Behind Polymarket’s $2 billion splurge: The New York Stock Exchange’s self-rescue campaign

Author: Chloe, ChainCatcher

At the beginning of October, ICE announced an investment of up to $2 billion in Polymarket, a move that sent shockwaves through the market. Almost simultaneously, Kalshi also announced a $300 million funding round at a $5 billion valuation. Overnight, the market landscape for prediction platforms was elevated to mainstream finance. Why did ICE need to make this move, turning a platform long in the gray area into a legitimate prediction tool? Are the businesses of those old Wall Street exchanges facing an urgent need for transformation?

The Dilemma of the NYSE: Market Share Eroded, Data Business Declining

Looking solely at the current competitive landscape among U.S. exchanges, according to the "US Equity Market Structure Compendium 2024" report, the U.S. stock trading market is highly fragmented and dispersed. The NYSE under ICE holds about 19.7% of the trading volume market share, while NASDAQ holds 15.6%. In terms of market capitalization, NASDAQ has already surpassed the NYSE. From June to September this year alone, the former’s market cap exceeded the latter’s for four consecutive months, reflecting investors’ preference for technology companies.

On the other hand, in terms of IPOs, NASDAQ far outpaces the NYSE with 79 traditional IPOs compared to the NYSE’s 15, controlling the gateway for emerging companies to go public. Tech startups and growth companies are flocking to NASDAQ, not only weakening the NYSE’s listing fee income but, more importantly, causing the NYSE to lose future drivers of market cap and trading volume growth.

Taking a longer view, from 2000 to 2016, the combined market share of the NYSE and NASDAQ plummeted from about 95% to below 30%. Behind this is a fundamental transformation of the U.S. stock market: trading is no longer concentrated on mainstream exchanges but dispersed to smaller exchanges, alternative trading systems (ATS), and multiple dark pools and over-the-counter venues.

According to NASDAQ’s analysis, the current U.S. stock market has split into three mutually independent markets: traditional exchanges (about 35-40%), dark pools and non-public trading (about 25-30%), and retail and over-the-counter trading (about 30-40%). This fragmentation leads to shattered liquidity.

Even if the NYSE tries to maintain its leading position, it must face fierce competition from all sides, not only with NASDAQ but also with emerging exchanges like Cboe, dozens of ATS platforms, and a vast dark pool ecosystem.

In addition, what was once considered a high-profit data services segment is also declining. According to ICE’s full-year 2024 financial report released in February this year, exchange data and connectivity services revenue in the fourth quarter was $230 million, down 2% year-on-year. This indicates that traditional market data businesses (such as market data and subscription services) have hit a growth bottleneck, and market demand for traditional financial data is becoming saturated. However, ICE believes that while traditional market data sales are cooling, there is still a market for customized, high-value indices and analytical tools.

Facing these challenges, ICE has begun adjusting the NYSE’s business segments in recent years. In October last year, the SEC approved the NYSE’s proposal for spot bitcoin ETF options, marking a move to seize the derivatives market. Derivatives trading typically generates higher fees than spot trading, and CME has long monopolized the futures market. By launching ETF options, the NYSE is attempting to carve out a share of the derivatives market.

Additionally, to strengthen the NYSE’s role as a data and index provider, in July this year, ICE not only launched the Elite Tech 100 Index, but more importantly, made the investment in Polymarket, planning to package Polymarket’s real-time probability data into financial products for sale to institutional clients.

Prediction Platform Data Is a Key Ingredient for Financial Products

ICE knows better than anyone: the forward-looking data provided by prediction markets is something traditional financial data cannot offer.

Setting aside the innate gambler’s mentality of humans, the underlying logic of prediction markets is based on the "Wisdom of Crowds"—that is, when there are enough diverse participants, collective predictions are often more accurate than those of individual experts. Because participants are putting real money on the line, this constraint makes them evaluate information more carefully, making it impossible for them to remain outsiders.

According to a 2024 study by Charles University, prediction markets—platforms that allow participants to bet on future events—can demonstrate precise predictive abilities in various fields, including finance, economics, politics, and public policy.

You might think that the combined predictive power of ten experts in a specialized field could cover a wide range of the market, but when thousands of people put their own money on an uncertain event, each person brings their own knowledge and information to bear. Because all available information is aggregated, the prediction can be more accurate than that of any single expert in a particular field.

What ICE values is precisely this predictive ability and the data accumulated behind it, which is a key ingredient for financial products.

The NYSE’s Self-Rescue Movement Redefines Traditional Exchange Business Segments

Of course, not all prediction markets can achieve the same effect. According to the "Sports Forecasting" study, the data quality of prediction markets depends on "market liquidity," which is defined by platform trading volume and the number of participants, and is positively correlated with the accuracy of predictions. In other words, prediction markets with higher liquidity tend to produce faster and more accurate results.

During the 2024 U.S. presidential election alone, Polymarket processed over $3.3 billion in transactions within just 15 months of launch, reaching a peak trading volume of $2.5 billion in November. The platform, originally known for political predictions, has now expanded to sports, macroeconomic indicators, and cultural events, covering everything from Federal Reserve interest rate decisions to TV show finales.

When such large trading volumes and liquidity are observed, these prediction platforms—once considered illegal online gambling—are transformed into the infrastructure craved by financial markets. Now ICE wants to integrate Polymarket’s data into its internal trading systems, a move akin to when the financial sector first adopted Bloomberg Terminal services, which provide real-time financial market data to financial professionals.

In essence, ICE is also seeking to fill a gap in the financial market. According to Kalshi’s 2025 statistics, when predicting inflation data, the consensus accuracy rate among Bloomberg economists was only 20%, while prediction markets achieved 85% accuracy—a difference of 65 percentage points. Economists underestimated inflation in their predictions for eight consecutive months, while prediction markets, leveraging participants from diverse backgrounds, accurately captured market realities.

If the two sides cooperate, their data and traditional analysis will form a complementary rather than a substitutive relationship.

The NYSE’s self-rescue movement essentially redefines the business model of traditional exchanges. With IPO market share lost, trading volumes declining, and data business growth stagnating, it is no longer possible to maintain competitiveness relying solely on the traditional exchange profit model.

It is imaginable that when ICE packages and sells this data to hedge funds, investment banks, and central banks, what they are selling is not history, but the right to price the future. In an increasingly unpredictable world, this may be the most valuable commodity.