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co-head of multi-asset clearing and prime services at Wedbush Securities, the growing appetite for prediction markets among some institutional investors is positive, and opens up an exciting opportunity for diversification and growth across the industry.
He said:“ We’ re really seeing a democratisation of the financial space. Essentially, we’ re building a liquidity pool of speculators, though within a framework of limited risk. Much of this activity resembles fully paid-for options- you put up only the money you can afford to lose. But fundamentally, futures markets have always been about risk transference.
“ The blossoming marketplace emerging from this has enormous potential for the industry as a whole. Therefore, this reflects how much is happening in the space right now and the significant opportunity to leverage the infrastructure of today’ s futures markets.”
Specifically, a key opportunity presented by trading in prediction markets is the possibility to gain access to early warning signals across the industry, and quickly and efficiently manage risk.
Highlighting this, Rob Flatley, chief executive of TS Imagine, said:“ Prediction markets offer a glimpse into how institutional risk may be expressed in the future. For decades, traditional financial contracts have tracked risk continuously as prices shift, valuations update and exposure evolves. Event contracts are an entirely different proposition – either something happens or it does not.”
In particular, trading eventbased contracts may offer valuable positions during periods of volatility. In addition, with recent examples such as the impact of the 2025‘ Liberation Day’ tariffs on the markets, being able to navigate and ride the waves of market turbulence, is increasingly becoming a vital skillset for traders, with prediction markets offering a potential helping hand.
“ Event contracts make risk explicit, rather than leaving it buried in volatility and correlation models,” Flatley added.
“ Their probabilities and their velocity can be incorporated as forward-looking inputs to value-atrisk models and provide market-implied weights for stress test scenarios. In addition, event probability can be treated as a systematic risk factor in multifactor models, alongside rates, credit, equity volumes, and macro indicators, while prediction market prices update continuously, providing a real-time sentiment indicator that is both incentive-
“ In the short term, data is the low hanging fruit of prediction markets. With the data generated from prediction markets, the exchanges can then go and resell this.”
JESSE FORSTER, HEAD OF EQUITY MARKET STRUCTURE AND TECHNOLOGY, COALITION
GREENWICH aligned and transparent.
Sudden moves in prediction markets odds – especially on policy, regulatory, or geopolitical contracts – can serve as early warning signals for portfolio managers and risk committees.”
In addition, a further institutional attraction may lie in the makeup of event markets themselves- that they are already integrated into the financial system. Specifically, these contracts are derivatives, and so are already subject to existing custody models, settlement arrangements, and market infrastructure, therefore making it easier for interested participants to seamlessly transition into using these markets.
In data we trust When trying to get to the bottom of where the most value-add lies for institutional players looking to participate, or leverage prediction markets, the answer appears to continuously route back to the
32 // TheTRADE // Q1 2026