TLDR
- Galaxy Digital is in discussions to become a liquidity provider for Polymarket and Kalshi.
- The firm is exploring small-scale market-making efforts to enhance liquidity on prediction platforms.
- Galaxy Digital aims to improve market depth by buying and selling prediction contracts.
- Institutional interest in prediction markets is growing as Galaxy Digital joins other firms like Jump Trading.
- Polymarket has secured regulatory approvals to return to the U.S. after a three-year hiatus.
Galaxy Digital is reportedly in discussions with prediction market platforms Polymarket and Kalshi to become a liquidity provider. The firm is exploring the possibility of acting as a market maker for these platforms, thereby improving liquidity and reducing costs for users. These talks come as institutional interest in prediction markets grows, driven by decreasing regulatory concerns.
Galaxy Digital’s Role as Market Maker
Galaxy Digital CEO Mike Novogratz confirmed that the company is conducting small-scale market-making experiments in prediction markets. In comments reported by Bloomberg, he mentioned,
“We’re doing some small-scale experimenting with market-making on prediction markets, but I think you’ll eventually see us providing broader liquidity.”
By stepping in as a market maker, Galaxy Digital would buy and sell prediction contracts, offering much-needed market depth.
In markets like these, where liquidity is often scarce and spreads are narrow, Galaxy’s involvement could reduce participants’ costs. The firm’s entry as a market maker could help stabilize prices and ensure more consistent liquidity across different prediction platforms. This move mirrors Galaxy’s approach in crypto markets, where it is known for providing liquidity and trading support.
Rising Institutional Interest in Prediction Markets
The presence of institutional players like Galaxy Digital could transform prediction markets, much as it did in the cryptocurrency sector. The cryptocurrency market saw similar shifts after firms like Jump Trading and Alameda Research became market makers. Today, Kalshi has already onboarded Susquehanna as its first institutional market maker, marking a clear trend toward institutional involvement in the space.
Kalshi’s founder, Tarek Mansour, noted that regulatory approval from the Commodity Futures Trading Commission (CFTC) played a key role in attracting institutional market makers. In 2024, Susquehanna’s entry marked a pivotal point for Kalshi’s institutional strategy. Earlier this year, Bloomberg reported that Jump Trading had also begun providing liquidity on Kalshi.
Polymarket’s Comeback After Regulatory Setbacks
Polymarket, which was forced to exit the U.S. in 2022 due to regulatory concerns, is now eyeing a broader return. The firm’s acquisition of QCEX earlier this year allowed it to secure the necessary regulatory approvals to operate in the U.S. QCEX’s CFTC licenses will enable Polymarket to offer exchange activities and clearing, a crucial step toward its planned U.S. expansion in 2026.
Galaxy Digital’s involvement in the prediction market space is a continuation of its broader efforts to capitalize on the growing interest in these platforms. By providing liquidity on both Polymarket and Kalshi, Galaxy could help address price disparities in prediction contracts. For instance, at the time of writing, contracts for Kevin Hasset to become Chair of the Federal Reserve were trading at different prices across platforms.
This divergence, reminiscent of early cryptocurrency markets, highlights the opportunity for market makers to bring much-needed stability. As Galaxy Digital engages more deeply with both platforms, its presence may reduce the inconsistencies in pricing and improve the overall user experience. The company’s move to provide liquidity could bring long-term improvements to the market dynamics on Polymarket and Kalshi.
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