Galaxy Digital has launched an institutional over-the-counter prediction-market trading desk, giving hedge funds, family offices, and other large investors access to event-driven contracts in sizes and with a level of discretion unavailable through retail interfaces.

The firm also executed a $10 million trade with crypto-native hedge fund Arca at launch, taking a position tied to the passage of the Clarity Act on Kalshi, according to a Tuesday announcement. Galaxy’s OTC desk acted as principal counterparty, enabling Arca to build the position on a bilateral basis at institutional scale.

“Event-driven markets are becoming core to how sophisticated investors express macro views, and they deserve institutional infrastructure to match,” said Jason Urban, global co-head of digital assets at Galaxy. Arca chief investment officer Jeff Dorman said prediction markets were the most appropriate hedging vehicle for the firm’s Washington-focused positions, but that existing retail liquidity was insufficient for a fund of its size.

The offering covers non-sports event contracts on Kalshi and Polymarket, spanning economic, political, and geopolitical markets with plans to expand to additional platforms. Galaxy can also pair prediction market positions with hedges in equities and commodities, allowing clients to build unified risk strategies around a single event rather than managing exposure separately across asset classes.

The launch follows a steady institutional march into prediction markets. Wintermute extended its trading infrastructure into event contracts last week, The Block reported. BitGo moved earlier in March, partnering with Susquehanna Crypto to offer institutional OTC access with crypto and stablecoin collateral. Jump Trading also struck market-making deals with both Polymarket and Kalshi in exchange for equity stakes in February.

Galaxy had been exploring the space since at least November and was reportedly in talks to serve as a liquidity provider for both Polymarket and Kalshi.

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RichSilo Visions:

Executive Summary (TL;DR)

Institutional crypto players are building sophisticated infrastructure for event-driven trading, moving beyond simple directional bets on crypto volatility. This signals the maturation of prediction markets into legitimate financial instruments with cross-asset hedging capabilities.

The Core Friction

The true driver behind Galaxy’s OTC prediction desk is a fundamental shift in institutional crypto strategy: funds like Arca have developed proprietary expertise in predicting regulatory and political outcomes that traditional markets can’t price efficiently. This isn’t merely about providing liquidity—it’s about creating asymmetric opportunities where information arbitrage generates alpha. The underlying friction is that traditional financial infrastructure lacks the flexibility to handle the complexity and specificity of crypto event contracts, forcing sophisticated players to build their own. Galaxy isn’t just facilitating trades; it’s constructing a moat around proprietary information advantages that many traditional institutions can’t yet access.

Market Impact & Chain Reaction

Short-term: We’ll see immediate capital inflows into Kalshi and Polymarket, driving higher liquidity and potentially more accurate pricing for political/regulatory events. The $10 million Arca trade sets a precedent for institutional-sized positions, encouraging other funds to scale their Washington-focused strategies. This will intensify competition among trading infrastructure providers like Wintermute, BitGo, and Jump Trading, who are already positioning in this space.

Mid-term: Prediction markets will evolve into sophisticated derivatives markets with options-like structures. Crypto-native funds with regulatory expertise will gain a significant performance edge, while traditional finance players will either enter through partnerships or become clients. The most significant development will be the convergence of traditional derivatives with prediction markets, allowing for truly cross-asset hedging strategies that manage event risk across multiple asset classes simultaneously.

RichSilo Verdict

Smart money should monitor how quickly these institutional desks can scale their offerings and which event categories generate the most liquidity. The true alpha opportunities lie in funds that can combine prediction market positions with traditional derivatives to create delta-neutral event strategies. As Galaxy and others build more sophisticated cross-asset hedging capabilities, the lines between prediction markets and traditional finance will continue to blur, creating new frontiers for institutional capital.