Galaxy Digital Eyes Liquidity Role On Polymarket And Kalshi As Prediction Markets Boom

Digital asset investment manager Galaxy Digital is in discussions to provide liquidity to prediction markets Polymarket and Kalshi.

In an interview with Bloomberg, the firm’s CEO Mike Novogratz said it is already taking part in “small-scale” experiments with market making on the prediction markets, adding that it intends to provide “broader liquidity” on these platforms in the future. 

By acting as a liquidity provider and market maker, Galaxy Digital would place steady bids and offers in order to narrow spreads in the platforms’ order books. It will also improve the overall depth on each platform. 

Only a few Wall Street firms have publicly ventured into prediction markets. Susquehanna International Group has been one of a limited number of institutional liquidity providers on Kalshi and Jump Trading has also recently started trading on the platform. 

Galaxy Digital’s Move Comes As Prediction Markets Gain Steam

Prediction markets allow traders to wager on real-life events. These events can range from sport outcomes, political decisions, timelines, and more. Users trade these events via simple yes or no contracts, with contract prices showing the market-implied probability of each outcome.  

Polymarket home screen (Source: Polymarket)

Currently leading the market are Polymarket and Kalshi, which have collectively seen $42.4 billion in cumulative volume. 

The platforms gained momentum during the 2024 US presidential election, after Polymarket correctly predicted the outcome of the elections. 

Kalshi Challenges Polymarket’s Dominance

Polymarket is a decentralization-focused platform that initially led the space, but is now seeing its dominance challenged by Kalshi, which is regulated by the US Commodity Futures Trading Commission (CFTC). 

Since September, Kalshi has seen more monthly volume than Polymarket.

But that lead could soon be challenged with Polymarket preparing for a US launch. It acquired QCX, a US-licensed derivatives exchange and clearing house, for around $112 million in July, giving it a regulated platform to re-enter the US. It has received a “green light” from the CFTC to return to the US. 

Polymarket has started rolling out its platform to a select group of US users in beta mode and there are reports it is aiming for a late November rollout, initially focus on sports prediction markets.

Polymarket recently signed a multi-year partnership with TKO Group Holdings, which is the owner of UFC and Zuffa Boxing, to become its “Official and Exclusive Prediction Market Partner” for live fan engagement. 

Meanwhile, Intercontinental Exchange (ICE), which is the owner of the New York Stock Exchange, has made a $2 billion strategic investment in Polymarket and the two also entered into a deal that will see ICE distribute Polymarket’s data.

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