- Traders flock to prediction markets as US-Iran tensions drive record activity with billions in volume.
- Wall Street firms and institutional investors are increasingly using these platforms for serious forecasting.
- Regulatory uncertainty and lack of margin trading remain key hurdles for large-scale adoption.
Prediction markets are booming as traders rush to bet on outcomes tied to the escalating US-Iran conflict. Platforms like Polymarket and Kalshi saw record activity last week, with trading volumes hitting $2.49 billion and $2.85 billion, respectively, according to Token Terminal.
Moreover, data from Dune shows that total volume across all prediction markets has climbed to over $145 billion with 2.8 million unique users. The growing attention comes as Washington evaluates clearer federal rules for event contracts and debates banning markets tied to war, terrorism, and death.
Tradeweb Sees Surge in Institutional Interest
According to a report, Troy Dixon, co-head of global markets at Tradeweb, highlighted the shift in professional interest. “People told us we were crazy,” Dixon said, recalling initial skepticism when proposing prediction markets. However, after partnering with Kalshi in February, client interest exploded. “We have never had this kind of feedback from clients on any other announcement,” he added.
Tradeweb, majority-owned by the London Stock Exchange Group, serves institutional investors, including hedge funds, banks, and pension funds. Hence, these platforms are transitioning from public-facing sports bets to serious financial tools.
Institutional Investors Fuel Growth
Kalshi says institutional investors are increasingly trading in markets focused on climate, weather, and science. Additionally, a new partnership with Brazil’s XP International lets Brazilian clients trade financial and political prediction contracts on Kalshi.
Lucas Rabechini, XP Inc.’s director of financial products, called these contracts “a new asset class.” Meanwhile, Intercontinental Exchange, which owns the NYSE, invested $2 billion in Kalshi’s competitor Polymarket.
Jump Trading also supports both Kalshi and Polymarket by providing market-making services. As a result, professional traders are now using these platforms as serious tools to forecast elections, geopolitical events, and commodity prices.
Regulatory and Operational Challenges
Even with growing popularity, prediction markets still face big regulatory questions. The Commodity Futures Trading Commission treats them as financial products, but some lawmakers want to label them as gambling.
In addition, most platforms don’t allow margin trading, which makes it hard for large institutions to trade efficiently. Former CFTC lawyer Jake Preiserowicz said, “Paying up front simply doesn’t make sense at scale.” At the same time, traders are starting to use these markets to hedge risks tied to GDP growth, interest rates, and energy prices.
Related: Polymarket Profits Shift to Bots as Automation Leads Prediction Markets
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