Hedge funds are increasingly seeking access to prediction markets, pushing prime brokers such as Clear Street and Marex Group to connect their clients to event contracts listed on Kalshi.
The plans were discussed at the Futures Industry Association’s annual conference, where market participants pointed to growing interest in prediction markets from hedge funds and other professional investors.
“Over the last few weeks we’ve seen very large hedge funds coming to us and saying, ‘Can you give us access to these markets?’” Thomas Texier, Marex’s head of clearing told Bloomberg in an interview at the FIA conference.
Texier added that Marex’s structured products desk is also interested in using prediction markets to hedge exposures in packaged investment products.
Building Institutional Market Access
The move is part of a broader push to integrate prediction markets into infrastructure used by institutional investors. Kalshi CEO Tarek Mansour said interest from traditional broker-dealers and banks has increased in recent months.
Tradeweb Markets recently agreed to distribute Kalshi’s event market data to its institutional clients, bringing prediction market pricing to institutional data feeds.
Technology vendors are also moving in. NinjaTrader Group, the retail futures brokerage acquired by Kraken for $1.5 billion, recently launched NinjaTrader Connect, a platform that allows brokers and fintech firms to build regulated futures and prediction market products without developing the underlying infrastructure.
Devexperts has introduced similar tools that let CFD brokers and prop firms launch event-trading platforms or integrate event contracts into existing systems.
Prime brokers such as Clear Street and Marex are now exploring clearing and execution services that would allow hedge funds to access these contracts through their existing brokerage relationships.
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Legal and Regulatory Considerations
Institutional interest comes as the sector continues to face regulatory and legal questions. Some state regulators have argued that certain prediction market contracts resemble sports betting or gambling products.
At the federal level, the Commodity Futures Trading Commission maintains that event contracts listed on regulated exchanges fall under its jurisdiction.
Clear Street CEO Ed Tilly acknowledged that some of the contracts are controversial but said the firm’s role is to provide access to regulated markets when clients request it.
At the same time, lawmakers have begun examining the sector. U.S. Senator Richard Blumenthal recently introduced the Prediction Markets Security and Integrity Act, a proposal that would restrict contracts tied to events such as war and address potential insider trading risks.
A New Institutional Segment
For prime brokers, the growing interest from hedge funds suggests prediction markets may gradually become another niche segment of the derivatives landscape.
By providing institutional access, brokers can offer clients exposure to these contracts while relying on the same clearing and compliance infrastructure used for other exchange-traded products.
