Firms Harvest Prediction Market Data for Clients
A new report profiles firms that are harvesting data from prediction markets like Polymarket for institutional and high-net-worth clients. This onchain, event-driven data is being integrated into alternative data pipelines to generate signals for systematic and discretionary trading strategies. Separately, discussions indicate firms like Susquehanna are actively hiring quants with expertise in this area.
The entry of Wall Street heavyweights like Susquehanna, DRW, and Jump Trading signals a new era for prediction markets, shifting them from retail speculation to a playground for sophisticated quantitative strategies. These firms are establishing dedicated desks to arbitrage inefficiencies and provide liquidity, treating event probabilities with the same rigor as traditional assets. Monthly trading volumes across prediction markets have surged past $8 billion, a dramatic increase from less than $100 million in early 2024. This institutional influx is transforming market structure, with bid-ask spreads on major event contracts shrinking from 10% in the early 2020s to less than 0.5% today. The data's value lies in its nature as a direct, real-time aggregation of collective belief, offering signals that can precede traditional polling or news flow. This has positioned prediction market data as a novel component of the broader alternative data market, which reached at least $2.5 billion in annual spending in 2024 and is projected to grow significantly. Firms access this on-chain data programmatically via APIs provided by platforms like Polymarket, which offer endpoints for market data, order books, and trade histories. This raw data, representing probabilities as tradable assets, is then fed into machine learning models to identify patterns, mispricings, and temporary inefficiencies that are not apparent in traditional financial data. The regulatory landscape remains a key variable, with the U.S. Commodity Futures Trading Commission (CFTC) providing a path to registration for platforms like Polymarket and Kalshi as Designated Contract Markets. However, tensions persist with state-level regulators over whether these instruments constitute gambling, creating a complex compliance environment. This dual pressure could lead to market fragmentation, with different contract types falling under either federal securities or state gaming oversight.
