Traditional financial firms are moving into the crypto prediction market as event-based contracts unlock deeper liquidity. According to Chainalysis, capital inflows have surged since September 2024, supported by retail traders, market makers and institutions.
Important points:
- As the crypto prediction market attracts deeper liquidity, traditional companies are expanding their presence.
- Retail activity helped draw market makers, institutions, and large deposits into the event contract.
- Regulatory disputes are likely to shape how prediction markets tap into broader financial infrastructure.
Traditional finance builds the rails for the cryptocurrency prediction market
Major exchanges and financial firms are accelerating their efforts in crypto prediction markets as event-based contracts increase institutional liquidity. Blockchain analytics firm Chainalysis announced on May 7 that inflows have surged since September 2024, supported by retail activity, market makers, and institutional investor participation. This trend shows that prediction markets are moving from niche crypto speculation to financial infrastructure.
Retail traders initially helped drive activity by betting on outcomes related to elections, interest rate decisions, sports, and entertainment. This activity attracted specialized companies seeking price differentials and stronger orders. Market makers now provide large amounts of margin to support deeper trading, making prediction markets more of a derivatives-style venue. The traditional finance push includes exchanges, brokerages, crypto platforms, and asset management companies that build products around event contracts. Chainalysis says:
“The most important change is the arrival of traditional finance. Big financial institutions are no longer ignoring the volume these markets generate and are building the infrastructure to capture it.”
Smart contracts provide the core structure. Users deposit collateral on the blockchain system, and stablecoins support payments. Decentralized oracles help validate real-world outcomes before contracts are resolved. This design provides financial institutions with faster settlements, public trading records, and programmable liquidity across global markets.
Event contracts move towards regulation of financial access
A few named companies exemplify that change. CME Group has launched swap-based event contracts, and Coinbase, Robinhood, and Crypto.com are exploring or deploying prediction market products. Chainalysis also noted that Intercontinental Exchange announced an investment of up to $2 billion in Polymarket.
Asset managers are testing broader access through securities markets. Bitwise, Round Hill, and Granite Shares have filed for a prediction market exchange traded fund (ETF) with the Securities and Exchange Commission (SEC). These funds will track contracts related to the 2028 U.S. presidential election and the 2026 Congressional midterm elections. Chainalysis says:
“While regulators are debating oversight, the market is already moving, and prediction markets are a place for retailers to speculate about real-world events.”
Regulation remains the main unresolved issue. The Commodity Futures Trading Commission (CFTC) and state regulators are arguing over whether event contracts are derivatives or gambling products. Still, activity by institutional investors continues to advance before legal clarity is achieved, placing prediction markets amid broader debate over liquidity, compliance, and blockchain-based market systems.
