Morgan Stanley Takes a Public Role at NEXTPredict as Institutions Eye Prediction Markets' Future

Table of Contents

• You might want to know


• Main Topic


• Key Insights Table


• Afterwards...

You might want to know

1. Could prediction markets evolve from predominantly sports-focused venues into tools used by institutional investors and businesses to hedge novel risks?

2. What barriers — regulatory, structural or perceptual — are preventing wider institutional adoption today?

Main Topic

Prediction markets have attracted renewed institutional attention, and Morgan Stanley’s decision to take a formal, public role at the NEXTPredict summit in New York highlights that trend. The bank will act as a strategic partner for the two-day event and will lead a panel on institutional capital, signaling a visible commitment to engaging with the sector’s development. Stephen Grambling, Morgan Stanley’s head of U.S. gaming, lodging and leisure research, will moderate the session focused on what would be required for institutions to meaningfully participate.

The interest from major financial firms is not new. Senior executives at large banks have acknowledged the potential and the challenges. Past public comments from other institutions framed prediction markets largely as closer to gambling than to conventional investing and ruled out participation in sports and political contracts; still, engagement at executive levels and meetings with major operators have been reported. Morgan Stanley’s public sponsorship and panel leadership represent one of the first clear, outward-facing endorsements by a major bank at an industry event.

Valuations in the sector underscore why institutions are watching closely. Recent funding rounds and reported valuations have placed major prediction-market platforms at multi-billion-dollar levels, sometimes exceeding publicly traded peers. Those valuations imply investor expectations that the market will broaden beyond its current composition: today, roughly 90% of turnover and liquidity is tied to sports contracts. For investors to justify current valuations, the product and participant mix need to evolve so that prediction markets serve broader use cases.

Proponents envision several such use cases. One example is corporate hedging of event risk that lacks traditional insurance or hedging instruments—situations like an event organizer losing significant revenue to a sudden natural disaster or other outsized, low-probability events that conventional markets do not price efficiently. Another use case is internal forecasting: firms using markets among employees to surface probabilities for business outcomes, improving planning and decision-making. Research desks and trading teams at banks are also interested in whether market-implied probabilities might offer superior real-time signals compared with traditional polling or forecasting methods.

However, several obstacles remain. Regulatory uncertainty is frequently cited as the primary barrier: large institutions are wary of entering a space where state-level litigation and uneven regulatory frameworks could expose them to compliance and legal risk. Market structure and liquidity concentration are additional concerns. With most liquidity concentrated in sports, institutions question whether markets for macro, corporate, or event-specific contracts can develop sufficient depth for meaningful hedging or investment. Finally, there is the perception challenge: many market participants and observers still classify these platforms alongside betting and gaming, which complicates efforts to reframe them as legitimate financial infrastructure for risk transfer.

Morgan Stanley’s involvement is informative beyond the headline. The bank has existing ties to the sector—participation in a major funding round for a leading exchange and internal research into the market’s growth and regulation—and long-standing relationships with certain platform operators. That history helps explain why a representative from the bank’s gaming research desk is leading the summit panel: the appointment reflects existing relationships and internal advocacy, even as the industry works to expand beyond gaming taxonomy.

Industry participants and investors are watching for signals that prediction markets can mature: clearer regulatory frameworks, broader product sets beyond sports, deeper liquidity across non-sports contract types, and demonstrable utility for institutional needs. Some firms are already experimenting internally—using markets for forecasting or exploring how contract prices align with outcomes—while academics and market analysts continue to evaluate predictive accuracy at scale. These empirical results matter: evidence that contract prices consistently track real-world outcomes and provide actionable hedging value would strengthen the case for institutional adoption.

In summary, Morgan Stanley’s public role at NEXTPredict is a notable milestone that underscores both opportunity and uncertainty. Institutions are curious and are beginning to engage, but widespread participation will hinge on regulatory clarity, improved market structure, and credible, non-sports use cases that justify current valuations and institutional capital deployment.

Key Insights Table

Afterwards...

Looking ahead, several areas deserve closer attention if prediction markets are to become useful tools for institutions. Regulatory harmonization at the federal or multi-state level would provide a clearer compliance pathway and reduce legal risk for large firms. Innovations in market design that encourage liquidity in non-sports contracts—such as market-making incentives, standardized contract templates for corporate-event hedges, and clearing arrangements—could broaden practical use cases.

Empirical research into forecasting accuracy and contract performance at scale will also matter: institutions require robust evidence that prices are reliable signals and that markets can provide effective hedges. Finally, product experimentation by corporates and financial firms—pilot programs for internal forecasting, client-facing hedges, or overlay risk management products—can demonstrate real-world utility. These developments together would help shift perception from betting toward recognized financial utility, enabling more institutional capital and expertise to enter the space.

As the sector matures, continued dialogue between operators, regulators, and financial institutions will be essential to realize the potential while managing the risks inherent in new market infrastructure.