Galaxy Digital Eyes Liquidity Role in Prediction Markets
- Galaxy Digital is in talks with Polymarket and Kalshi to supply institutional-grade liquidity.
- Prediction markets are shifting from retail platforms to deeper venues for professional trading.
- Wall Street firms like Jump are quietly entering the space, signaling early institutionalization.
Prediction markets are entering a new phase as financial firms explore the sector. Mike Novogratz’s Galaxy Digital is in discussions with Polymarket and Kalshi to provide liquidity for their trading platforms, as prediction markets attract growing interest from institutional firms and Wall Street market makers. The development mirrors the early stages of institutional entry into spot crypto markets during 2017 through 2020.
Institutional Liquidity Eyes Prediction Markets
Galaxy Digital has focused on institutional crypto infrastructure for years. The company is now taking early steps to expand into prediction markets. Mike Novogratz said the firm is experimenting with market making to understand order flow and platform mechanics.
He said the goal is to eventually support broader liquidity across multiple markets. The discussions involve Polymarket and Kalshi, two platforms experiencing sharp increases in trading participation from retail and professional traders.
Prediction markets allow users to trade binary contracts tied to real-world events. Traders buy or sell outcomes based on elections, sports results, policy decisions, and other major public events.
Platforms like Polymarket and Kalshi match buyers and sellers directly instead of taking the other side like a sportsbook. This makes liquidity crucial, since every trade requires a counterparty willing to take the opposite position. The pressure to support consistent order flow is pushing platforms to court market makers capable of trading at scale.
Galaxy Digital is not the first professional firm exploring these markets. Susquehanna International Group has discussed its role as a market maker on Kalshi in past statements. However, Wall Street activity remained limited until recently because prediction markets were small and fragmented.
Trading volume has increased sharply this year, and major liquidity firms are now viewing the space as profitable. According to reports, Jump Trading has begun quietly market-making on Kalshi. AQR Capital Management is also considering expansion into event-driven betting markets.
Platforms Race to Build Deep Liquidity
Kalshi and Polymarket have rolled out incentive programs to attract liquidity providers and active traders. These programs reward participants who post orders in specific markets to deepen spreads and tighten price discovery. Exchanges say this support helps ensure users can always buy or sell positions without major slippage. Kalshi also operates an internal trading desk to meet demand. The company said the unit runs independently with no access to private customer information.
The Commodity Futures Trading Commission oversees the legal structure for these markets. Some U.S. states argue that prediction markets fall under gambling laws, but the federal regulator has not intervened.
Related: Kalshi Soars to 11B Valuation after Major Funding Round
This regulatory gray zone has not slowed adoption. Retail and institutional demand continues to expand across U.S. and global trading platforms. Wall Street firms are evaluating whether prediction markets can develop into a standardized asset class similar to equities, futures, or crypto.
Analysts say institutional liquidity could change how prediction markets function. Professional market makers can support tighter bid-ask spreads and higher trading depth. Traders could gain more accurate pricing on major political and financial events as liquidity increases.
Exchanges may also evolve their infrastructure to match institutional requirements. That includes clearing systems, compliance frameworks, and automated market-making tools. Market growth could accelerate if large liquidity desks enter in greater size.
Prediction markets are still early in their development phase. Their evolution resembles the early years of regulated crypto trading. Retail participants drove the first phase of growth, and institutional players arrived later as market structure improved. Galaxy Digital’s talks with major platforms signal that the shift to institutional liquidity may now be underway.
