Hedge Funds Are About to Jump into Prediction Markets in a Big Way

Cantor Fitzgerald is among the first investment firms that will offer its clients institutional trading on the prediction market platform Kalshi, the company announced Wednesday.

Pascal Bandelier, co-CEO and global head of equities at Cantor, stated in a press release that prediction markets are experiencing rapid growth, but institutional participation has lagged due to the lack of ability for investors to transact at scale on a regulated exchange. He emphasized, "The liquidity is here."

The global investment firm will function as a broker, facilitating block trades on Kalshi's event contracts for its clients. Block trades are large, privately negotiated deals typically executed off-exchange to mitigate price volatility, a common practice for major Wall Street firms.

Susquehanna International Group will provide pricing and liquidity as a market maker for trades involving Cantor's clients. Joe Grubb, the company's head of business development, views institutional risk transfer as the next critical phase for the substantial growth of prediction markets.

According to Kalshi spokesperson Elisabeth Diana, Cantor Fitzgerald initially contacted Kalshi several months ago. The global investment bank also has the ability to request that Kalshi design new markets for its clients to trade on.

Diana mentioned that these new markets would be submitted to the CFTC, ensuring sufficient liquidity. She also noted that clients are expected to show interest in Kalshi's climate, weather, and economic indicator markets.

This development represents Kalshi's latest effort to attract Wall Street interest. The company has been increasingly focusing on professional investors, even as retail traders have previously driven its growth, primarily through sports-related event contracts on the platform.

Kalshi executed its first block trade on an event contract exchange in April. This year, the company has also announced a series of partnerships and internal initiatives designed to increase the confidence of institutional clients in participating in this novel asset class.