Wall Street is eyeing the prediction market! Several brokerages are assisting hedge funds and institutional clients in entering trades.

Bloomberg reports that several brokerages serving Wall Street hedge funds and professional traders are planning to provide trading channels for clients to access prediction markets platforms. This trend indicates that these originally retail-dominated event betting markets are attracting institutional capital and are seen as new hedging tools and market expectation indicators.

(What are prediction markets? Polymarket Beginner’s Guide: Betting Methods, Settlement Processes, and Risk Analysis)

Wall Street brokerages entering prediction markets to open trading channels for institutional funds

The report states that US broker Clear Street is expected to complete its first clearing transaction on the prediction market platform Kalshi later this month and plans to offer access to its hedge fund and institutional investors later this year.

Meanwhile, London-based broker Marex Group also announced that it will open access to Kalshi’s platform for clients within the coming months. These moves demonstrate that Wall Street institutions and large investors are seeking to establish trading channels into prediction markets.

A few months ago, firms including Chicago market maker DRW, crypto hedge fund Tyr Capital, and options trading giant Susquehanna International Group (SIG) were preparing to establish independent prediction market trading divisions, recruiting full-time traders with a base salary of $200,000.

(Wall Street market-making giant hires traders with $200,000 annual salary to enter prediction markets—can retail traders still profit?)

Institutional investors focus on two main uses: hedging tools and reference data sources

Prediction markets allow traders to engage in binary contracts on specific event outcomes, such as election results, economic data, or geopolitical events.

Kalshi CEO Tarek Mansour said that institutional interest in these markets is rapidly increasing, mainly for two reasons: first, using event contracts as hedging tools for investment portfolios; second, viewing market prices as alternative data to measure the likelihood of global events.

For example, hedge funds might hedge macro risks through related contracts or estimate the probability of policy changes and economic conditions based on market prices. Earlier reports indicate that brokerages like Charles Schwab and Interactive Brokers are also exploring prediction markets for weather forecasting, hedging electricity demand, or energy market risk management.

Financial institutions rushing in, but liquidity and regulatory concerns remain

Despite rising market interest, large financial institutions remain cautious. Ed Tilly, CEO of Clear Street, noted that prediction markets still face issues such as insufficient liquidity and regulatory uncertainty. Some state regulators have filed lawsuits against certain prediction markets, claiming some event contracts could be considered disguised gambling.

He said the company remains cautious when entering emerging markets, paying particular attention to insider trading risks and regulatory disputes. However, he also pointed out that market demand is growing rapidly, and the firm does not have a preference for specific trading venues.

Prediction markets moving toward institutionalization, collaborative trading gaining favor

As brokerages and fintech companies continue to join, prediction markets are gradually shifting from retail-dominated trading spaces toward institutional development. Electronic trading platforms like Tradeweb Markets and quantitative trading giant Jump Trading announced earlier this year that they have partnered with Kalshi to provide services related to prediction market data integration and liquidity provision.

(Why are prediction markets becoming a VC goldmine? Polymarket and Kalshi leading the way—could their scale surpass stock markets?)

Tilly noted that if more financial institutions participate and improve market liquidity, prediction markets could evolve beyond mere speculation or hedging tools to become an important source of information for observing the probabilities of global events in financial markets.

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