Cantor Fitzgerald is making its first serious push into prediction markets, and it’s bringing a few thousand friends along. The full-service investment bank announced it will act as an introducing broker for approximately 3,000 institutional clients, giving hedge funds and family offices access to block trading on Kalshi, the CFTC-regulated prediction market exchange.
The partnership effectively solves one of the biggest problems that has kept institutional money on the sidelines of prediction markets: scale. Block trades allow large orders to be executed privately, away from the central order book, meaning a hedge fund can take a meaningful position on, say, the next Fed rate decision without moving the market against itself.
How the plumbing works
Cantor isn’t going it alone on the market-making side. Susquehanna International Group, one of the largest quantitative trading firms in the world, will provide pricing and liquidity for the block trades. Think of it as a three-legged stool: Kalshi runs the exchange, Cantor brings the clients, and Susquehanna makes sure there’s someone on the other side of every trade.
Brandon Lutnick, Cantor’s Chairman, framed the move as a strategic effort to bring significant institutions into the prediction market space. The timing isn’t accidental. Prediction market activity surged following recent political developments, and the appetite for event-driven trading instruments has grown considerably among sophisticated investors looking for uncorrelated return streams.
From novelty to asset class
Prediction markets let participants trade yes/no contracts tied to real-world outcomes. Will the US economy enter a recession this quarter? Will a specific company beat earnings estimates? Will a hurricane make landfall in Florida before October? Each of these questions becomes a tradeable contract with a price between zero and one dollar, where the price roughly reflects the market’s implied probability of the event occurring.
Kalshi, which launched in 2020, changed the equation by securing CFTC approval for a broad range of event contracts. Still, institutional participation remained sparse. The contracts were too small, the liquidity too thin, and the infrastructure too unfamiliar for portfolio managers allocating hundreds of millions of dollars. Cantor’s entry directly addresses each of those friction points.
The potential market size is anything but trivial. Bernstein has projected that prediction markets could reach $1 trillion in annual trading volumes by the end of the decade.