Prediction Markets Are Going Institutional – Execution Should Too

Prediction market volumes and institutional share is rising 

Prediction markets have gone from a regulatory gray area to a legitimate, CFTC-regulated asset class in about a year: Kalshi and Polymarket US are both now CFTC-regulated exchanges, and combined monthly trading volume has grown roughly ninefold in under a year, from under $5 billion to about $44.8 billion. Institutional participation has grown right along with it: about 40% of Kalshi’s volume comes from institutions¹ whose trading has grown 800% in the first half of 2026.²

Trading at institutional scale comes at a cost

Trading at institutional size by trading against the visible book gets expensive fast, which is exactly why the largest allocators and market makers increasingly need institutional-grade execution tools in prediction markets. Talos’s integration with Kalshi brings execution algos and RFQ block trading to prediction markets on the same infrastructure institutions already use to trade digital assets. To assess slippage at institutional-scale trading, we picked three topical prediction markets and simulated various quant execution strategies. We found surprising alpha in the process.

We simulated institutional-scale orders across three Kalshi markets

To provide tooling is one thing; to show why it matters is another. In order to make the case concretely, we built a transaction cost analysis (TCA) simulation comparing two of Talos’s algos, TWAP and Sniper, against two benchmarks: the arrival price and an instant sweep of the book. 

• TWAP works an order according to a schedule within a tolerance band. 
• Sniper is opportunistic, pegging passively near arrival and only crossing the spread when price moves favorably or unfavorably past a threshold.

We simulated both algos buying 100,000 contracts across three real Kalshi markets: 

• The England-Argentina World Cup semifinal
• The Spain-Argentina final
• A BTC daily strike market. 

Each was split across several intraday volatility regimes. 

Alongside that, we ran an analysis inspired by a published academic study on settlement-related order-flow manipulation on Polymarket’s 5-minute crypto contracts.

Execution algos reduced slippage – and surfaced a potential manipulation pattern

Our analysis shows that execution algos generally outperformed an instant sweep of the book, especially in thinner and idiosyncratic markets. It also surfaced a pattern consistent with potential settlement-related manipulation tied to Polymarket's BTC's 5-minute contracts, underscoring why institutions need quant execution infrastructure in prediction markets.

Access the full results → 

What’s in the report

• Interactive TCA breakdown for each of the three markets, with regime-by-regime slippage vs. arrival and vs. an instant sweep, for both YES and NO sides
• Click-through to child-fill detail for any regime, see exactly when and where each simulated fill happened

• The order book chart with match/price events overlaid
• BTC daily strike page also includes the spot-price overlay and the lead-lag correlation

• The settlement-manipulation tab: per-coin order-flow charts (BTC, ETH, SOL, DOGE, XRP, BNB), 2026 vs. 2025, plus the toggle between still-live conditioning thresholds

Who should read this report

• Market makers, prop desks and hedge funds trading or evaluating Kalshi, Polymarket or Binance Predict.
• Banks and brokers looking to surface implied probabilities in existing products (e.g., the odds a benchmark index closes down 15% by year end). 
• Hedge funds and prop desks trading TradFi equities, index products or commodities alongside their perpetual or prediction-market equivalents. A funding rate and basis trade between the two is starting to emerge, and this report's execution findings apply directly to the leg traded in prediction markets or perps.
• Brokers offering 24/7 TradFi and crypto CFDs or perpetuals 
• Institutional brokers assessing trade sophistication needed in the “prediction of anything” space.
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^{1 Source: Trade Ideas}

^{2 Source: Kalshi}

^{Disclaimer: Talos Global, Inc., together with its affiliates (collectively, “Talos”), is not an investment advisor or broker/dealer. No Talos product or service constitutes an offer to buy or sell, or a promotion or recommendation of, any digital asset, security, derivative, commodity, financial instrument or product or trading strategy. Further, No Talos product or service is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Talos offers data and software as a service products that provide connectivity tools for institutional clients.}