Institutional growth and regulation of prediction markets

The prediction market sector is transitioning toward institutional use, supported by evolving regulatory frameworks for event contracts and digital-asset perpetual futures in the United States. Cartesian Digital recently launched a specialized service to provide the accounting, investment operations, and reporting infrastructure required by hedge funds and market makers to manage these strategies at scale.

As the market expands, regulatory scrutiny is increasing. Citadel Securities has urged U.S. regulators to move oversight of certain products from the Commodity Futures Trading Commission (CFTC) to the Securities and Exchange Commission (SEC), arguing that contracts tied to the performance of public companies should be classified as security-based swaps. This push comes as platforms like Kalshi seek approval for single-stock perpetual futures on major companies.

In Europe, the European Securities and Markets Authority (ESMA) has issued warnings regarding platforms such as Polymarket and Kalshi, noting they generally lack authorization to sell event contracts within the European Union. Regulators expressed concerns regarding the use of VPNs to bypass geographic restrictions and the potential for these contracts to fall under strict gambling or financial instrument regulations.