Prediction markets enter institutional phase after Kalshi block trade, Bernstein says

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Prediction markets enter institutional phase

Highlights

Kalshi facilitated its first institutional block trade last week, involving a bespoke contract on California carbon auction prices with Greenlight Commodities and Jump Trading.
Retail users accounted for over 80% of the $25.7 billion in prediction market volume in March according to Bitget Wallet and Polymarket, but Bernstein projects possible trillion-dollar growth by decade's end as institutions enter.
U.S. regulatory environment remains fragmented, with Kalshi trading under Commodity Futures Trading Commission oversight and Polymarket receiving conditional approval to operate regulated event contracts in late 2025.

Institutional access expands through bespoke contracts

As reported by Cointelegraph, prediction markets are moving beyond retail speculation into institutional finance because they offer clearly defined binary contracts tied to events such as tariffs, elections and geopolitical developments.

The brokerage points to the first bespoke institutional block trade executed on Kalshi last week as a significant step in that shift. The privately negotiated transaction is brokered by Greenlight Commodities and involves a Houston, Texas-based environmental hedge fund, with Jump Trading acting as liquidity provider.

The custom contract is linked to the clearing price of California’s May carbon allowance auction, showing how event contracts can be structured around specific client exposures. Bernstein analysts write that block trading and bespoke contracts could widen participation among investors seeking targeted hedges, while Clear Street’s partnership with Kalshi gives institutions a regulated route to trade these products alongside stocks and futures.

Retail dominance persists as U.S. regulation develops

Despite the institutional push, prediction market activity remains primarily retail-led. A recent report by Bitget Wallet and Polymarket finds that retail users account for more than 80% of the $25.7 billion in prediction market volume recorded in March.

Bernstein says greater institutional participation could speed up the market’s expansion, with the sector potentially developing into a trillion-dollar industry by the end of the decade. Trading volumes top $25 billion in March, underscoring the scale already reached even before broader institutional adoption takes hold.

The regulatory backdrop in the U.S. is also influencing the market’s direction, although rules remain uneven across platforms. Kalshi operates as a federally regulated exchange under the Commodity Futures Trading Commission, while Polymarket receives conditional approval in late 2025 to offer event contracts in the U.S. through regulated channels.

In our earlier report on the CFTC’s proposed rule for prediction-market event contracts, we described how the agency was collecting extensive public feedback as a federal-state jurisdiction dispute intensified. We also noted the split between industry participants seeking exclusive CFTC oversight and state gambling regulators and consumer groups calling for tighter limits on contracts tied to sports, elections, and geopolitics.

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