Prediction markets are moving closer to institutional finance as large investors seek direct ways to trade event risk, according to a May 4 report from Bernstein.
The company said these markets help investors track outcomes related to tariffs, elections, policy decisions and geopolitics through clear yes-or-no contracts.
Mr. Bernstein cited Kalsi’s first bespoke institutional block trade as a key step. Block trades are large-scale private transactions negotiated between market participants. In this case, the contract was built around the clearing price of California’s May carbon credits auction.
Kalsi trade attracts institutional attention
The Carsi deal was brokered by Greenlight Commodities. This involved a Houston-based environmental hedge fund, with Jump Trading acting as the liquidity provider. This structure demonstrated how prediction markets can address specific hedging needs as well as broad retail speculation.
“We believe the introduction of block trades and bespoke contracts could lead to greater participation from institutional investors seeking targeted exposure to event risk,” Bernstein analysts said.
The report frames custom contracts as a possible entry point for investors who require clear outcomes and larger deal sizes.
The ClearStreet and Kalsi partnership also adds a regulated access route for large investors. The agreement includes clearing, settlement, block trading, swap services and trading tools for institutional customers. ClearStreet said it has become the first Institutional Futures Commission member to join Kalsi’s exchange and clearinghouse.
Retail still leads the market size
Despite growing interest from institutional investors, prediction markets remain primarily retail-driven. According to Bitget Wallet and Polymarket reports, Polymarket recorded $25.7 billion in trading volume in March. It also found that most of its users are small traders, with 82.8% trading with less than $10,000.
Bernstein said prediction markets could become an even bigger industry by the end of this decade if institutional investors become more available. However, the sector still faces questions about regulation, risk management and whether event contracts should be more closely aligned with financial or gambling markets.
US regulation remains uneven
Calci operates under the Commodity Futures Trading Commission, while Polymarket received conditional approval to offer event contracts in the U.S. through a regulated route in late 2025, Bernstein’s report said.
Regulators and lawmakers continue to review the market. Reuters reported on May 4 that the SEC has delayed the issuance of more than 20 proposed prediction market ETFs while asking issuers for more information on how they work and how they should be disclosed to investors.
The U.S. Senate also passed a resolution on April 30th banning the use of prediction markets by senators, staff, and officials. Lawmakers cited concerns about public officials trading on real-world events while accessing classified information.
