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Big investors turn to off-exchange prediction markets

Created at 26 Aug · 3:41 AM1 source↑ Market-relevant
IN SHORT

A nascent over-the-counter market for event contracts is emerging, allowing institutional investors to execute large, bilateral trades away from public exchanges. These deals can be as substantial as $10 million and are being facilitated by platforms that mirror listed event contracts.

Key Numbers

$10 millionsize of individual OTC event contract deals

Who's Involved

Kalshi
retail-focused prediction exchange
Polymarket
retail-focused prediction exchange

↳ Why This Matters

The emergence of an OTC market for event contracts suggests a growing institutional appetite for alternative investment and hedging tools, potentially offering greater privacy and customization for large-scale predictions on future events.

Key facts

  • An over-the-counter market for event contracts is developing.
  • Institutional investors are participating in this market.
  • Trades are executed bilaterally, away from public exchanges.
  • Individual deals can reach up to $10 million.
  • These OTC deals may reference listed event contracts.

A new over-the-counter (OTC) market for event contracts is emerging, operating in parallel to retail-focused prediction exchanges like Kalshi and Polymarket. This OTC market enables institutional investors to conduct large, bilateral trades away from public exchanges. Some of these transactions are structured to reference existing listed event contracts. Individual deals within this OTC market have been observed to be as large as $10 million, indicating significant institutional interest in this developing area of financial speculation.

Frequently asked questions

An event contract is a financial instrument whose payout is based on the outcome of a specific event, such as an election result or an economic indicator.

Exchange markets are centralized and transparent, with standardized contracts traded publicly. OTC markets are decentralized, with trades negotiated directly between two parties.

Investors might use OTC markets for larger trade sizes, greater privacy, and the ability to customize contract terms compared to public exchanges.

What Happens Next

01Further details on the structure and participants of the OTC market are expected.
02The volume of monthly trades in this market is anticipated to grow.
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How It Developed

An over-the-counter market for event contracts is emerging.
Institutional investors are using this market for large, bilateral trades.
Some deals reference listed event contracts.
Individual deals can be as large as $10 million.

Sources

T1
Big investors turn to off-exchange prediction marketsRisk.net

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