Prediction trading platforms are aggressively pursuing Wall Street’s biggest players as they seek to expand beyond their retail investor base, potentially reshaping how traditional finance operates despite ongoing challenges in achieving widespread adoption.
These betting markets have seen tremendous growth and popularity in the last year among individual traders, but now they’re focusing on the profitable segment of well-funded financial institutions and investment firms capable of executing massive trades.
“Hedge funds need a more nuanced and surgical way to express their views in other derivative markets that they can’t access in traditional financial venues,” said Asaf Meir, CEO of Solidus Labs, which is a trade surveillance partner for Kalshi. Meir added that a lot of hedge funds and institutional investors are looking closely at opportunities to execute trades on prediction markets.
According to Andy Ross, head of institutional business at Kalshi, the platform recently completed its first customized block trade and is actively pursuing even bigger institutions. The company has seen its annualized trading volumes more than triple in the last six months to reach $178 billion, while institutional investor trading volumes jumped 800% during the same period.
Ross explained that this growth has come mainly from increased participation by major asset managers, hedge funds, prime brokerages and other financial institutions. These high-value clients typically purchase contracts linked to scheduled monthly events, such as employment data releases.
Asset managers using platforms like Kalshi often manage their risk by taking opposing positions, frequently betting the other side of the same wager on the platform. According to Ross, some of these contracts can be worth millions of dollars.
“We’re seeing much more institutional interest in hedging the next few months,” said Ross.
However, Ross acknowledged that Kalshi remains in the beginning phases of attracting a broader institutional investor base and resolving liquidity issues on its platform.
“We’re in the foothills of this, but we’re climbing pretty fast here,” he said.
To attract and grow their institutional client base, prediction markets have begun establishing partnerships with prime brokers and other liquidity providers.
Clear Street, which serves as a broker for institutional investors and hedge funds, recently formed a partnership with Kalshi to provide customers access to event contracts. Proprietary trading firm Jump Trading has also been collaborating with institutional investors, including asset managers and hedge funds, to provide them access to these platforms, according to two sources familiar with the situation.
London-based futures and options broker Marex, which counts Jump as a client, recently began working with both Kalshi and competitor Polymarket to help develop infrastructure connecting investors to these exchanges, the sources indicated.
Polymarket did not respond to requests for comment for this story. On its website, it gives no comment on institutional growth on its platform.
Quantitative trading platforms and market-making firms are also seeking to capitalize on the expanding prediction markets business. A Reuters review found that AQR Capital Management, Susquehanna International Group and crypto exchange OKX are among several companies that have recently posted job listings for specialized prediction market traders on third-party websites. AQR declined to comment while Susquehanna and OKX did not respond to requests for comment.
“The ability to isolate a specific risk factor in real time with greater precision and without the noise of any other investment product is one of the primary selling points for prediction markets,” said Devin Ryan, head of financial technology research at Citizens JMP.
Multiple analysts and market specialists cautioned that prediction markets must resolve long-term liquidity issues on their platforms to attract major investment firms, since larger trades often overwhelm limited order books and cause sharper price movements.
“No hedge fund is going to go and route flow to a venue that has less than, at the very minimum, $10 million daily notional volume,” said Meir. “Institutional adoption means not a block trade every now and then. It means, for the type of flows I’m used to, it’s going to take a minute, but the market is working towards it, for sure.”
Edward Ridgely, co-founder and CEO of Stand, a platform that allows users to trade simultaneously on Kalshi and Polymarket, noted that some of the top markets on Polymarket have only about $30 million of total liquidity. As a result, if a large institutional investor invested several million dollars in a specific market, it would cause dramatic price swings in that market.
“What we’ve seen on our end are people like individual traders who don’t have quite the same bankroll or account size that I think normal institutions do,” Ridgely said. “There’s institutional interest, but there’s not institutional activity.”
Kalshi stated it is working to address client liquidity concerns by bringing more institutions onto its platform.
Some believe these efforts will ultimately succeed.
“They are increasingly being treated as a legitimate alternative asset class,” Toni Gemayel, head of prediction markets at Coinbase, told Reuters. “Institutions are using these markets to hedge against specific risks that traditional instruments might only capture indirectly.”
