Galaxy Digital Launches OTC Derivatives Desk for Prediction Markets

Galaxy Digital has launched an over-the-counter derivatives trading desk tied to prediction markets, targeting institutional demand for hedges against political and economic events.

Bloomberg reported on June 2 that Galaxy Derivatives, the firm's swap-dealer unit, has begun offering OTC derivatives linked to prediction-market events.

In May, Galaxy Derivatives executed a $10 million event swap with crypto hedge fund Arca. The trade was structured around whether the Digital Asset Market Clarity Act of 2025 will pass the US Congress.

Under the terms of the contract, Arca pays Galaxy if the bill passes before 2027. If it does not, Galaxy pays Arca. Arca used the trade to hedge the risk that its crypto holdings could be hurt if the legislation fails.

Galaxy has stressed that the product is a hedging tool, not gambling. "This is not gambling, it's a hedging mechanism," Jason Urban, Galaxy's global co-head of digital assets, said.

OTC trading can handle larger transactions and keep them private. Bloomberg said cumulative trading volume in a Kalshi-listed contract on when crypto market-structure legislation might pass was about $2.2 million, roughly one-fifth the size of the OTC trade between Galaxy and Arca.

Galaxy sees OTC trading as a more attractive option for institutional investors such as hedge funds and family offices because prediction-market contracts tied to political and economic events tend to have thin liquidity and wide bid-ask spreads.

Gilbert Wasserman, Galaxy's head of prediction markets, said discretion and privacy are key advantages of OTC trading. Large block trades on Polymarket can expose wallet addresses, he said.

Galaxy said event swaps can be structured using existing International Swaps and Derivatives Association, or ISDA, agreements. That would let institutional investors trade event risk without directly accessing prediction-market exchanges or setting up separate legal and operational infrastructure.

Investors would instead assume Galaxy's credit risk rather than an exchange's. Galaxy said it will initially offer swaps based on events already listed on Kalshi and Polymarket, with scope to expand later into more specialized event risks.