Quants are earning $1m+ on Kalshi. Trading firms have to pay double or nothing to hire them.

Prediction markets like Kalshi and Polymarket are the modern Wild West of financial markets. They're barely regulated and are minting millionaires, but they're rife with the potential for insider trading, and hinge upon a 'PVP' trading system that can be predatory towards inexperienced traders. Traders using this system to their advantage are also sought after by hedge funds and trading firms. These firms can be willing to double the Kalshi earnings of those traders to bring them in.

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Kalshi's leaderboard shows that the second most profitable trader of all time on the platform right now goes by the username 'lad.'. We spoke to him for this article and he requested that he remain anonymous. Lad. confirmed that he comes from one of the major quant trading firms; he spent a few years at Hudson River Trading, but working as an engineer rather than a trader. He left HRT and, while serving his noncompete, discovered prediction markets via Manifold Markets, a free social prediction platform. After success there, lad. told us he stopped "fiddling around with fake money" on Manifold and joined Kalshi, primarily trading in sports markets.

He's not the only person from the quant trading space on Kalshi. Lad. said that other HRT alums are also lurking. One financial services recruiter, speaking anonymously, said that many other people in the quant space have discovered Kalshi while serving out non-competes. "A lot of non-competes don't cover prediction markets; it's on a person-by-person basis, but firms are currently updating contracts to cover it," the recruiter said. 

Some traders have built out prediction markets strategies while employed by a trading firm. Sometimes they negotiate this ability in their contracts. Sometimes they ignore their contracts and trade prediction markets all the same.

The recruiter said that "a lot of traders entering prediction markets trade options and futures," in traditional financial markets. Kalshi gives them a chance to apply their skillset to markets they're more passionate about, like sports or politics. However, lad. told us he almost never watches the games he trades on and, when he does, he "still need[s] to read the rules of the game" before watching.

The recruiter said that quants are "making money they can retire on," and earn between $500k and $1m in prediction markets. Lad., meanwhile, has made a profit of over $7m.

There's also an abundance of 'Sharps,' traders on prediction markets with deep subject matter expertise who often don't have traditional finance backgrounds. The Wall Street Journal spoke to many of these in May, who work (or used to work) as screenwriters, schoolteachers and IT workers. 

Which firms are hiring prediction markets traders and how much do they pay?

There are various types of firms operating in prediction markets. The most well known of these are institutional market makers; Susquehanna and Jump Trading are both publicly operating in the space (and have stakes in prediction markets firms). A headhunter in the space said that one major trading firm which has not publicly entered prediction markets yet is also quietly trading on prediction markets. Kalshi's founders said earlier this year, however, that just 5% of bid matching done on the platform is done by institutional investors. 

There are also hedge funds, family offices and other firms which are building out prediction markets trading desks. The recruiter told us "60% of new clients are in the prediction markets space" in some capacity, while the headhunter said "there is a huge interest" among both clients and candidates. Alongside more traditional financial firms, the recruiter said that "bookmakers have transitioned into quant trading firms for prediction markets;" FanDuel, for example, is paying up to a $200k salary for a senior algorithmic trading manager. Prediction markets are also popular among newer, smaller trading firms which are starting out in the space to prove themselves viable for a long-term buildout.

Demand for prediction markets traders among non-market makers rose massively over the World Cup. Lad. said "all the sports traders made a lot of money," and while volumes have dropped since the competition ended, the institutional demand is still there. Good performance in the World Cup alone won't get you a job though; firms want a proven track record of performance over at least three months to even consider you.

The problem is that most of the elite traders with that track record don't really want to join these firms because they're making plenty of money independently. It takes a significant financial offer, therefore, to justify losing their independence. The headhunter said that packages of $1m to $2m are being offered and that offers below that tend to fall through. When being hired to build out a desk, the recruiter said traders are demanding more guaranteed bonuses instead of tying pay to their PnL since they're taking on the risk of that buildout.

The kinds of people that all the institutional firms are looking to hire make up extremely small minority of prediction markets traders. An analysis of 2.5m prediction markets traders from Andrey Sergeenkov in April showed that 84% of traders have made a lifetime loss or broken even, while just 0.033% have made lifetime profits above $100k. The headhunter said that "most people are nowhere near the bar," not just for being able to trade on prediction markets, but for doing so in a sustainable way that won't worry clients. 

Lad. currently has an offer from one of Hudson River Trading's biggest rivals, separate from his work in prediction markets, but he's not as intent on declining a return to a trading firm. "Alpha decays fast and Kalshi's regulatory status is in constant turmoil," he said. "I fully expect to work a real finance job again once my noncompete is up."

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