Galaxy Bets Prediction Markets Will Rival Traditional Derivatives

Galaxy Digital Holdings, the crypto infrastructure firm led by Mike Novogratz, is exploring a strategic shift into prediction markets by engaging in talks with platforms Polymarket and Kalshi to serve as a liquidity provider according to Bloomberg. This move positions the firm to capitalize on the growing retail and institutional interest in event-driven financial products, where traders bet on outcomes ranging from elections to economic data releases. Novogratz confirmed in a Bloomberg interview that Galaxy is experimenting with small-scale market-making efforts and anticipates expanding its role as a broader liquidity provider in the space.

Prediction markets have surged in popularity this year, with platforms like Polymarket and Kalshi accounting for 97% of global trading volume. Their growth has been fueled by regulatory progress, including Kalshi's CFTC approvals and Polymarket's acquisition of a CFTC-licensed exchange, as well as high-profile partnerships such as the National Hockey League's data licensing agreements according to financial analysis. Google's decision to integrate live odds from both platforms into its search and finance tools has further mainstreamed the sector, exposing prediction markets to millions of users according to crypto news.

The regulatory landscape remains fragmented, with some U.S. states challenging prediction markets under gambling laws while the federal Commodity Futures Trading Commission has not intervened according to Bloomberg. This ambiguity has spurred institutional players to test the waters: Jump Trading recently began market-making on Kalshi, and AQR Capital's Cliff Asness is evaluating sports-betting expansion according to crypto news. Galaxy's entry could deepen liquidity, addressing a key challenge for peer-to-peer platforms where "yes" and "no" positions require counterparties according to market analysis.

The sector's rapid evolution has also attracted traditional financial and tech firms. Clearing Co., a startup backed by Union Square Ventures and Coinbase Ventures, is building blockchain-based infrastructure to enable brokerages to offer prediction markets alongside stocks and crypto according to the Wall Street Journal. Meanwhile, sportsbooks like FanDuel and DraftKings have launched their own prediction-market platforms, fracturing the American Gaming Association as they compete in unregulated states according to sports analysis.

For Galaxy, the pivot aligns with its broader strategy to diversify beyond crypto infrastructure. While its data center buildouts and digital asset trading remain core, Novogratz's focus on prediction markets reflects a bet on the sector's potential to rival traditional derivatives. As prediction markets mature, the ability to provide consistent liquidity will become a key differentiator, with Galaxy's institutional expertise offering a competitive edge according to market analysis.