Institutional investors are entering prediction markets as block trades, custom contracts and US regulatory shifts reshape a sector still dominated by retail users. Prediction markets are evolving from retail speculation platforms into institutional-grade financial instruments, driven by demand for precise macro hedging and clearly defined binary outcomes, according to a May 4 report by Bernstein.
The report highlights why institutional investors may find these markets attractive — namely, they allow users to hedge specific event risks, such as tariffs, elections and geopolitical developments, using contracts that resolve to simple yes-or-no outcomes.
Bernstein pointed to the first bespoke institutional block trade executed on Kalshi last week as a key milestone. A block trade refers to a privately negotiated, large transaction typically arranged between institutional counterparties.
The deal was brokered by Greenlight Commodities and involved a Houston, Texas-based environmental hedge fund and Jump Trading as the liquidity provider. The custom contract was tied to the clearing price of California’s May carbon allowance auction, illustrating how prediction markets can be tailored to specific client needs.
“We believe the introduction of block trading and bespoke contracts could expand participation from institutional investors seeking targeted exposure to event risks,” wrote the Bernstein analysts.
Separately, Bernstein said Clear Street’s partnership with Kalshi gives institutional investors a regulated way to access prediction markets, allowing them to trade these contracts alongside traditional assets like stocks and futures.
