The structure mirrors how institutions already trade traditional derivatives, where assets remain in custody and positions are collateralized rather than fully funded upfront. In contrast, most prediction market activity today takes place on retail platforms that require pre-funding and offer limited integration with institutional custody systems.
Institutional investors are increasingly using prediction markets as a hedging tool, taking positions on event outcomes, such as elections, policy decisions or macroeconomic shifts, to offset risks in their broader portfolios. By pricing discrete, real-world events, these markets offer a way to hedge tail risks that are difficult to capture with traditional instruments such as equities, rates, or options.
Prediction markets have seen rapid growth, with trading volumes topping roughly $40 billion–$45 billion in 2025, up several-fold year over year as retail participation surged and platforms like Polymarket and Kalshi gained traction.
At the same time, institutional interest has begun to build, with hedge funds and banks increasingly using these markets for price discovery around political and economic events, even as infrastructure and regulatory uncertainty continue to limit broader adoption.
Regulatory fragmentation has also slowed adoption. In the U.S., platforms like Kalshi operate under Commodity Futures Trading Commission oversight, while others, such as Polymarket, remain offshore, limiting access for domestic institutional capital. That has pushed many firms to explore alternative structures that better align with existing compliance frameworks.
The companies said the new offering is designed to address those gaps by combining custody, collateral management and OTC execution into a single workflow. By allowing investors to trade against crypto collateral without moving assets off-platform, the model aims to bring prediction markets closer to the infrastructure institutions already use in other asset classes.
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