Galaxy Digital Explores Partnerships with Prediction Markets Polymarket and Kalshi

In recent developments, Mike Novogratz's Galaxy Digital is engaging in discussions with prediction market platforms Polymarket and Kalshi to potentially serve as a liquidity provider. This interest comes as on-chain betting on real-life events gains momentum among both retail traders and institutional players in Wall Street.

Key Takeaways

Galaxy Digital is considering a partnership with Polymarket and Kalshi to enhance liquidity in prediction markets.
Prediction markets allow traders to bet on real-world outcomes such as elections and sports events.
Major trading firms are beginning to engage with prediction markets, which could lead to increased legitimacy in the sector.
Google Finance's upcoming integration of live data from these platforms signifies growing mainstream interest.

Galaxy

Galaxy Digital, known for its focus on providing cryptocurrency infrastructure and services to institutional clients, aims to act as a market-maker on these platforms, regularly posting bids and offers to enhance trading activity.

In an interview with Bloomberg, Novogratz shared, "We are experimenting on a small scale with market-making in prediction markets, but I believe you will ultimately see us providing wider liquidity."

The Rise of Prediction Markets for Real-World Betting

Prediction markets have seen significant growth recently, offering binary contracts that are linked to outcomes like elections, sports results, and vital economic events. Traders can purchase shares labeled “yes” or “no,” with the pricing reflecting the collective probability that a specific outcome will happen.

Currently, the regulatory landscape around prediction markets is inconsistent. Some US states classify them under gambling laws, while the federal level has not yet intervened to restrict activities on platforms like Polymarket and Kalshi. Unlike conventional sportsbooks, which bet against customers, Polymarket and Kalshi primarily operate as peer-to-peer order books. To purchase a “yes” share, a trader requires someone to take the “no” position, making liquidity providers and market makers essential for a smooth user experience.

In an effort to foster activity, both platforms have launched incentive programs that reward participants who facilitate orders in certain markets.

Leading Trading Firms Getting Involved

Historically, event markets were too small to draw significant participation from major trading firms. However, Susquehanna International Group is one of the few entities that has acknowledged its role as a market maker on Kalshi publicly.

Additionally, some exchanges have their own internal market-making teams to cater to market demand. Kalshi operates a unit called Kalshi Trading, which trades against its customers. The company emphasizes that this desk is separate from regular operations and does not have access to confidential information from the exchange.

Polymarket, which initially saw much of its trading volume generated outside the US, has recently started live testing its US exchange. The platform has onboarded a select group of users to facilitate genuine trades as it prepares for a more comprehensive relaunch in the US betting market.

Maturity of the Sector as Technology and Liquidity Intersect

Interest in betting on real-world events has surged since the last US presidential election, with traders viewing prediction markets as both speculative avenues and informal polling systems. Increased liquidity from firms like Galaxy would significantly enable larger transactions within the order books without leading to major price fluctuations.

Moreover, major tech companies are helping to normalize the sector. For instance, Google Finance has announced that it will soon provide live data from Polymarket and Kalshi, allowing users to inquire about future events and view public price evaluations.

This type of visibility may encourage both crypto enthusiasts and traditional investors to see prediction markets as less of a niche project and more as a standard element of the market framework.