Prediction market exchanges that surged in popularity among retail traders are now pivoting toward institutional clients in an effort to expand capacity and accommodate larger trades. Companies such as Kalshi have intensified efforts to court hedge funds, asset managers and other deep-pocketed financial institutions that can place multi-million dollar orders and provide the kind of consistent flow needed to sustain larger markets.
Supporters and service providers argue there is strong institutional interest because prediction markets can offer a precise, targeted way to express views on discrete outcomes that traditional instruments may not isolate as cleanly. Asaf Meir, chief executive of Solidus Labs - a trade surveillance partner for Kalshi - said hedge funds require more nuanced mechanisms to express their views in derivative markets that are not available through standard financial venues. Meir added that many hedge funds and institutional investors are actively examining opportunities to trade on prediction market platforms.
Kalshi said it has already taken steps toward institutionalization. Andy Ross, the firm’s head of institutional business, told Reuters that Kalshi recently completed its first customized block trade and is pursuing relationships with even larger institutions. The company reported annualized trading volumes that have more than tripled over the past six months to $178 billion, and it stated that trading volumes attributable to institutional investors rose 800% during the same period. Ross attributed that institutional growth to increased adoption by large asset managers, hedge funds, prime brokerages and other financial institutions.
Institutional clients typically target event-driven contracts that settle on scheduled outcomes - for example, contracts tied to monthly payroll figures. According to Ross, asset managers using platforms like Kalshi commonly hedge risk by taking offsetting positions, often trading the opposite side of a contract on the same platform. He noted that some individual contracts on these venues can exceed several million dollars.
Despite the recent traction, Kalshi and other prediction market platforms acknowledge that the transition to broader institutional participation is in an early stage. Ross characterized the progress as being in the "foothills" even as the firm accelerates outreach and product capabilities to address institutional concerns, particularly around liquidity.
To build connectivity and provide the plumbing required for large-scale institutional trading, prediction markets are forging partnerships with prime brokers, proprietary trading firms and conventional market-making organizations. Clear Street, which serves as a broker to institutional investors and hedge funds, recently entered a partnership with Kalshi to enable client access to event contracts. Proprietary trading firm Jump Trading has been assisting institutional investors, including asset managers and hedge funds, in gaining access to these platforms, according to people familiar with the matter.
Additionally, Marex - a London-based futures and options broker that counts Jump among its clients - has been engaged with both Kalshi and rival Polymarket to help build the infrastructure needed to link investors to prediction exchanges, according to sources. Polymarket did not provide comment or detail institutional growth on its platform through public channels.
Quantitative trading groups and market-making firms have also shown growing interest. A number of firms, including AQR Capital Management, Susquehanna International Group and crypto exchange OKX, recently advertised roles for specialist prediction market traders on third-party sites, a review of postings found. AQR declined to comment, while Susquehanna and OKX did not respond to requests for comment.
Devin Ryan, head of financial technology research at Citizens JMP, described a key selling point for prediction markets as the ability to isolate a specific risk factor in real time with precision and without the influence of other, more complex investment products.
Despite the interest and emerging infrastructure partnerships, multiple analysts and market participants warn that liquidity remains the sector’s primary long-term challenge. Larger institutional orders can swamp shallow order books, producing outsized price movements that deter repeated institutional flow. Meir said no hedge fund is likely to route trades to a venue that does not consistently clear at least $10 million in daily notional volume, emphasizing that institutional adoption requires sustained liquidity, not simply occasional block trades.
Edward Ridgely, co-founder and chief executive of Stand - a platform that enables simultaneous trading across Kalshi and Polymarket - highlighted the practical limits of current liquidity on some venues. Ridgely pointed out that some top markets on Polymarket only have roughly $30 million of total liquidity. Under those conditions, he said, a single institutional investor placing several million dollars into one market could cause substantial price swings. Ridgely observed that most activity to date has come from individual traders without the account sizes typical of institutional participants, capturing institutional interest but not yet institutional-scale activity.
Kalshi said it is addressing liquidity concerns by onboarding additional institutional participants to deepen the pool of available capital on its platform. Market participants expect that broader institutional engagement and additional liquidity provisioning will help reduce price volatility in the largest contracts and make venues more attractive to larger clients.
Some market executives and stakeholders believe these efforts may eventually yield structural change in how certain risks are hedged. Toni Gemayel, head of prediction markets at Coinbase, said the market is increasingly being treated as a legitimate alternative asset class and that institutions are employing prediction markets to hedge specific risks that traditional instruments might only capture indirectly.
An on-site blurb highlighted in recent coverage posed the question of whether the MRX ticker represents a bargain and promoted a Fair Value calculator that it said uses a mix of 17 industry valuation models to assess stocks. The promotional element suggested the tool can provide a valuation baseline for MRX and other companies.
As prediction markets seek to mature into venues capable of handling institutional flows, the path forward will likely depend on continued infrastructure development, deeper liquidity pools and broader engagement from the ecosystem of brokers, market-makers and institutional trading desks. For now, interest is evident, infrastructure is evolving, and liquidity constraints remain the central hurdle to converting institutional curiosity into sustained, large-scale activity.