- Bernstein says prediction markets are evolving into institutional tools for hedging macro and event-based risks through binary contracts.
- Kalshi’s first bespoke institutional block trade signals early adoption, supported by infrastructure links like Clear Street.
- Despite institutional growth signals, retail trading still dominates while regulation remains split across US platforms.
Prediction markets are still largely driven by retail participation, even as institutional interest begins to build around their use as hedging tools for macroeconomic and event-driven risks. Retail traders account for more than 80% of the US$25.7 billion (AU$36.21 billion) in trading volume recorded in March, highlighting how dominant this segment remains despite growing professional attention.
Against this backdrop, Bernstein argues that prediction markets are starting to shift towards institutional-grade financial instruments, particularly as investors look for ways to structure exposure to clearly defined binary outcomes.
These contracts allow positioning around specific events such as tariffs, elections and geopolitical developments, creating a more targeted approach to risk management.
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Kalshi Trade Marks Milestone
Signs of this transition are emerging through early institutional activity on Kalshi, including the first bespoke block trade executed on the platform.
The transaction was arranged through Greenlight Commodities and involved a Houston-based environmental hedge fund alongside Jump Trading as liquidity provider, with the contract linked to California’s May carbon allowance auction clearing price.
Bernstein describes this as evidence that event markets can be structured around specific institutional exposures rather than generalised speculation.
Infrastructure development is also playing a role, with Clear Street’s partnership with Kalshi enabling institutional investors to access prediction markets through regulated channels alongside traditional asset classes such as equities and futures. Bernstein suggests that if institutional participation continues to expand, the sector could scale significantly and potentially develop into a trillion-dollar market over the coming decade.
Regulation remains uneven across platforms, with Kalshi operating under Commodity Futures Trading Commission oversight while Polymarket has received conditional approval to offer regulated event contracts in the United States.
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