eToro Group (NASDAQ: ETOR) has confirmed that it is in talks with Kalshi and Polymarket to join the ranks of brokerage houses in the prediction markets area.
Co-founder, CEO, and Chairman Jonathan Assia stated that eToro is in talks with Kalshi and Polymarket, the two biggest prediction market operators, during the company's third-quarter earnings conference call on Monday.
“We are talking to Kalshi and Polymarket, obviously, the market leaders in prediction markets. And we are excited about exploring the path of our users to be able to trade prediction markets on financial events,” said Assia in response to a question from Needham analyst John Todaro.
The CEO of eTorro stated that the company has "the infrastructure to support prediction markets in the future" thanks to its recent foray into futures trading.
“We’ve launched futures in Europe, and the future rails that we’ve launched in Europe are the same rails that eventually enable basically to trade prediction markets in the US as well,” said Assia in response to a query from TD Cowen analyst William Katz.
Fintech and brokerage companies are flooding the prediction markets industry. One of the first financial services companies to enter the market was Crypto.com, and according to some estimates, Robinhood Markets (NASDAQ: HOOD) accounts for up to 35% of Kalshi's daily volume.
Additionally, Intercontinental Exchange (NYSE: ICE) just acquired a $2 billion investment in Polymarket, and CME Group (NASDAQ: CME) is collaborating with FanDuel on event contracts.
The digital currency exchange owned by Cameron and Tyler Winklevoss, Gemini Space Station (NASDAQ: GEMI), hinted last week that it would also investigate prediction markets.
eToro has the potential to be a significant player in the prediction markets on its own. Assets under management increased by 76% to $20.8 billion at the end of the third quarter, while the corporation had 3.73 million funded accounts, up 16% year over year.
Additionally, as of September 30, the trading business had $1.2 billion in cash and cash equivalents, indicating that it had the funds to invest in prediction markets initiatives if necessary.
Although eToro seems optimistic about prediction markets, it isn't explicitly stating that it is prepared to enter into contracts for sporting events. Given that sports derivatives are putting businesses like Kalshi under legal and regulatory scrutiny, that might be a wise decision on the company's behalf.
"We do believe that prediction markets on financial events, on geopolitics, on economic events have — do create significant value and people thinking about their trading strategies or hedging what they want to do,” said Assia on the conference call. “And that initially will be our focus to help our customers basically find those financial opportunities that are related to their portfolios.”
He did clarify, though, that eToro sees potential at the nexus between prediction markets and cryptocurrencies.
“In addition, we are launching our crypto wallet, which will enable our customers to engage with on-chain prediction markets such as poly-chain and others,” said the executive.
