Written by: Niuske, Deep Tide TechFlow
It has finally arrived. The prediction market, once built by political supporters, speculative retail investors, and opportunists, is now welcoming a group of silent yet deadly new players.
According to a report by the Financial Times on Thursday, several well-known trading firms, including DRW, Susquehanna, and Tyr Capital, are forming dedicated prediction market trading teams.
Last week, DRW posted job advertisements offering base annual salaries of up to $200,000 for traders who can "monitor and trade active markets in real-time" on platforms like Polymarket and Kalshi.
Options trading giant Susquehanna is hiring prediction market traders who can "detect incorrect fair values," identify "anomalous behavior" and "inefficiencies" in prediction markets, and is also forming a dedicated sports trading team.
Cryptocurrency hedge fund Tyr Capital continues to recruit prediction market traders who "are already running complex strategies."
Data supports this expansion ambition.
Monthly trading volume surged from less than $100 million at the beginning of 2024 to over $8 billion by December 2025, with a record single-day trading volume of $701.7 million on January 12.
When the pool of funds is deep enough to accommodate giants, Wall Street's entry becomes inevitable.
Arbitrage Priority
In the prediction market, institutions and retail investors are not playing the same game.
Retail investors often rely on fragmented information to predict individual events, which is essentially a form of gambling, while institutional players focus on cross-platform arbitrage and structural market opportunities.
In October 2025, Boaz Weinstein, founder of hedge fund Saba Capital Management, stated at a closed-door meeting that prediction markets allow portfolio managers to hedge investments with greater precision, especially regarding the probability of specific events occurring.
He stood next to Polymarket CEO Shayne Coplan and said, "A few months ago, Polymarket showed a 50% probability of economic recession, while the credit market showed a risk of about 2%. You can think of countless pairs trades that were previously impossible."
According to Weinstein, hedge fund managers could buy contracts on Polymarket for "the economy will not go into recession," as the market believes the probability of recession is as high as 50%, making this contract relatively cheap.
Meanwhile, in the credit market, they could short some bonds or credit products that would plummet during an economic recession, as the credit market only assigns a 2% probability to recession, keeping those products' prices high.
If the economy does go into recession, they might lose a small amount on Polymarket but make a significant profit in the credit market, as those overvalued bonds would crash.
If the economy does not go into recession, they profit on Polymarket, and may incur a small loss in the credit market, but overall, they still profit.
The emergence of prediction markets has provided traditional financial markets with a brand new "price discovery tool."
Arrival of the Privileged Class
What further tips the balance is the privilege at the regulatory level.
Susquehanna is the first market maker for Kalshi and has reached an event contract agreement with Robinhood.
Kalshi offers various incentives to market makers: lower fees, special trading limits, and more convenient trading channels, though specific terms have not been disclosed.
The entry of market makers will quickly change this market.
Previously, prediction markets often faced liquidity issues, especially for niche events. When you wanted to buy or sell a large number of contracts, you might encounter significant price spreads or find no counterparties at all.
Professional institutions will quickly eliminate obvious pricing errors. For example, price discrepancies for the same event across different platforms or clearly unreasonable probability pricing will be rapidly smoothed out.
This is not good news for retail investors. Previously, you might have found that "Trump winning" had a 60% probability on Polymarket and 55% on Kalshi, allowing for simple arbitrage; such opportunities will likely be nonexistent in the future.
With Wall Street leading with PhDs earning hundreds of thousands in annual salaries, prediction contracts may soon enter an era of specialization and diversification, rather than just single-event predictions, such as:
- Multi-event combination contracts, similar to parlay betting in sports
- Time series contracts, predicting the probability of an event occurring within a specific time frame
- Conditional probability products, determining the probability of B occurring if A occurs
…
Looking back at financial history, from foreign exchange to futures to cryptocurrencies, the development of each emerging market follows a similar trajectory: ignited by retail investors, ultimately taken over by institutions.
Prediction markets are repeating this process. Technological advantages, capital scale, and privileged access will ultimately determine who can last in this probability game.
For retail investors, while there may still be a glimmer of hope in long-term predictions or niche areas, it is essential to recognize the reality that when Wall Street's precision machinery begins to operate at full speed, the era of easy profits from information asymmetry may be gone for good.
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