Galaxy Digital Explores Market-Making Role in Expanding Prediction Markets

Galaxy Digital is in active discussions with Polymarket and Kalshi about becoming a liquidity provider, according to Bloomberg.

It's part of a continuing trend of prediction market exploration by retail traders and large financial firms. 

Galaxy CEO Mike Novogratz said the company has been testing small-scale market-making activity and is considering a broader role on the platforms. The firm, which traditionally focused on crypto infrastructure for institutional clients, would offer consistent buy and sell orders to deepen liquidity and improve trade execution.

Prediction markets have expanded rapidly as users trade binary contracts tied to outcomes in politics, sports, and other real-world events. State gambling regulators have taken notice of the activity, but the Commodity Futures Trading Commission (CFTC), which oversees registered event-contract exchanges, has not taken any action against the platforms. 

Event-based exchanges operate on a peer-to-peer model that requires counterparties for each position, which differs from sportsbooks. This means that operators need to focus on getting more market makers.

Polymarket and Kalshi have launched incentive programs to encourage trading and ensure that customers can easily enter and exit positions.  Until recently, these markets were too small for major financial companies to join.

Susquehanna International Group has been one of the few firms to publicly discuss its role on Kalshi, while others are beginning to take an interest. Bloomberg reported that Jump Trading has started providing liquidity on Kalshi, and AQR Capital Management's Cliff Asness said the firm is evaluating an expansion into sports wagering. 

Kalshi also has an internal trading desk to meet customer needs, but the company says that this unit works on its own and doesn't have access to private information.

Kalshi's $1 billion fundraise

The push by major trading firms into prediction markets comes as Kalshi secures a $1 billion funding round that values the company at $11 billion. The round was led by existing backers Sequoia Capital and CapitalG, with participation also from Andreessen Horowitz, Anthos Capital, Neo, and Paradigm. 

It follows a $300 million raise completed just a month ago at a $5 billion valuation, highlighting accelerated interest from venture investors.

The new valuation places Kalshi closer to the target range of $12 billion to $15 billion reportedly sought by its decentralized competitor Polymarket. As a regulated US exchange, Kalshi is overseen by the CFTC. It offers contracts on economic indicators and political outcomes, and both retail and institutional users can use fiat to access the site. 

Both Kalshi and Polymarket are now at the top of the quickly growing event-contract market. Kalshi focuses on making rules clear and making it easier for more people to participate in the financial system, while Polymarket focuses on decentralized architecture and making it easier for people all over the world to access it.