BitGo, Susquehanna roll out institutional OTC access to prediction markets

The offering allows institutional investors to trade event-based contracts using crypto collateral, as regulatory scrutiny of prediction markets intensifies in the United States.

BitGo, a digital asset custody and trading platform, and Susquehanna Crypto will collaborate to give institutional clients over-the-counter access to prediction markets, allowing them to trade event-based contracts using cryptocurrency or stablecoins held in custody.

According to Tuesday’s announcement, trades will be routed through BitGo’s platform, with liquidity provided by Susquehanna, which will enable hedge funds, family offices and other large investors to execute bilateral trades without moving assets off platform or converting holdings, including Bitcoin or stablecoin, into cash.

Positions are backed by crypto collateral and documented using derivatives-style agreements, with minimum trade sizes starting at $100,000.

Prediction markets allow users to trade contracts tied to the outcome of real-world events, with prices reflecting the market’s implied probability of an outcome. Contracts can cover everything from sports and geopolitical events to niche outcomes like short-term Bitcoin (BTC) price movements or weather conditions.

While these markets have grown as tools for pricing event-driven risk, institutional participation has remained limited due to gaps in custody, collateral management and execution infrastructure, according to BitGo.

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The launch comes as prediction markets face growing legal challenges in the United States, where at least 11 states have taken action against platforms like Kalshi, arguing they operate as unlicensed gambling venues.

In Nevada, a state court issued a temporary ban on Kalshi on March 20, siding with gaming regulators who said the platform offers unlicensed betting on event outcomes.  The ruling followed a federal appeals court decision on Thursday to deny Kalshi’s emergency request to pause the case.

In Arizona, authorities filed criminal charges against entities linked to Kalshi, alleging it accepted wagers on elections and sports in violation of state law. However, Kalshi co-founder and CEO Tarek Mansour called the charges a “total overstep,” arguing that his platform’s activity is unrelated to gambling and accusing the state of attempting to bypass the judicial process.

Elsewhere, lawmakers are moving to bring prediction markets under existing gaming frameworks. In Utah, proposed legislation would classify certain event-based contracts as gambling, while in Pennsylvania, lawmakers are preparing a bill that would place the sector under the state’s gaming regulator, including a 34% tax on revenue.

To be sure, not all efforts against prediction market platforms have succeeded. In Tennessee, a federal judge blocked a state attempt in February to halt Kalshi’s operations, ruling that its event contracts fall under the Commodity Exchange Act and are subject to oversight by the Commodity Futures Trading Commission (CFTC) rather than individual states.

Prediction markets have also faced scrutiny over potential insider trading after several well-timed bets appeared to anticipate major events. In response, Kalshi and Polymarket introduced new restrictions on Monday to limit the use of non-public information and prevent participants with direct influence over outcomes from trading.

At the federal level, authorities are evaluating potential regulatory approaches. On March 12, the CFTC published an advance notice of proposed rulemaking seeking public input on how prediction market contracts should be regulated.

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Source: CoinTelegraph