Wall Street Is Already Betting on Prediction Markets

When Troy Dixon first suggested incorporating prediction markets into the electronic trading platform where he works, he was met with incredulity. “People told us we were crazy,” Dixon, Tradeweb’s cohead of global markets, tells WIRED. But after the company announced it was partnering with Kalshi in February, Dixon says, the mood changed dramatically. “We’ve been inundated with calls,” he says. “We have never had this kind of feedback from clients on any other announcement.”

Tradeweb, which is majority-owned by the London Stock Exchange Group, serves the traditional finance world, including institutional investors like pension and mutual funds, banks, hedge funds, and insurance companies. While most of the public debate over prediction markets is related to their sports offerings—there’s a fierce legal war underway over whether they’re really just sports betting companies—the platforms are also becoming popular among professional traders. Sophisticated investors are interested in them largely because of markets on topics like election results, the Iran war, and the price of Bitcoin. Many of them see prediction markets as forecasting tools that can be used to inform trading decisions. “We’re super excited,” Dixon says. “It’s very rare you have something this new and cutting-edge.”

Kalshi, one of the two biggest players in the industry, is eager to forge closer ties with the finance world. The company is already seeing billions of dollars in trading volume generated by institutional investors on markets in its climate/weather and science/tech categories, according to spokesperson Elisabeth Diana. This week, Kalshi announced it is partnering with XP International, a Brazilian financial services firm. The deal lets Brazilian clients trade on financial and political prediction markets on Kalshi through XP. In a statement, Lucas Rabechini, XP Inc.’s director of financial products, called prediction market contracts “a new asset class.”

Prediction markets are currently regulated in the US by the Commodity Futures Trading Commission, the federal agency that oversees derivatives markets. Although there’s a growing bipartisan push to classify prediction market events as gambling, the CFTC maintains that these platforms are indeed offering financial products.

For Kalshi, cozying up to Wall Street may prove to be a savvy strategy. The company is facing a wave of lawsuits over its sports markets. Anything that highlights its utility in the finance world will help the company make its argument that it’s not a hub for putting money on sports but rather a hub for the future of finance. And although the vast majority of activity on its platform is still from regular people (known in industry lingo as retail traders or click traders) trying to predict the outcome of football games and other athletic competitions, professional traders are also increasingly present.

Some of the biggest names in finance have already jumped into the world of prediction markets. In October 2025, Intercontinental Exchange, the New York Stock Exchange’s parent company, invested $2 billion in Polymarket, Kalshi’s biggest competitor. Jump Trading, a high-frequency trading firm, has taken an equity stake in both Kalshi and Polymarket in exchange for providing the companies with market-making services. (Market-makers buy and sell contracts immediately and are necessary for derivatives markets to function.) Susquehanna International Group, one of the largest market-makers globally, is currently Kalshi’s lead market-maker. SIG also plans to launch its own prediction market offering in collaboration with the fintech company Robinhood and is recruiting staff specifically to trade on prediction markets. A number of prominent brokerages serving blue-chip banking clients, like Clear Street and Marex, are also planning to provide clients access to prediction markets soon.

Not every firm is going all in, though. “There’s still a lot of uncertainty,” says Edward Ridgeley, the CEO of prediction market software startup Stand. He believes the industry is currently where crypto was around 2017. Some firms are choosing to wait and see while the ongoing spats between federal regulators and state authorities play out.

In addition to regulatory concerns, another major roadblock to adoption is the lack of margin trading available on the major platforms. Margin trading is a strategy used by many professional investors that involves borrowing money and then using it to trade instead of paying up front for stocks, commodities, and other financial instruments. “When you’re buying derivatives contracts, you generally only post margin,” says former CFTC lawyer Jake Preiserowicz, who is now a partner at the law firm McDermott Will & Schulte. Paying up front simply doesn’t make sense at scale. “Imagine, you think the price of oil is going to go up, so you’re going to buy 10,000 barrels of oil. That’s a lot of cash to put up for commodities that generally only move a few pennies,” Preiserowicz explains. “It’s not a feasible way to be able to hedge.”

In the finance world, hedging is an investment strategy that works like an insurance policy to protect against losses; if a trader holds a big risky position tied to, say, fossil fuel companies, they can hedge by purchasing financial instruments that do well when the oil and gas industry is in turmoil.

Industry observers say there’s some hedging starting to take place on prediction markets as traders test the waters. “We’re seeing it in contracts related to economic indicators, like GDP growth rate, whether interest rates are going up or down,” says Preiserowicz.

The global electronic trading platform Interactive Brokers, which has its own in-house prediction market offering, says it has already seen examples of hedging on its event contracts, including on those related to weather conditions. “Extreme temperatures correlate with higher electricity use resulting in higher electricity prices and eventually greater natural gas consumption in specific localities,” says Interactive Brokers founder and chairman Thomas Peterffy. “Utilities and pipelines are typical users.”

Right now, prediction markets are still seen as platforms where individual people put money down to guess on the outcomes of events like the Super Bowl and elections. But as Wall Street’s presence grows, large segments of the contracts offered on these platforms will really be the purview of professional traders. Some critics believe this is already the case. “Trading firms and crypto funds that have gotten into prediction markets are making the majority of the profits,” says Cory Klippsten, CEO of Swan Bitcoin. “Retail is really just getting their face ripped off every day.”

There’s even more intermingling in the works. The financial services behemoth Nasdaq recently filed a plan to offer prediction-market-style yes-or-no contracts on the outcomes of future events to the Securities and Exchange Commission. Several other investment firms have submitted proposals to the SEC to sell prediction market exchange-traded funds (ETFs), a bundle of investments that is often organized around a theme. (Clean-energy ETFs are a popular category.)

These funds would essentially allow customers to make prediction-market-style wagers. For example, one of the ETFs proposed by Roundhill Financial is called the Democrat President ETF. An interested client would deposit money to Roundhill, which would in turn “invest” the funds into a prediction market. If the Democratic candidate wins, there will be a payout. If they lose, the ETF loses all its value. It remains to be seen whether the SEC will approve these proposals. Or if these products will catch on; it’s not clear exactly who the ideal investor here is, since one of the appeals of prediction markets is the absence of intermediaries. What is clear: This is likely just the beginning of Wall Street’s enmeshment with the industry.