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From Retail Bets to Blocks
Prediction markets are moving toward an institutional era after the first bespoke institutional block trade, according to a May 4 report by Bernstein.
“Prediction markets entering institutional era after first block trade — Bernstein”
The report says the sector is evolving “from retail speculation platforms into institutional-grade financial instruments,” driven by demand for “precise macro hedging and clearly defined binary outcomes.”
Bernstein points to a milestone on Kalshi last week, describing a block trade as a “privately negotiated, large transaction typically arranged between institutional counterparties.”
The deal was brokered by Greenlight Commodities and involved a Houston, Texas-based environmental hedge fund and Jump Trading as the liquidity provider.
The custom contract was tied to the clearing price of California’s May carbon allowance auction, showing how prediction markets can be tailored to specific client needs.
Bernstein’s analysts wrote, “We believe the introduction of block trading and bespoke contracts could expand participation from institutional investors seeking targeted exposure to event risks.”
The same Bernstein report also highlights Clear Street’s partnership with Kalshi, saying it gives institutional investors “a regulated way to access prediction markets,” including trading alongside “traditional assets like stocks and futures.”
Even as institutional interest grows, the sector still appears dominated by retail activity, with a Bitget Wallet and Polymarket report finding that “retail users accounted for more than 80% of the $25.7 billion in prediction market volumes recorded in March.”
ETF Wrappers for Elections
A parallel shift is underway in how prediction-market exposure is packaged for mainstream brokerage accounts, with Roundhill Investments launching six exchange-traded funds tied to U.S. election results on 5 de mayo.
The Yellow report says the launch will mark “la primera vez que contratos de prediction market se negociarán en cuentas de corretaje estándar,” and it traces the timing to a filing with the SEC.
Bloomberg ETF analyst James Seyffart is cited saying Roundhill filed a post-effective amendment “fijando el 5 de mayo como la fecha de efectividad.”
The six ETF symbols are BLUP, REDP, BLUS, REDS, BLUH y REDH, covering “el control demócrata y republicano de la Casa Blanca, el Senado y la Cámara de Representantes.”
The funds tied to Congress reference the midterm elections of “el 3 de noviembre de 2026,” while the presidential funds point to “los comicios del 7 de noviembre de 2028.”
Each fund gets exposure through swap agreements on binary contracts traded on regulated platforms under the CFTC, with the example that contracts settle at “1 dólar si ocurre el resultado objetivo y a 0 dólares si no ocurre.”
The report also quotes Bloomberg’s Eric Balchunas saying the products “abrirían una enorme puerta a todo tipo de cosas,” and it notes that Bitwise and GraniteShares had filed “en febrero gamas prácticamente idénticas de seis fondos.”
The ETF structure is described as a way to move beyond direct trading of event contracts, while still relying on the same binary outcomes and regulated trading venues.
Regulation and Market Fragmentation
Regulatory momentum is shaping prediction markets, but the rules are uneven across jurisdictions, and that unevenness is repeatedly tied to how institutions can participate.
“Kalshi operates as a federally regulated exchange under the Commodity Futures Trading Commission”
In the United States, Kalshi is described as operating as a federally regulated exchange under the Commodity Futures Trading Commission, while Polymarket received “conditional approval in late 2025 to offer event contracts in the US through regulated channels.”
The KuCoin report adds that, in March 2026, the U.S. Commodity Futures Trading Commission (CFTC) advanced a formal proposal to regulate event contracts, following a January 2026 announcement that the CFTC pledged to draft specific rules.
It also says that “reports emerged that Belgium, France, Italy, Poland, and Romania had implemented prohibitions on certain platforms,” labeling them as unlicensed gambling.
In Brazil, a different regulatory approach is described as a clampdown led by the Central Bank and the Ministry of Finance, classifying prediction platforms as illegal bets and prohibiting their registration as financial derivatives.
The GI Español report says CMN Resolution No. 5298, “formalized on April 24, 2026,” establishes an express prohibition on offering and trading derivative contracts whose underlying assets are linked to real or virtual events of sporting, political, electoral, social, cultural, or entertainment nature.
It further states that the Ministry of Finance issued “Technical Note No. 2958,” which classifies operations on predictive platforms as “fixed-odds bets,” and it says the Secretariat of Prizes and Bets declares their commercialization as “illicit activity.”
Taken together, the sources depict a sector where institutional access depends not only on market structure like block trades and swaps, but also on whether regulators treat event contracts as permissible hedges or prohibited gambling.
Odds, Volumes, and Institutional Skepticism
Even as institutional structures expand, the market’s internal pricing of outcomes remains contested, and the sources show that bettors’ probabilities can diverge sharply from analysts’ targets.
TradingView reports that Polymarket assigns only a “27% chance” to Bitcoin reaching “$150,000” in 2026, while it frames the contrast against “analysts such as Bernstein and Grayscale” who maintain targets “($150,000 to $200,000).”
The same TradingView piece says “61% of participants think BTC could stay below the symbolic $100,000 mark in 2026,” and it situates those odds in a volatility context where Bitcoin “fell below $90,000 by year-end” after “flirting with $126,000 in October 2025.”
It also cites Geoff Kendrick at Standard Chartered saying Bitcoin ETFs have made BTC “more sensitive to macroeconomic fluctuations, such as interest rates or inflation,” and it links that sensitivity to a “30% drop after the October peak.”
Separately, the Bitget Wallet and Polymarket data cited by Cointelegraph shows retail dominance in prediction-market volumes, with “more than 80% of the $25.7 billion in prediction market volumes recorded in March” attributed to retail users.
The KuCoin report claims global adoption is pushing prediction markets toward a $10 billion value in 2026 and says “Global prediction market volume reached $64 billion in 2025,” while also stating that “The industry reached a monthly volume of $37 billion in January 2026.”
It adds that “More than 80% of total trading volume in March” remained concentrated in sports-related contracts.
Together, these sources portray a sector where institutional participation is growing through block trades and ETF wrappers, but the probabilities embedded in prediction-market pricing—like Polymarket’s 27% for $150,000—remain a focal point of disagreement.
What Comes Next for the Sector
Looking ahead, the sources tie the next phase of prediction markets to both product innovation and regulatory outcomes, with multiple reports describing how institutional access could expand while compliance risks persist.
“We believe the introduction of block trading and bespoke contracts could expand participation from institutional investors seeking targeted exposure to event risks”
Bernstein’s report argues that block trading and bespoke contracts could expand participation from institutional investors seeking targeted exposure to event risks, explicitly stating, “We believe the introduction of block trading and bespoke contracts could expand participation from institutional investors seeking targeted exposure to event risks.”
It also says Clear Street’s partnership with Kalshi provides “a regulated way to access prediction markets,” enabling trading “alongside traditional assets like stocks and futures.”
The Yellow report frames Roundhill’s election ETFs as a gateway, quoting Eric Balchunas that the products “abrirían una enorme puerta a todo tipo de cosas,” and it specifies that the funds’ binary contracts settle at “1 dólar si ocurre el resultado objetivo y a 0 dólares si no ocurre.”
At the same time, the KuCoin report describes regulatory change as a “double-edged sword,” stating that it “invites institutional capital” but also “brings compliance risks,” and it notes that in March 2026 the CFTC advanced a formal proposal to regulate event contracts.
The GI Español report describes Brazil’s approach as closing a gray area by prohibiting certain derivative structures and classifying predictive platforms as “fixed-odds bets,” with commercialization declared “illicit activity.”
In the United States, the Cryptonews.net report says the regulatory landscape remains uneven, even as Kalshi is federally regulated and Polymarket has conditional approval, emphasizing that institutional access depends on whether platforms operate through regulated channels.
The KuCoin report also projects growth, claiming “prediction markets” are becoming an institutional asset class worth “$10 billion” in 2026 and citing “Analysts from Citizens and DraftKings” expecting “$10 billion annually” in revenues.
