covering congressional control, district elections, total seat counts, and various other markets, while HIP-4 has not yet launched any related subjects.

This is data from Kalshi's prediction market, with 92 days remaining until the U.S. midterm elections. The market predicts a 54% chance for the Republican Party to control the Senate, with the current Democratic Party holding 49 seats and the Republican Party 47 seats; obtaining 51 seats would secure control of the Senate, with each state on the map marked with the corresponding party's winning probability.

Whether third-party deployers can fill this gap depends on when the permissionless HIP-4 goes live on the mainnet. Historical reference: HIP-3 took 164 days from the launch of the first permissionless testnet version to the mainnet rollout; however, from the release of the mainnet's initial specifications to the official launch, only 18 days elapsed.

HIP-4's current progress is between the two: the preliminary architecture of the mainnet has been made public, and the testnet has opened deployment features, but the mainnet-level bug bounty program has not yet been launched, and the overall progress remains uncertain.

If this system can go live on time, deployers will be able to build a complete election trading section based on the midterm elections, rather than launching scattered independent campaign topic markets—provided that validators simultaneously approve trading templates that support election scenarios.

If the permissionless deployment misses the midterm election window, validators can still manually launch various midterm election markets. Even so, HIP-4 would still be able to attract trading traffic, but it would miss its first significant practical opportunity: failing to prove to the market that external third-party deployers can continuously supply timely popular trading markets for the platform.

The World Cup has already proven that Hyperliquid users are willing to engage in trading on significant real-world events. At the same time, the rapid decline in trading volume after the World Cup also exposes a pain point: without major events, the platform struggles to maintain activity.

The upcoming midterm elections are a great opportunity for HIP-4. The platform can leverage this to maintain market enthusiasm while also promoting the implementation of permissionless deployment. In the coming weeks, relevant progress can be closely monitored.

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