Major high-frequency trading firms and quantitative hedge funds, including DRW, Susquehanna International Group, and Jump Trading, are building dedicated desks focused on prediction markets, signalling a new phase for a market long dominated by retail speculation.
According to recent reporting by the Financial Times, these firms are entering prediction markets to deploy the same quantitative playbooks used in equities and derivatives. They identify mispricing, arbitrage discrepancies between platforms, and do market-making in structurally inefficient venues.
“The opportunity is not about guessing outcomes,” said Joseph Saluzzi, co-founder of Themis Trading. “In a market this new, where platforms are still siloed and liquidity is fragmented, arbitrage opportunities are everywhere.”
From Novelty to Market Structure
Job listings underscore how seriously institutional players are approaching the space. DRW is hiring traders for a dedicated prediction-markets desk with base salaries reaching $200,000. Susquehanna International Group is recruiting talent to “detect incorrect fair values” and identify market inefficiencies, while Swiss-based G-20 Advisors is seeking quantitative engineers to build probability models for event contracts.
Other professional trading firms, including Flow Traders, as well as specialist funds such as Kirin, Anti Capital and Sfermion, are also increasing activity in event-driven markets, reflecting a broader influx of quant capital.
This institutional interest has been fuelled by rapid growth in trading activity. Volumes on prediction-market platforms have risen from less than $100 million a month in early 2024 to more than $8 billion in December 2025, transforming what was once a niche experiment into a market large enough to attract professional arbitrageurs.
Liquidity Incentives and Embedded Market Makers
The structure of leading platforms has also made them attractive to sophisticated traders. On Kalshi, Susquehanna International Group became the first official market maker, receiving reduced fees and higher position limits in return for providing liquidity.
Similar arrangements are common in traditional derivatives markets, but their adoption in prediction markets highlights how closely institutional firms are now embedded in the sector’s infrastructure.
For many of these players, prediction markets offer more than just arbitrage.
Boaz Weinstein, founder of Saba Capital Management, has described event contracts as a highly specific hedging tool, allowing portfolio managers to offset the probability of discrete outcomes and take larger, more confident positions elsewhere.
A Clear Signal of Professionalisation
Some large hedge funds remain cautious, citing the market’s still-modest size relative to multi-trillion-dollar asset classes and the evolving regulatory landscape. Yet the arrival of top-tier HFT firms marks a clear inflection point.
These firms are not treating prediction markets as a novelty or a betting venue, but as an emerging asset class defined by inefficiency, fragmentation and the absence of mature pricing – conditions where quantitative strategies historically thrive.
As professional market makers and arbitrageurs move in, prediction markets are beginning to resemble early-stage financial markets elsewhere: volatile, imperfect, and increasingly shaped by institutional capital seeking to impose order, liquidity and price discipline.
This article was written by Tanya Chepkova at www.financemagnates.com.
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