Key Takeaways:
Kalshi's record-breaking retail volumes are funding a strategic shift: the regulated prediction market platform is now building the infrastructure to serve hedge funds, brokerages, and institutional traders.
Kalshi processed $17.3 billion in trading volume in May, a monthly record and a 2,500% increase from a year earlier, according to data from Artemis. The platform now accounts for 61% of the $28.4 billion prediction market sector, nearly double the $8.4 billion handled by Polymarket over the same period.
"The expectation institutions will start trading on these markets en masse is behind the rising valuations," said Pierre Lindh, founder of Next.io, an events company focused on the prediction market industry. Kalshi's valuation doubled to $22 billion in five months, up from $11 billion in December.
The institutional push gained momentum in April when Kalshi completed the first block trade on a prediction market platform — a transaction between a Texas environmental hedge fund and a market maker on a California carbon allowance contract. Institutional trading volumes rose more than 800% over the prior six months, though Kalshi has not disclosed the dollar figure for that subgroup.
The Infrastructure Build
Kalshi has signed four partnerships since February to address the compliance, data, and clearing requirements that institutional traders demand. The company partnered with Solidus Labs for market surveillance and insider trading detection, with Tradeweb Markets to distribute its data through platforms institutions already use, and with Fidelity National Information Service to develop prediction market trade clearing.
"There's been a bunch of other excitement from people who didn't even want to have the conversation three to six months ago, to now going, 'Okay, send me some literature,'" said John Conlon, director at Greenlight Commodities, which brokered the first block trade.
Clear Street and Interactive Brokers both announced in May they would integrate some Kalshi contracts onto their platforms, giving institutional clients direct access. Kalshi has waived fees for block trades of 100,000 or more contracts through Sept. 1, according to a regulatory filing.
The Retail Question
The institutional push raises a question for the retail traders who built Kalshi's volume base. Brian Jacobs, portfolio manager at Aptus Capital Advisors, said institutions with access to broader information sets could gain a temporary edge, though that advantage would erode as more large players enter the market.
Andy Ross, head of institutional at Kalshi, argued that institutional liquidity will benefit retail traders who make accurate predictions. "If you're a smart predictor and you continue to be right, and there's more people who are predicting… you'll just continue to be more and more right and make more and more money," he said.
Charles Schwab CEO Rick Wurster said on the company's April earnings call that prediction markets rank "very low on the list" of client demand, though he expects the firm will eventually integrate them.
The broader prediction market sector has posted four consecutive months of rising volumes, with May's $28.4 billion topping the previous high of $27.1 billion set in January. The streak suggests activity is shifting from event-driven spikes toward a sustained baseline, according to Artemis data.
This article is for informational purposes only and does not constitute investment advice.
