OPINION: The $100 billion pivot - what prediction markets must build to win Wall Street

That perception is rapidly changing as major regulated players, like CME Group, and data powerhouses, like LSEG and Nasdaq, come to recognize the inherent value of these platforms for real-time risk hedging and forecasting.

According to Acuiti‘s fourth quarter proprietary trading management report, nearly half of proprietary trading firms worldwide are exploring opportunities in prediction markets: 10% are already active, 35% are considering it. Interest is strongest in the US, where more than three-quarters of firms are either currently trading in prediction markets or evaluating them.

This adoption is underpinned by signals of institutional validation: the parent company of the New York Stock Exchange, Intercontinental Exchange (ICE), recently invested $2 billion (£1.5bn) in Polymarket. This single transaction marks the definitive shift, reframing event markets not as DeFi novelties, but as financial infrastructure. Most recently, Gemini announced it is preparing to launch prediction markets, with a request filed with the CFTC to operate derivatives contracts. CME Group is teaming up with FanDuel to launch a new predictions markets platform.

As prediction markets gain credibility and traction, institutions are increasingly asking how to build the infrastructure required to capitalize on the opportunity.

The Institutional Barrier: A Regulatory and Reputational Reckoning

The primary friction point lies in the industry's historical operation in a regulatory gray area, especially on the retail side, straddling the line between a financial derivative and gambling.

Past enforcement actions have provided a stark warning. The CFTC’s 2022 settlement with Polymarket served as the industry's defining moment, clearly indicating that regulators will prioritize markets that demonstrably emphasize governance and transparency over those that prioritize pure, unregulated decentralization.

This risk profile has created a chasm: institutional interest is high, but actual deployment of capital is held back by reputational risk and compliance uncertainty. To cross this chasm, the entire ecosystem must shed its speculative past with institutional-grade technology firmly part of the solution, built to withstand the scrutiny of a bank's risk committee and regulatory bodies.

The Blueprint for a Financial-Grade Asset Class

To truly capture institutional capital, prediction market infrastructure must adopt a new 'rulebook' built on the same high standards set by traditional capital markets - standards defined by three principles: operational resilience, demonstrable control and provable compliance.

Provable Compliance

The foundation of institutional trust is based on transparency and auditability. To achieve verifiable integrity, the underlying infrastructure needs to show properties such as tamper-proof record-keeping, time-sequenced data, and complete traceability. The ability to replay exactly what happened - from the placement of an order to the settlement of an outcome - in case of a regulator request or a market dispute, is how systems move from novelty to institutional-grade.

Furthermore, to foster genuine confidence, the use of standardized interfaces and data feeds is essential. By adopting transparent open standards, the institutional community can inspect and verify the market's fairness.

Operational Resilience (Mission-Critical Systems)

For a prediction market platform to serve institutional clients, it must function with the operational rigor of a major TradFi exchange. This means building systems that prioritize resilience and consistency while ensuring high performance.

Prediction markets need to be engineered for 24/7, always-on high availability; they must ride out traffic spikes, keep running through upgrades, and recover instantly from failure. These requirements are quickly becoming the operational standard for next-gen financial infrastructure.

In addition, the underlying platform technology needs to ensure strong cyber security, as well as observability and monitoring to identify operational issues and prevent malicious market manipulation, ensuring an orderly market. While very low latency and high throughput are essential for market efficiency, when news breaks, this performance cannot come at the expense of fairness, transparency, or stability.

Lastly, the platform must balance speed with resilience - a challenge solved today through purpose-built institutional-grade capital markets technology that enables sequencer architectures and modular tech stacks.

Deployment Flexibility

To truly win Wall Street, seamless integration into the buyer's existing technology environment is key. The infrastructure needs to meet buyers where they are, by being deployable on-premises, in co-location facilities, and in major public clouds (like AWS, Azure, or Google Cloud). This flexibility is key to meeting the diverse security and compliance mandates of different financial firms.

Architecting the Future of Event Markets

The investment pivot by firms like ICE confirms that event markets are fundamentally changing how the world gathers, prices, and trades data on future outcomes. The challenge now is not innovation, but maturation.