BitGo & Susquehanna launch institutional OTC prediction markets

• BitGo and Susquehanna Crypto have partnered to provide institutional investors with over-the-counter (OTC) access to prediction markets.
• The service requires a minimum trade size of $100,000 and allows the use of Bitcoin or stablecoins as collateral.
• The launch coincides with a surge in regulatory pressure in the U.S., including bans and legal challenges in states like Nevada and Arizona.

Institutional Access to Event-Based Contracts

Digital asset custody platform BitGo and Susquehanna Crypto are bridging the gap for institutional participation in prediction markets. This collaboration allows hedge funds, family offices, and large-scale investors to engage in bilateral trades tied to real-world outcomes. By routing trades through BitGo’s platform with liquidity provided by Susquehanna, clients can execute strategies without moving assets off-platform or converting their cryptocurrency holdings into fiat currency.

These contracts cover a broad spectrum of events, including geopolitical shifts, sporting results, and specific financial metrics like short-term Bitcoin price volatility. Positions are structured using derivatives-style agreements, ensuring that institutional standards for documentation and risk management are met.

Overcoming Infrastructure Gaps

While prediction markets have gained popularity as tools for hedging event-driven risk, institutional adoption has historically been hindered by a lack of robust infrastructure. BitGo notes that gaps in custody solutions, collateral management, and execution venues have kept large players on the sidelines. The new offering addresses these issues by:

• Supporting Bitcoin (BTC) and stablecoins as direct collateral.
• Eliminating the need for cash conversions for trade settlement.
• Providing a secure environment for high-volume transactions starting at $100,000.

A Complex Regulatory Landscape

The partnership enters the market as prediction platforms face intense legal scrutiny across the United States. At least 11 states have taken measures against platforms like Kalshi, often categorizing them as unlicensed gambling operations. Recent legal developments include:

• In Nevada, a state court issued a temporary ban on March 20, siding with regulators who view the activity as unlicensed betting.
• Arizona authorities have filed criminal charges against entities associated with Kalshi over election and sports wagering.
• Pennsylvania lawmakers are considering a bill that would impose a 34% tax on revenue and place the sector under the state’s gaming regulator.

Conversely, a federal judge in Tennessee blocked a state-level attempt to stop operations in February, ruling that such contracts are governed by the Commodity Exchange Act and fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC).

Compliance and Federal Oversight

Federal regulators are currently weighing how to formalize oversight. On March 12, the CFTC issued an advance notice of proposed rulemaking to gather public input on prediction market regulation. Simultaneously, market leaders like Kalshi and Polymarket have introduced new internal restrictions to combat potential insider trading. These rules aim to prevent participants with non-public information or direct influence over event outcomes from placing bets, addressing concerns regarding market integrity and transparency.