Galaxy Digital has established a swap dealer operation enabling institutional investors to access event-driven prediction contracts through bilateral OTC structures rather than public platforms. The debut transaction involved a ten million dollar event swap with crypto hedge fund Arca linked to passage of major U.S. crypto legislation, a deal roughly five times the size of equivalent listed contracts on Kalshi.
The migration to OTC structures addresses three institutional pain points. First, despite Kalshi’s recent volume surge to an annualized one hundred seventy-eight billion dollars, liquidity on non-sports event markets remains insufficient for large block trades without significant price impact. Second, blockchain-based platforms like Polymarket create public wallet records that expose fund positioning, whereas bilateral OTC execution maintains complete privacy. Third, ISDA Master Agreements allow institutions to book event risk using existing legal documentation and counterparty frameworks, eliminating the need to onboard with new and often offshore venues.
This development signals prediction markets are entering a bifurcated phase where retail flow remains on transparent exchanges while institutional capital moves through traditional dealer channels. Regulated OTC structures also reduce compliance uncertainty for funds prohibited from using certain offshore platforms. Similar intermediary activity is emerging across the sector, with Wintermute providing liquidity on public venues and Marex creating structured notes tied to prediction outcomes. For brokers and fintech firms, the trend underscores how novel asset classes eventually conform to established institutional infrastructure rather than replacing it.
FXnCO Insight
Dealers willing to warehouse event risk through compliant bilateral structures can capture institutional flow that prediction exchanges cannot service due to liquidity constraints and disclosure requirements.
Source: Finance Magnates