Kalshi Block Trade Sparks Institutional Rush to Prediction Markets: Retail Still Dominates

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Prediction markets enter institutional era after first Kalshi block trade

Large investors are increasingly interested in prediction markets as a way to directly trade on the potential risks associated with future events, as highlighted in a recent report from Bernstein on May 4th.

Summary

  • Bernstein says Kalshi’s first bespoke block trade could attract institutions seeking direct event-risk exposure.
  • Greenlight brokered the Kalshi trade, with Jump Trading providing liquidity for a carbon allowance contract.
  • Retail still drives prediction markets, with Polymarket and Bitget reporting $25.7B in March volume.

The company explained that these markets allow investors to easily follow the results of events like tariffs, elections, policy changes, and global political situations using simple contracts that are either yes or no.

Bernstein highlighted Kalshi’s first customized large-scale trade as a significant milestone. These kinds of trades, known as block trades, are private deals negotiated directly between participants. This particular trade was based on the final price from California’s May auction of carbon allowances.

Kalshi trade draws institutional attention

As an analyst, I’ve been following the Kalshi deal closely. Greenlight Commodities put it together, connecting a Houston-based environmental hedge fund with Jump Trading as the entity providing the necessary liquidity. What’s particularly interesting about this arrangement is that it demonstrates how prediction markets can be used for targeted hedging strategies, moving beyond just general public betting.

From my perspective as an analyst, we’re seeing potential for increased institutional investment if block trading and customized contracts become more widely available. These tools would allow investors to specifically target opportunities related to events with associated risks, which is something many are looking for.

The report suggests custom contracts could be a good option for investors seeking specific results and wanting to make larger investments.

Clear Street teamed up with Kalshi to give bigger investors a secure and regulated way to trade. This partnership includes services like clearing and settling trades, large-volume trading, swaps, and tools for institutions. Clear Street was the first of its kind to connect to Kalshi’s trading and clearing system.

Retail still leads market volume

Although more institutions are starting to show interest, prediction markets are still primarily used by individual traders. Recent data from Bitget Wallet and Polymarket shows that Polymarket processed $25.7 billion in trades during March, but the vast majority – 82.8% – came from traders exchanging less than $10,000.

Bernstein believes that if more institutions start using prediction markets, the industry could grow significantly by the end of the decade. However, some challenges remain, including how these markets should be regulated, how to manage risks, and whether they should be considered more like financial investments or bets.

U.S. regulation remains uneven

Kalshi is regulated by the Commodity Futures Trading Commission. Polymarket, as noted in a Bernstein report, received preliminary approval in late 2025 to legally offer event-based contracts within the U.S.

Financial regulators are still examining the market closely. According to a Reuters report from May 4th, the Securities and Exchange Commission (SEC) has put a hold on over twenty proposed exchange-traded funds (ETFs) that would allow people to bet on future events. The SEC is requesting more details from the companies creating these ETFs about how they would work and what information they would provide to investors.

On April 30th, the U.S. Senate voted to prohibit senators, their staff, and other officials from participating in prediction markets. This decision was made because of worries that individuals with inside information could use these markets to profit from real-world events.

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2026-05-05 08:36