- Galaxy Digital explores market-making partnerships with Polymarket and Kalshi platforms.
- Novogratz confirms firm testing small-scale liquidity provision on prediction markets.
- Institutional traders enter prediction space as regulatory barriers decline over time.
Galaxy Digital is exploring partnerships with prediction market platforms Polymarket and Kalshi to serve as a liquidity provider, according to a Bloomberg report. The firm’s CEO, Mike Novogratz, confirmed the company is testing market-making operations in the sector.
Novogratz told media that Galaxy Digital is currently conducting small-scale experiments with market-making on prediction platforms. He added that the firm plans to eventually provide liquidity across these markets at a larger scale.
Galaxy Tests Market-Making Infrastructure
The investment management firm would step in to buy and sell prediction contracts, adding market depth similar to its operations on crypto exchanges. This approach could help reduce costs for users by tightening spreads and improving order execution.
Prediction markets allow users to trade yes or no contracts, with prices showing the probability of specific outcomes. Polymarket and Kalshi have processed approximately $42.4 billion in combined trading volume across their platforms.
Kalshi has surpassed Polymarket in monthly volume since September. The CFTC-regulated platform gained ground after Polymarket was ordered to withdraw from the U.S. market in 2022. However, Polymarket’s acquisition of QCEX earlier this year enabled its return to American users.
Institutional Firms Enter Prediction Market Space
The lack of arbitrage traders in prediction markets has created price gaps between platforms. Contracts for Kevin Hasset to become Federal Reserve Chair currently trade at $0.35 on Kalshi and $0.14 on Polymarket, according to recent data.
Kalshi brought on Susquehanna as its first major institutional market maker in 2024. Bloomberg also reported that Jump Trading began providing liquidity for the platform earlier this month. These firms previously helped establish infrastructure for crypto market liquidity before 2016.
Both platforms have secured partnerships with high-profile organizations. Galaxy Digital, Google Finance and the U.S. National Hockey League chose to work with both Polymarket and Kalshi through separate agreements.
Kalshi founder Tarek Mansour stated that institutional market-making became viable after the platform received CFTC regulatory approval. Legal challenges from gambling enforcement agencies continue to face prediction markets, though courts appear likely to rule in favor of the platforms.
Related: Kalshi Raises $1 Billion, Boosting Its Valuation to $11 Billion
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