Cantor Lets Hedge Funds Place Big Bets on Kalshi’s Prediction Markets
The investment bank will serve as a broker, arranging block trades on everything from weather forecasts to iPhone sales
- Cantor Fitzgerald plans to give its institutional clients access to Kalshi’s prediction markets.
- Cantor Fitzgerald will act as a broker, buying or selling blocks of event contracts and helping to distribute them through private negotiations.
- Susquehanna International Group will provide pricing and liquidity for trades based on the event contracts.
Cantor Fitzgerald plans to give investment funds access to Kalshi’s prediction markets.
Cantor’s some 3,000 institutional clients, which range from family offices to hedge funds, will have full access to Kalshi’s suite of events-based, yes-or-no contracts such as those tied to weather, commodities and corporate results.
“The investor base that we’ve met—we’ve met dozens—has been really keen on entering and participating in the prediction markets,” said Pascal Bandelier, co-chief executive and global head of equities at Cantor.
Susquehanna International Group, Kalshi’s flagship market maker, will provide pricing and liquidity for trades based on the event contracts.
The details
Cantor plans to serve as a broker to those clients, buying or selling blocks of event contracts and often helping to distribute those holdings to other investors through private negotiations.
Bandelier said that hedge funds have expressed interest in trading event contracts tied to iPhone sales rather than trying to anticipate how Apple shares will react to sales numbers. Family offices have interest in hedging risks related to weather or commodities such as crop outputs and oil prices, he added.
Other use cases include risks to artificial-intelligence supply chains and betting on the price of computing power, said Joe Grubb, head of business development at Susquehanna Predictions.
Institutions will also be able to propose markets for their specific needs. The companies have already been in discussions with institutional investors about what markets they would like to see.
“I think prediction markets allow us to be much more creative with the types of hedging,” said Grubb. “And we’re seeing a lot of interesting ideas from counterparties.”
The context
Proponents say that prediction markets harness the wisdom of crowds to accurately forecast the outcome of future events and that they offer a more specialized way to hedge risk or make wagers that aren’t possible in traditional financial markets and insurance policies.
Kalshi has turned its attention to wooing institutional investors in recent months, completing its first block trade earlier this year for a contract tied to carbon allowances in California that was created specifically for the trade. The company partnered with Interactive Brokers earlier this year, another leg in the race to draw institutions to their markets.
“We get a lot of questions of, I do want to hedge specific event risk, but I don’t know how to do it,” said Max Crowley, vice president of business development at Kalshi. “The demand is there.”