Chicago-based trading giant DRW, a dominant force in derivatives and crypto since 1992, is building a dedicated prediction market desk targeting platforms like Polymarket and Kalshi. The move signals that sophisticated quantitative firms now view prediction markets as a legitimate trading venue.
Other firms are following. Wintermute and IMC are hiring algorithmic traders for binary event contracts. Exchanges like OKX and Crypto.com have also posted related openings.
The catalyst is surging volume. Polymarket processed $22-40 billion in 2025, up from nearly zero three years ago. As of last week, the UEFA Champions League Winner market alone hit $256 million, while the 2026 NBA Champion market reached $399 million. Combined, three major sports markets represent over $730 million in volume.
But institutional players are not necessarily trying to predict outcomes better than fans. Harry Crane, a statistics professor at Rutgers, argues they are likely applying short-term trading techniques to exploit pricing gaps. For example, on May 14, Polymarket priced Andy Burnham's chances as UK prime minister at 24 cents, while Betfair showed 50 cents-an obvious cross-market inefficiency.
Key structural features driving interest: information lag between traditional betting exchanges and decentralized platforms, and liquidity fragmentation across Polymarket, Kalshi, and sportsbooks. These create windows for arbitrage.
Competition is intensifying. Crypto market makers are studying sports analytics, while sports betting specialists are being recruited by crypto firms. HyperLiquid is preparing to launch prediction markets ahead of the 2026 World Cup.