Event trading is following the same path as crypto derivatives, evolving from a retail niche into a serious business for hedge funds. Major market makers and prime brokers are already building the infrastructure for a larger institutional push into the sector.
Prediction markets are developing the same institutional infrastructure that helped crypto derivatives expand beyond retail trading into a Wall Street trading business.
Part of that shift is coming from growing institutional activity, particularly among macro hedge funds looking for more targeted ways to trade specific events and risks.
Kalshi said its institutional trading volume grew 800% over the past six months, while annualized platform volume more than tripled to $178 billion.
"We're seeing much more institutional interest in hedging the next few months," said Andy Ross, Kalshi's head of institutional business, told Reuters. "We're in the foothills of this, but we're climbing pretty fast."
The Infrastructure Race
Prime brokers and trading venues are starting to integrate prediction markets into existing institutional trading workflows.
Clear Street has partnered with Kalshi to give hedge funds direct access to event contracts. Marex Group is building the technical infrastructure to link professional investors to both Kalshi and Polymarket. Tradeweb Markets took a minority stake in Kalshi to embed prediction markets into its institutional client workflows.
Marex Solutions has already gone a step further, structuring a capped $10 million note for a Swiss client tied to a prediction market outcome on Nvidia's market capitalisation. That's a useful proof of concept for how brokers can package binary risk into familiar instruments.
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Liquidity Constraints and Who's Moving In
Top markets on platforms like Polymarket usually have around $30 million in liquidity, meaning a multi-million dollar trade can move prices sharply. Hedge funds generally want at least $10 million in daily notional volume before routing consistent flow through a venue.
Large pricing gaps are attracting professional trading firms. Susquehanna International Group, Jump Trading, and AQR Capital Management are building dedicated prediction market desks for arbitrage and market-making strategies.
Citadel Securities has indicated it is seriously considering entering as an institutional liquidity provider, describing the asset class as having "sound industrial logic."
Retail volume establishes the market, infrastructure gaps attract quants, quants attract prime brokers, and the cycle compresses spreads. Prediction markets appear to be somewhere in the middle of that sequence.
