Institutional investors are gaining private access to prediction markets through new infrastructure designed to handle large trades that retail platforms cannot accommodate. Galaxy Digital, a Nasdaq-listed digital asset firm, has opened an over-the-counter (OTC) prediction markets trading desk that allows sophisticated investors to place bets on real-world events at scales unavailable on public platforms like Polymarket and Kalshi.

Why Are Institutions Suddenly Interested in Prediction Markets?

Prediction markets have exploded in popularity over the past two years, but they face a fundamental problem: liquidity constraints. When a hedge fund or institutional investor wants to place a multi-million-dollar bet on whether a piece of legislation will pass or a geopolitical event will occur, retail-focused platforms simply cannot handle the order size. Galaxy's inaugural trade illustrates this gap perfectly. The firm executed a $10 million transaction with crypto hedge fund Arca on the Digital Asset Market Clarity Act of 2025, a contract worth nearly five times the total volume on Kalshi's equivalent listing.

Beyond sheer size, institutional players face another barrier: privacy. When traders place bets on platforms like Polymarket, their wallet addresses become visible on the blockchain, exposing their positions to the public. For large funds managing billions in assets, this transparency can be a dealbreaker. Galaxy's head of prediction markets, Gilbert Wasserman, explained to Bloomberg that privacy is a major attraction for institutional clients seeking to build positions without telegraphing their views to competitors and the broader market.

How Does Galaxy's Institutional Infrastructure Work?

Rather than requiring institutions to open accounts directly on prediction market platforms, Galaxy structures these trades as event swaps under pre-existing International Swaps and Derivatives Association (ISDA) agreements. This legal framework allows sophisticated investors to participate in prediction markets using familiar derivatives infrastructure, eliminating the need to set up new accounts or navigate unfamiliar platforms.

The structure also enables institutions to combine prediction market positions with other hedges across multiple asset classes, creating more sophisticated strategies than isolated bets. Galaxy plans to expand beyond Kalshi and Polymarket to additional platforms over time, while assessing offerings on a jurisdiction-by-jurisdiction basis to navigate regulatory uncertainty.

Key Features of Institutional Prediction Market Access

• Trade Size: Institutions can execute trades worth millions of dollars, compared to retail platform liquidity constraints that limit individual orders to thousands.
• Privacy Protection: OTC trades do not expose wallet addresses or positions to the public blockchain, allowing funds to build stakes without market detection.
• Legal Framework: Event swaps structured under ISDA agreements provide familiar derivatives infrastructure rather than requiring new account setups on retail platforms.
• Multi-Asset Strategies: Institutions can combine prediction market positions with traditional hedges across stocks, bonds, and other asset classes for integrated risk management.

Jeff Dorman, chief investment officer at Arca, emphasized that prediction markets are becoming essential tools for hedging exposure to regulatory developments in crypto, but that existing platforms lack the liquidity to serve large funds effectively. Galaxy's move addresses this gap by bringing institutional-grade infrastructure to an emerging asset class.

What Does This Mean for Prediction Markets as an Asset Class?

The entry of Wall Street infrastructure into prediction markets signals a maturation phase for the industry. When major financial institutions begin building dedicated trading desks and legal frameworks around an asset class, it typically indicates growing confidence in its legitimacy and long-term viability. Galaxy's decision to launch this service suggests that prediction markets are transitioning from a niche retail phenomenon into a serious tool for professional investors managing real capital.

Meanwhile, wallet providers are also expanding access to prediction markets. KuCoin Web3 Wallet announced integration with Polymarket, allowing users to explore event-driven markets directly within the wallet interface without moving between fragmented platforms. Gas Meng, lead of KuCoin Web3 Wallet Operations, stated that "web3 wallets are becoming a key gateway where users access assets, applications and real-world market signals," and that the Polymarket integration reflects a commitment to building a comprehensive one-stop Web3 entry point.

This dual expansion, from institutional OTC desks to retail wallet integration, suggests prediction markets are attracting participants across the entire investment spectrum. The infrastructure buildout happening now may determine which platforms and protocols dominate this emerging market in the years ahead.