Event Bets Pose a Problem for Wall Street Firms Looking to Trade

Prediction markets are booming. Wagers on everything from the return of Jesus Christ to who will win the World Cup have driven weekly volumes on platforms like Polymarket and Kalshi into the billions of dollars.

Even as some Wall Street players have taken the first steps into this sort of event betting, many big trading firms, including Citadel Securities, IMC Trading and Hudson River Trading have stayed away so far.

There are numerous reasons why institutional traders have not joined in, including the lack of regulatory clarity and the relatively light volumes compared with the other areas where they ...