A liquidity gap and US congressional insider trading probe are keeping big capital cautious
There is institutional interest in prediction markets. There is not yet institutional activity.
Some top Polymarket markets carry only about US$30m in total liquidity, leaving them vulnerable to sharp price swings from a single large position, Edward Ridgely told Reuters.
Ridgely is co-founder and CEO of Stand, a platform that allows simultaneous trading on Kalshi and Polymarket.
The platforms' pitch to institutions is specific: prediction markets let investors isolate and hedge discrete event risk that traditional instruments can only capture indirectly.
Devin Ryan, head of financial technology research at Citizens JMP, told Reuters that "the ability to isolate a specific risk factor in real time with greater precision and without the noise of any other investment product is one of the primary selling points."
Kalshi's head of institutional business, Andy Ross, told Reuters that institutional volumes on the platform have grown 800 percent over the past six months, driven by asset managers, hedge funds, and prime brokerages buying contracts tied to scheduled events such as monthly payroll data.
Infrastructure is forming around the space.
Clear Street recently partnered with Kalshi to give institutional clients access to event contracts.
London-based broker Marex started working with both Kalshi and Polymarket to connect investors to the exchanges, and proprietary trading firm Jump Trading has been working with asset managers and hedge funds to give them platform access, two people familiar with the matter told Reuters.
Liquidity remains the barrier
Despite the momentum, Asaf Meir, CEO of trade surveillance firm Solidus Labs, told Reuters the minimum threshold for serious institutional routing is at least US$10m in daily notional volume — a bar most prediction market venues have not consistently cleared.
"Institutional adoption means not a block trade every now and then," Meir said.
Ross acknowledged Kalshi is still "in the foothills" of building a broad institutional base.
Congressional probe
A congressional insider trading investigation is adding to institutional caution.
House Oversight Committee chairman James Comer wrote to the CEOs of Kalshi and Polymarket on Friday requesting documents on insider trading investigations and identity verification, as the committee opened a formal probe into both platforms, CBS News reported.
Comer cited trading tied to the Iran conflict and the Trump administration's capture of former Venezuelan leader Nicolás Maduro.
A "60 Minutes" investigation found nine Polymarket accounts made a combined US$2.4m correctly predicting key dates in the Iran conflict, according to CBS News.
In April, federal prosecutors charged US special forces soldier Gannon Ken Van Dyke, 38, with using confidential government information to bet on Maduro's removal, netting more than US$400,000.
Van Dyke has pleaded not guilty.
Both platforms said they have tightened integrity rules in response.
Kalshi now bans members of Congress from the platform after fining three congressional candidates who gambled on their own elections.
Polymarket implemented a rule in March barring traders who "hold a position of authority" that could affect an event's outcome, CBS News reported.
Scale and regulatory outlook
The growth backdrop remains hard to ignore.
Kalshi and Polymarket have already recorded roughly US$60bn in combined volume year-to-date in 2026, surpassing the US$51bn in total prediction market volume for all of 2025, according to Bernstein.
The investment bank projects US$240bn in total volumes this year and US$1tn annually by 2030, as the institutional market develops around economics, business, and political contracts rather than sports.
The CFTC and 17 states remain locked in an unresolved jurisdictional dispute over who regulates event contracts, with one state moving to ban them entirely, CNBC reported.
Bernstein analyst Gautam Chhugani expects platforms to benefit from "increasing regulatory clarity" and closer alignment with federal regulators, though he noted legal action is pending in 14 states alongside four congressional bills.
