Whalesbook
The strategic alliance between BitGo Prime and Susquehanna Crypto marks a key step for making event-risk hedging available to institutions, a growing area for sophisticated investors. This partnership aims to integrate prediction markets into the financial systems institutions already use for managing complex risks.
Bringing Event-Risk Hedging to Institutions
BitGo Prime, part of BitGo Holdings (NYSE: BTGO), will handle collateral management and trade execution using its digital asset custody expertise. Susquehanna Crypto, a proprietary digital asset trading firm and an extension of Susquehanna International Group (SIG), provides vital liquidity and market-making. This partnership allows institutional clients, including hedge funds and family offices, to trade prediction market contracts for $100,000 or more. These trades use existing cryptocurrency or stablecoin holdings as collateral, eliminating the need for upfront funding or liquidation of digital assets—a major barrier for retail platforms. The system works much like traditional derivatives, with assets remaining in custody and positions collateralized instead of fully funded upfront.
Bridging the Gap for Prediction Markets
Prediction markets have seen rapid growth, with trading volumes reportedly reaching $40 billion–$45 billion in 2025. This surge is driven by increased retail participation and growing institutional recognition of their value as hedging instruments for tail risks difficult to capture with traditional assets. However, institutional adoption has been limited by complex regulations and a lack of integrated systems. Retail-focused platforms often require pre-funding and lack seamless integration with institutional custody and compliance systems. This new offering solves these issues with a single workflow for custody, collateral management, and over-the-counter (OTC) execution. The move follows rivals like Polymarket, which recently secured regulated U.S. exchange status via an amended CFTC order in late 2025, allowing intermediated access. Kalshi also operates as a CFTC-regulated Designated Contract Market (DCM), offering event contracts under federal oversight.
Susquehanna's Deep Derivatives Experience
Susquehanna International Group (SIG) has a strong history in traditional derivatives, particularly options market making, and has steadily expanded its crypto operations since 2014. SIG established Susquehanna Crypto to provide liquidity in global digital asset spot and derivatives markets. SIG has also been a key market maker for Kalshi, increasing liquidity on the regulated exchange. This deep experience helps them support institutional trading in event contracts. The trend of institutions using sophisticated hedging tools, such as delta-neutral strategies and on-chain analytics, is well-established in crypto. Prediction markets now represent a new type of asset for event-specific hedging, adding to these existing strategies. This development aligns with the broader growth in crypto derivatives, which now account for over 74% of total crypto trading volume.
Regulatory Challenges and Risks
Despite increasing institutional interest, the prediction market sector faces considerable regulatory uncertainty. While platforms like Kalshi operate under CFTC oversight, some states challenge this federal oversight, arguing that certain event contracts, especially those tied to sports, are considered illegal gambling. Arizona's attorney general filed criminal charges against Kalshi alleging illegal gambling, and Nevada imposed a temporary restraining order halting certain contracts. These legal battles highlight the patchwork of rules and the potential for state actions to disrupt operations. Furthermore, while BitGo provides robust custody solutions, using volatile digital assets as collateral introduces inherent risk from market swings that could lead to margin calls or liquidations if not carefully managed. Past regulatory actions, such as Polymarket's $1.4 million fine in 2022 for operating an unregistered platform in the U.S., remind firms of compliance challenges.
Future Outlook
This partnership between BitGo Prime and Susquehanna Crypto is set to speed up the development of prediction markets into a standard institutional asset class. By connecting crypto collateral with traditional derivatives workflows, they are solving key infrastructure and regulatory problems. Industry data suggests prediction market volumes could exceed $325 billion in 2026, a substantial increase from an estimated $64 billion in 2025. As regulatory clarity slowly develops, and with entities like Kalshi and Polymarket showing they can handle U.S. federal oversight, event-driven hedging tools will become more attractive to institutional portfolios, further integrating these markets into the broader financial ecosystem.