Key facts
- Morgan Stanley is a strategic partner at the NEXTPredict summit in New York on October 22-23.
- The bank will lead a panel discussion on institutional capital's role in prediction markets.
- Stephen Grambling, Morgan Stanley's head of U.S. gaming, lodging and leisure research, will lead the panel.
- Around 90% of current prediction market turnover is in sports contracts.
- Kalshi was reportedly valued at $40 billion in a recent funding round, and Polymarket closed a round at $20 billion.
- Morgan Stanley's wealth management arm examined prediction markets in an April report.
Morgan Stanley has joined the NEXTPredict summit in New York as a strategic partner, signaling a growing institutional interest in prediction markets. The bank will lead a panel on institutional capital, addressing the opportunities, market structure, and risks involved in bringing larger financial players into the space.
While prediction markets are attracting attention, their current landscape is dominated by sports contracts, with approximately 90% of turnover derived from this category, according to NEXT.io co-founder Pierre Lindh. For the high valuations of platforms like Kalshi (reportedly $40 billion) and Polymarket ($20 billion) to be sustained, the sector needs to evolve beyond its current use as an alternative to sportsbooks.
Lindh suggests that institutional investors are looking for prediction markets to become a more robust tool for hedging business risks that are not well-covered by conventional financial instruments. Examples include a conference organizer hedging against event disruption from natural disasters. Banks are also interested in using market odds as a potential indicator of world events or for internal forecasting.
However, regulatory clarity remains a significant hurdle, with large banks reportedly holding back until state-level litigation concerning these markets is resolved. Morgan Stanley's representative, Stephen Grambling, who covers the gaming sector, highlights the need for a clear understanding of the opportunity and risks. The bank has prior engagement in the sector, having participated in Kalshi's Series F funding round and examining prediction markets in a wealth management report.