Wintermute, a major player in digital asset market-making, has expanded into prediction markets, offering liquidity to platforms like Kalshi and Polymarket. The firm will provide two-sided quotes on event contracts, aiming to improve execution depth and narrow bid-ask spreads. This move comes as the prediction market sector experiences explosive growth, with trading volumes exceeding $60 billion in 2026 and monthly activity reaching $20-$25 billion.
Jake Ostrovskis, Wintermute’s head of OTC trading, noted that prediction market demand mirrors that of larger asset classes, but liquidity remains underdeveloped. He emphasized that sustained two-sided liquidity can enhance price discovery and support larger trades. Wintermute, which has handled over $5 trillion in cumulative volume across crypto venues, sees its infrastructure as directly applicable to event-contract trading.
The sector’s growth has drawn institutional interest, exemplified by Kalshi’s $22 billion valuation after a $1 billion Series F round. Kalshi, a CFTC-regulated exchange, saw its annualized volume jump from $52 billion to $178 billion in six months. Meanwhile, regulatory scrutiny is increasing, with the CFTC issuing a rulemaking proposal on manipulation risks and at least 11 states advancing legislation targeting prediction markets. Tax concerns also loom, with an estimate suggesting $600 million in forgone tax revenue from unregulated platforms.
Wintermute’s entry could reshape market dynamics, as thin order books have historically plagued prediction markets. For instance, arbitrage opportunities on Polymarket between April 2024 and April 2025 totaled roughly $40 million, indicating pricing inefficiencies that professional market makers can exploit. By tightening spreads, Wintermute aims to make prediction markets more accessible for larger positions and improve the overall trading experience.