Galaxy Digital launches institutional prediction desk with $10M Arca bet on CLARITY Act
Galaxy Digital is moving aggressively into prediction markets, unveiling an over-the-counter desk for institutional clients and debuting the service with a $10 million event swap executed with crypto hedge fund Arca. The inaugural trade is tied to the Digital Asset Market Clarity Act, better known in the industry as the CLARITY Act, and marks one of the largest single-ticket prediction-market transactions to date.
The new desk sits inside Galaxy’s Global Markets division and focuses on non-sports event contracts listed on platforms such as Kalshi and Polymarket. Rather than routing orders directly through public order books, Galaxy will operate as a principal counterparty. That means the firm stands on the other side of trades itself, quoting prices for large bilateral deals and carrying the associated risk on its own balance sheet.
The first deal structured through the desk allowed Arca to express a view on whether the CLARITY Act will become law before 2027. Under the terms of the swap, Arca pays Galaxy if the bill is enacted ahead of that deadline. If legislators fail to pass it in time, Galaxy pays Arca instead. Economically, the trade functions like a large, bespoke position in Kalshi’s binary market on the bill, where “yes” shares trade between $0 and $1 based on the implied probability of passage.
Galaxy’s research team currently assigns a 75% probability that the CLARITY Act will ultimately pass, projecting a potential signing window in the week of August 3. Over the previous month, Kalshi and Polymarket markets have reflected a somewhat wider range of views, with implied probabilities fluctuating between roughly 50% and 73%. Galaxy’s structure allows an investor the size of Arca to build a meaningful position around that view without grinding through fragmented liquidity on the retail-facing venues.
According to the firm, the desk is specifically targeting block-sized transactions that cannot be efficiently executed on existing prediction-market order books. Even as platforms have seen explosive growth, Galaxy argues that depth for very large orders remains thin. A single $10 million instruction, the firm noted, can easily move prices before the order is fully completed, leading to slippage and suboptimal execution for institutional players.
To address this, Galaxy is offering not only direct exposure to event outcomes but also the ability to wrap those views inside broader macro and cross-asset strategies. The firm says it can combine positions in prediction markets with hedges in equities, commodities, or other digital assets. That structure opens the door for more sophisticated trades around political, regulatory, and macroeconomic catalysts, such as elections, central bank decisions, or high-impact legislative votes like the CLARITY Act.
The scale of the addressable market appears significant. Galaxy estimates that prediction markets cleared more than $60 billion in volume in 2026. Yet, despite this rapid growth, liquidity is still dominated by smaller tickets, leaving large funds with limited options when they want to move size. For institutional managers who need to deploy tens or hundreds of millions of dollars, that gap is increasingly seen as both a constraint and an opportunity.
Jeff Dorman, Arca’s chief investment officer, described prediction markets as among the most effective tools currently available to hedge regulatory risk tied to the CLARITY Act. At the same time, he acknowledged that institutional liquidity in these markets remains underdeveloped. For a fund of Arca’s size, publicly listed contracts are not deep enough to absorb the full extent of its views without materially impacting the price.
The CLARITY-linked swap is anchored to Kalshi’s binary contract on the bill, which reflects the market’s aggregate expectation of whether the legislation passes before a set date. The underlying contract trades between 0 and 1 dollar per share, so a price of 0.70 would indicate a 70% implied probability of passage. Galaxy highlighted that the Senate Banking Committee advanced the bill on May 14 in a 15-9 vote, moving it one step closer to a floor vote and turning it into a credible macro and regulatory catalyst for digital asset markets.
Jason Urban, Galaxy’s global co-head of digital assets, framed the initiative as part of a broader shift in how sophisticated investors articulate macro views. Instead of expressing opinions solely through traditional instruments like equity indices, rates futures, or volatility products, funds are increasingly inclined to trade the events themselves. Event-driven markets, he argued, are becoming critical tools for translating political and regulatory convictions into portfolio positions.
Galaxy’s strategy differs from that of pure market makers who focus primarily on providing continuous two-sided quotes with tight spreads on exchanges. Rather than streaming quotes across thousands of small orders, Galaxy’s desk is structured to absorb large, negotiated block trades that exceed what on-exchange order books can comfortably handle. This role mirrors what block desks do in traditional equities and derivatives markets, stepping in when clients need size and discretion.
The pivot into prediction markets also places Galaxy alongside other major trading firms that have made similar moves this year. Proprietary trading powerhouse Jump Trading and market maker Wintermute have both formalized their activity in the sector, with Wintermute recently beginning to stream two-sided prices on select markets. Together, these firms signal that prediction markets are transitioning from a niche experiment into a legitimate institutional asset class.
Underlying platforms are experiencing their own surge in activity. Combined monthly turnover on Kalshi and Polymarket has ballooned from under $5 billion in September 2025 to around $24 billion by April, according to figures cited by Galaxy. That acceleration reflects not just retail speculation, but the first waves of institutional participation as funds, prop desks, and family offices look for new ways to position around real-world events.
Kalshi itself has reported a dramatic spike in institutional flow. Over a recent six-month period, its annualized institutional volume climbed 800% to reach $178 billion, coinciding with a fresh $1 billion capital raise and a valuation of $22 billion. Polymarket is also drawing heavyweight backing, with Intercontinental Exchange-the parent company of the New York Stock Exchange-committing $2 billion in funding to help scale the platform’s infrastructure and regulatory footprint.
For institutional investors, the attraction of event contracts is straightforward: they can offer a purer, more direct exposure to specific risks than many traditional instruments. Rather than inferring regulatory risk from the price of a crypto index or a futures curve, a fund can simply take a position on whether a given bill passes, a particular candidate wins an election, or a key policy threshold is crossed. When paired with classic hedging strategies in equities, bonds, and digital assets, these contracts can create highly tailored payoff structures.
Galaxy’s CLARITY swap with Arca is a case study in that approach. Regulatory clarity around digital assets could reshape valuations across the crypto ecosystem, affecting everything from exchange revenues to DeFi activity and stablecoin adoption. By isolating the pass/fail outcome of the bill, Arca can hedge or amplify its wider portfolio exposure, while Galaxy captures a structured view on how fast the U.S. regulatory regime will evolve.
The rise of institutional prediction markets also has implications for price discovery beyond crypto. As more large players commit capital to event contracts, their pricing may become a reference point for broader markets. If prediction markets consistently prove accurate on issues like election outcomes or major regulatory decisions, traditional investors may start using those probabilities as inputs for valuation models in equities, rates, and credit.
However, the model is not without risk. Acting as a principal counterparty means Galaxy is directly exposed to the binary outcomes of the events it trades. Misjudging probabilities-or failing to adequately hedge residual exposures-could lead to concentrated losses around key dates. The firm’s ability to combine event swaps with hedges in other asset classes will be central to managing that risk at scale.
There is also a regulatory dimension. While Kalshi and Polymarket operate under specific legal frameworks and permissions, the rapid institutionalization of event trading will likely attract more scrutiny. Questions around the boundary between permissible event contracts and prohibited forms of wagering, as well as concerns over information asymmetry and potential market manipulation, are likely to intensify as the space grows.
For now, the CLARITY Act provides a clear focal point. The bill is seen by many in the industry as a blueprint for how the U.S. might regulate digital asset markets over the next decade, including rules for exchanges, stablecoins, and token classification. Its progress through committee, and the relatively high probability Galaxy assigns to its passage, help explain why it was chosen as the first anchor trade for the new desk.
Looking ahead, the same structure used for the CLARITY swap could be applied to a wide range of catalysts. Future block trades might center on presidential and congressional elections, central bank policy paths, global regulatory milestones, or even macroeconomic thresholds such as inflation or unemployment levels. As long as a venue lists a binary or scalar contract on the event, a desk like Galaxy’s can wrap it into a bespoke swap tailored to a client’s risk profile.
The involvement of firms like Galaxy, Jump, and Wintermute suggests that prediction markets are entering a new phase, where institutional infrastructure, risk management, and balance sheet capacity become as important as user interfaces and retail engagement. Block trading, in particular, may be the bridge that lets very large investors participate without overwhelming relatively young order books.
In that sense, Galaxy’s move is less a one-off innovation and more an early sign of how macro investing could evolve. Instead of treating political and regulatory events as exogenous shocks, funds can increasingly trade those events directly, hedging their portfolios or seeking alpha from perceived mispricings in the market-implied odds. The $10 million CLARITY swap is one of the first visible examples of this playbook at institutional scale-but it is unlikely to be the last.