Jeremy Maletz of Susquehanna International Group (SIG) said prediction markets now provide institutional investors with viable tools to hedge economic risks.
This shift marks a transition for prediction markets from niche speculative tools to institutional-grade financial instruments. By providing price discovery and stability, these markets allow hedge funds and large firms to protect portfolios against specific geopolitical or macroeconomic events.
Maletz, who serves as the head of macro trading and prediction markets at SIG, said these strategies during an appearance on Bloomberg Television’s Odd Lots podcast. He said the strategic importance of market-making ensures that there is consistent liquidity for traders to enter and exit positions.
Through a partnership with the platform Kalshi, SIG acts as a market maker to support institutional trades. This relationship helps bridge the gap between retail speculation and the high-capital requirements of professional investors. Maletz said, "Prediction markets are already good enough to hedge real money, even on contracts that barely trade" [1].
These markets allow investors to price specific risks, such as instability in the Strait of Hormuz, by trading on the probability of certain outcomes. When a market maker provides a continuous bid and ask price, it creates a reliable mechanism for institutions to offset potential losses in other assets.
While the industry seeks growth, the regulatory environment remains complex. Some reports indicate that Congress is considering action regarding prediction markets due to corruption concerns, even as platforms make a concerted push to attract top hedge funds [2].
Despite these hurdles, the integration of institutional capital and professional market-making is viewed as the next phase of growth for the sector [2]. The ability to quantify uncertainty through trading prices provides a real-time data stream that traditional polling, or forecasting, often lacks.
“Prediction markets are already good enough to hedge real money, even on contracts that barely trade.”
The movement of prediction markets into the institutional sphere suggests a growing demand for precise, event-driven hedging. By moving away from purely speculative retail trading and toward structured market-making, firms like SIG are treating geopolitical volatility as a tradable asset class, which could increase the overall liquidity and accuracy of these markets.
