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After the World Cup, the HIP-4 awaits its "Election Day"

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Once accounting for nearly half of the platform's trading volume before plummeting by 90%, Hyperliquid now predicts whether the market can regain momentum following the midterm elections.

Original Article Title: HIP-4 Must Get Ready for the Midterms
Original Article Author: David Christopher, Bankless
Original Article Translation: Saoirse, Foresight News

Hyperliquid's HIP-4 predicts the market's biggest success to date, stemming from World Cup-related transactions.

I did not anticipate this situation before. When HIP-4 was just launched, I put forward the view that Hyperliquid was not actually here to compete head-on with Polymarket or Kalshi. These outcome prediction markets are more like an extension tool of its trading system: providing cryptocurrency daily binary contracts to hedge perpetual contracts, build options-like risk exposure, and allowing traders to keep all positions unified within the Hyperliquid platform.

However, the subsequent developments were unexpected, as Hyperliquid successively launched NBA Finals, World Cup single-match events, and event championship-related trading markets. These three market categories (with the latter two contributing the majority of the trading volume) collectively account for around 48% of HIP-4's total trading volume to date.

After the peak of World Cup trading activity, the related open interest contracts saw a drop of over 90%. Nevertheless, objectively speaking, this does not mean that HIP-4 has failed; it simply lacks event targets with trading activity at the moment.

At the current stage, the system is still in a permissioned mode, where all trading markets require validators to manually create them for launch. Most of the remaining markets on the platform are mostly related to cryptocurrency price movements, with meager trading volume that cannot be compared to the volume driven by sports events.

Hyperliquid now aims to break free from this limitation. On July 31, the permissionless HIP-4 deployment feature went live on the test net, paving the way for third-party teams to independently create and operate outcome prediction markets, while also outlining the various conditions required for successful deployment and operation.

Between May and August 2026, 47.8% of HIP-4's trading volume comes from sports events markets, with the World Cup contributing the majority of the sports trading volume, highlighting the platform's strong reliance on major hot event matches to drive trading volume.

Operating Mechanism of HIP-4 in Permissionless Mode

Please Note: Permissionless deployment does not equal freely creating markets without restrictions.

According to the mainnet's initial proposal: Validators will pre-approve a market template, which is a reusable standard framework that defines market creation rules and settlement methods. Subsequently, deployers will choose an approved template to create specific trading markets, filling in information such as the trading topic, optional outcomes, expiration time, settlement criteria, and more.

One thing to note: Deployers only need to call the validator-approved template to generate a market, without needing separate approval for each individual market.

Similar to the HIP-3 mechanism, deployers need to precisely define market rules and ensure proper settlement. In the event of a major error, validators have the right to confiscate the staked assets.

The proposal requires deployers to stake 500,000 HYPE tokens (following the same standards as HIP-3), with a staking lockup period of 6 months. Only after all markets under their name have been fully settled can deployers withdraw their staked assets. Initially, each deployer can create up to 100 unique outcome markets; once a market is settled, the limit can be reused. The platform plans to expand the capacity through auctions in the future. Deployers can earn up to 50% of the trading fees from markets they create.

After the World Cup craze, what is the next core opportunity?

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

Prediction markets initially relied on political issues to enter the public eye. Kalshi and Polymarket have already established comprehensive election trading platforms covering various markets such as congressional control, district elections, total seats, etc., while HIP-4 has not yet listed any relevant assets.

Whether third-party deployers can fill this gap depends on when permissionless HIP-4 goes live on the mainnet. Looking back: HIP-3 took 164 days from the simplest version launch on the first permissionless testnet to the mainnet launch; however, from releasing the initial mainnet specs, starting the mainnet bug bounty program to the official launch, only 18 days passed.

The current progress of HIP-4 falls between these two scenarios: the mainnet's preliminary architecture has been disclosed, the testnet has deployed features, but the mainnet-level bug bounty program has not been introduced, and the overall progress is still uncertain.

If this system can be launched on time, deployers will be able to build a complete election trading zone based on the midterm elections, rather than launching scattered independent campaign marketplaces—provided that validators simultaneously approve the transaction template for election scenarios.

If permissionless deployment is not required to go live in time for the midterms, validators can still manually launch various midterm election markets. Nevertheless, HIP-4 will still be able to capture transaction volume, but it will miss the first significant real-world test: the inability to demonstrate to the market that external, third-party deployers can consistently supply the platform with timely, high-demand transaction markets.

The World Cup has already proven that Hyperliquid users are willing to engage in transactions related to major real-world events. However, the rapid drop in transaction volume after the World Cup also exposed a pain point: without a major event, the platform struggles to maintain activity.

This surge in midterm election interest is a golden opportunity for HIP-4. The platform can both use this to sustain market interest and drive permissionless deployment. In the coming weeks, it will be crucial to closely monitor relevant developments.