Author: Niusike, Deep Tide TechFlow
It has finally arrived. The prediction markets, once built by political supporters, speculative retail investors, and airdrop hunters, are now welcoming a group of silent yet deadly new players.
According to a Thursday report by the Financial Times, several well-known trading firms, including DRW, Susquehanna, and Tyr Capital, are forming specialized prediction market trading teams.
DRW posted a job advertisement last week, offering a base annual salary of up to $200,000 for traders capable of "monitoring and trading active markets in real-time" on platforms like Polymarket and Kalshi.
Options trading giant Susquehanna is recruiting prediction market traders who can "detect incorrect fair value," identify "anomalous behavior" and "inefficiencies" in prediction markets, and is also building a dedicated sports trading team.
Crypto hedge fund Tyr Capital is continuously hiring prediction market traders who are "already running complex strategies."
Data supports this ambitious expansion.
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 becomes deep enough to accommodate the size of giants, Wall Street's entry becomes inevitable.
Arbitrage First
In prediction markets, institutions and retail investors are not playing the same game.
Retail investors often rely on fragmented information to predict single events, which is essentially 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, particularly regarding the probability of specific events occurring.
Standing next to Polymarket CEO Shayne Coplan at the time, he said, "A few months ago, Polymarket showed a 50% probability of recession, while the credit market indicated a risk of about 2%. You can think of countless paired trades that were previously impossible."
According to Weinstein's view, a fund manager could buy the "no recession" contract on Polymarket. Because the market believed there was a 50% chance of recession, this contract was relatively cheap.
At the same time, in the credit market, one could short some bonds or credit products that would fall sharply in a recession. Because the credit market only assigned a 2% probability to a recession, these products were still priced high.
If a recession did occur, you would lose a small amount on Polymarket, but make a large profit in the credit market as those overvalued bonds plummet.
If no recession occurred, you would make money on Polymarket and might incur a small loss in the credit market, but overall still profit.
The emergence of prediction markets has provided traditional financial markets with a new "price discovery tool."
The Arrival of the Privileged Class
What tilts the scales even further is privilege at the regulatory level.
Susquehanna is the first market maker on Kalshi and has reached an event contract agreement with Robinhood.
Kalshi offers market makers numerous benefits: lower fees, special trading limits, and more convenient trading channels. The specific terms are not public.
The entry of market makers will quickly change this market.
Previously, prediction markets often suffered from insufficient liquidity, especially for niche events. When you wanted to buy or sell a large number of contracts, you might face wide spreads or simply no counterparty.
Professional institutions will quickly eliminate obvious pricing errors. For example, price differences for the same event on different platforms, or clearly unreasonable probability pricing, will be rapidly smoothed out.
This is not good news for retail investors. Previously, you might find that "Trump wins" was at a 60% probability on Polymarket and 55% on Kalshi, allowing for simple arbitrage. In the future, such opportunities will基本ally not exist.
With Wall Street's PhDs earning hundreds of thousands of dollars, future prediction contracts may also enter an era of specialization and diversification, not just单一 event prediction, such as:
1. Multi-event combination contracts, similar to parlays in sports betting
2. Time series contracts, predicting the probability of an event occurring within a specific time period
3. Conditional probability products, e.g., if A happens, what is the probability of B happening
......
Looking back at financial history, from foreign exchange to futures, to cryptocurrencies, the development of every emerging market follows a similar trajectory: ignited by retail investors, eventually taken over by institutions.
Prediction markets are repeating this process. Technological advantages, capital scale, and privileged access will ultimately determine who stays in this game of probability until the end.
For retail investors, although there may still be a glimmer of hope in long-cycle predictions or niche areas, they must face reality. When Wall Street's精密 machines start running at full speed, the狂欢 period of easy profits from information asymmetry may be gone forever.
