Prediction markets have become popular in the past two years. From a monthly trading volume of less than $100 million at the beginning of last year to over $8 billion now, the growth rate is truly astonishing. The popularity of Polymarket and Kalshi has soared, especially with contracts related to the US elections and sporting events, which have become hot trading topics.

But behind this boom, the rules of the game are changing. Major Wall Street institutions are starting to pay attention to this market. Reports indicate that several leading trading firms are now offering annual salaries of $200,000 to hire full-time traders dedicated to cross-platform arbitrage and market-making operations. What does this mean? It means prediction markets are gradually shifting from a domain dominated by retail traders to a playground for professional funds.

In the past, prediction markets were mainly played by information traders, each analyzing event probabilities based on their own skills. Now, it’s different. When trading volume reaches this scale and standardization is high enough, traditional financial institutions begin to show interest. They have quantitative models, substantial capital, and complex arbitrage strategies—these advantages are especially valuable in highly volatile, standardized events.

Market makers like DRW in Chicago and crypto hedge funds like Tyr Capital have already started to position themselves in prediction markets. Once they enter, the market structure will inevitably change. The arbitrage opportunities that retail traders once exploited will be squeezed smaller and smaller. On one hand, this can push prediction markets toward greater professionalism and maturity, but on the other hand, the survival space for ordinary traders will indeed be compressed. It’s similar to the growth process of any emerging market—initially, wild growth is full of opportunities, but once institutions come in, the landscape becomes more fixed.