Here's How Hedge Funds Explore Prediction Markets For Investment Insights

Hedge funds are beginning to utilize data from prediction markets to shape their investment strategies.

Historically, hedge funds have been reluctant to engage with prediction markets due to the challenges associated with trading on platforms like Kalshi and Polymarket.

These platforms often lack the depth necessary for larger bets on macro developments, and getting approval from compliance teams can be difficult.

However, proprietary trading firms such as Susquehanna have begun to explore these markets. The key attraction for these firms is the data generated by prediction market platforms, which is used to inform their investment strategies, reports the Insider.

Following the trend of monitoring retail traders’ discussions on Reddit forums after the GameStop incident in 2021, funds are now analyzing data on activity on platforms like Polymarket and Kalshi. These platforms offer a free data feed on trading volumes and have partnered with exchange and clearing house Intercontinental Exchange and Dow Jones to create additional data products for funds.

Companies like Dysrupt Labs are developing products using prediction market data. Dysrupt’s CEO, Karl Mattingly, told the outlet that the data from prediction markets often aligns with the consensus from traditional sources, offering traders a chance to profit from deviations.

Despite the potential, the novelty of these platforms means hedge funds are still determining the most effective ways to utilize this data.

Daryl Smith, head of research at data consulting firm Neudata, pointed out that macro managers are not yet incorporating prediction market data into their models.

Why It Matters The shift towards using prediction market data represents a significant change in hedge fund strategy. This data offers a new perspective on market trends, potentially giving funds an edge in their investment decisions.

However, the novelty of these platforms and the challenges associated with their use means that the full potential of prediction market data is yet to be realized.

As hedge funds continue to explore these platforms, the impact on their strategies and the broader market will be closely watched.

• Polymarket has announced another significant partnership, now agreeing to distribute prediction data to Dow Jones outlets, which include The Wall Street Journal (WSJ), Barron’s, and Investor’s Business Daily. The breaking news was given by Bloomberg, a WSJ competitor, in contact with Polymarket. An official announcement is expected later on Jan. 7, according to the report. Polymarket data will be displayed online and in print and used in new features such as an earnings calendar showing expected results for publicly traded companies, the outlet wrote. This is the first traditional media partnership for Polymarket. Meanwhile, the New York-based prediction market platform’s main competitor, Kalshi, had already partnered with CNBC and CNN for a similar intent. Both prediction markets have been on a business development run to carve partnerships and expand their services, reach, and brand awareness among traditional enterprises.

  Prediction Markets’ Partnerships Run With Enterprises

  Nevertheless, Polymarket had already consolidated significant partnerships, as Coinspeaker reported in 2025. In November, the platform partnered with the Ultimate Fighting Championship (UFC), bringing crypto-powered predictions to UFC and Zuffa Boxing events, featuring broadcast integration and venue activations. Also in November, Polymarket became Yahoo Finance’s exclusive crypto prediction market provider. Google, a direct competitor to Yahoo and an industry leader, is also tapping into prediction market-oriented insights from both Polymarket and Kalshi for the Google Search and Google Finance products. This explosive growth in partnerships and attention prediction markets are receiving does not come at a low cost. Despite proven recognized value from some people, prediction markets have raised relevant concerns and become the center of long debates and controversies. Critics claim that prediction markets are just gambling platforms in disguise to avoid gambling regulation. Additionally, insider trading is a recurrent concern, as insiders can highly benefit from first-hand positioning and taking action that can influence results in the available markets. Brian Armstrong, CEO of Coinbase, addressed this latter concern, arguing that insider trading would not be desirable if these platforms were optimizing for trading and gambling, but the opposite is true if they are optimizing for becoming data and news insights platforms. In this case, “you 100% want insider trading, because that’s where you get real signals,” Armstrong said in a video circulating on X. The logic here is simple: insiders will build large-volume positions in the outcome they know will win and people can watch these odds and movements as “a source of news and what will happen in the world,” in his words.