Intercontinental Exchange makes strategic investment in Polymarket in bet on prediction markets

Financial market operator Intercontinental Exchange, or ICE, announced it would invest up to $2 billion in prediction markets company Polymarket amid growing signs that the prediction markets business is gaining traction.

ICE — the parent company of the New York Stock Exchange and the ICE futures markets, among others — didn’t move much on the news, perhaps because of the rather limited scope of the immediate business relationship, in which ICE will become the distributor of the data produced by Polymarket’s predictions business. ICE said the deal “is not expected to have a material impact on ICE’s 2025 financial results.”

And for now, Polymarket trading remains barred in the US, following a 2022 agreement settling Commodity Futures Trading Commission allegations that it was running what amounted to an unlicensed commodities exchange.

But Polymarket is expected to begin offering trading in the US again soon. Last month, it purchased a CFTC-licensed derivatives exchange in a likely precursor to reentry. Polymarket has also gone into business with the Trump family, as Donald Trump Jr.’s 1789 Capital fund recently made an undisclosed investment. The president’s son is also on the company’s advisory board.

But more broadly, the growth of prediction markets could be seen Tuesday in the shares of sports betting apps DraftKings and Flutter Entertainment — the parent of FanDuel — which both tumbled.

Investors have grown concerned that the sports betting business is likely to come under continued pressure from prediction markets, in part because of seemingly advantageous federal regulatory treatment of sports-related trading on prediction markets. The industry argues that prediction markets are a form of financial derivatives and not sports betting, and therefore should be federally regulated by the CFTC. That could mean prediction markets will bypass state and tribal laws and constraints on sports gambling. The question is currently in the courts.

But in the meantime, Kalshi sports markets are live in 50 states, and football-related trading at Kalshi hit another new record this weekend as a result of trading around college and NFL football, according to a note from Piper Sandler analyst Patrick Moley.

Moley notes that in September, Kalshi’s volumes totaled almost $2.9 billion, up 328% from last year, with sports predictions accounting for some 90% of all volumes.

Moley noted that that should bode well for Robinhood Markets, which has a strategic relationship with Kalshi in which Robinhood traders can access Kalshi markets. Moley estimates that activity on Robinhood accounts for 25% to 35% of all Kalshi volumes.

(Robinhood Markets Inc. is the parent company of Sherwood Media, an independently operated media company subject to certain legal and regulatory restrictions. I own stock as part of my compensation.)