Wall Street Firms Move into Crypto Prediction Markets

Exchanges, brokerages and asset managers have begun offering crypto prediction-market products and committing capital as inflows into event contracts rose sharply from September 2024, according to a May 7 report from a blockchain analytics firm.

Retail traders first increased activity by placing wagers on outcomes tied to elections, interest-rate decisions, sports and entertainment. That retail volume drew professional traders seeking pricing gaps and deeper order books. Market makers subsequently added large deposits that supported wider trading and pushed event contracts closer to derivatives-style venues.

Several established financial firms have developed or tested products. CME Group introduced swap-based event contracts. Major trading platforms have explored or started offering prediction products. Intercontinental Exchange announced plans to invest up to $2 billion in a leading prediction-market platform. Asset managers including Bitwise, Roundhill and Graniteshares filed with the Securities and Exchange Commission for exchange-traded funds that would track contracts linked to the 2028 U.S. presidential race and the 2026 congressional midterms.

Most event contracts use smart contracts on blockchains for core execution. Users post collateral, commonly in stablecoins, and outcomes are settled on-chain after verification. Decentralized oracles are used to confirm real-world results before a contract resolves. These features allow near-immediate settlement, visible transaction records and automated liquidity across platforms.

Regulators have not settled on how to classify event contracts. The Commodity Futures Trading Commission and some state regulators are debating whether the instruments should be treated as derivatives, which would bring them under futures rules, or as gaming products with different oversight. Firms continue product development and make capital commitments while legal definitions are still being worked out.

The analytics firm wrote: “The most significant shift is the arrival of traditional finance. Major institutions are no longer ignoring the volume these markets generate; they are building infrastructure to capture it.”

Market makers’ larger deposits have deepened order books, and some asset managers are testing ways to give retail and institutional investors access through regulated securities. Since September 2024, the combined activity of retail traders, professional firms and institutional capital has increased the scale and liquidity of event contracts.