Alpaca, a provider of high-end technology and brokerage infrastructure to the trading community, is gearing up for a move into the rapidly growing prediction market industry.
The financial technology (fintech) company announced today that it’s now a member of the National Futures Association (NFA) and that it registered with the Commodity Futures Trading Commission (CFTC) as a futures commission merchant (FCM) — two telltale signs a firm is looking to operate a yes/no exchange. The CFTC is the federal regulator with oversight responsibility for prediction markets operating in the U.S.
“This milestone broadens Alpaca’s regulated brokerage capabilities and enables the company to offer access to event contracts traded on prediction markets,” according to a statement issued by the New York-based company. “Over time, Alpaca plans to introduce a broader range of futures products, subject to regulatory approval.”
A leader in Application Programming Interface (API) trading services for algorithm trading platforms and quantitative funds, among other clients, Alpaca could tap prediction markets to help the companies it serves enhance event contract exposure for their clients.
Alpaca Has Chops to Be Credible Prediction Market Player
At a time when technology is an increasingly prominent part of the prediction market equation, Alpaca has the expertise to be a credible business-to-business (B2B) contender in the fast-growing industry.
Alpaca clients include brokerage firms, other fintech companies and software developers. The first two categories are already proving to be fertile territory for prediction market adoption, indicating that Alpaca may be on to something with its event contract foray. The company’s areas of expertise may prove appealing to client-facing partners who want to offer event contracts while alleviating some of the logistical and technological burdens associated with those integrations.
“Entering a new market often means integrating multiple providers and taking on added operational complexity,” notes Tony Lee, Chief Brokerage Officer at Alpaca. “By adding event contracts to our platform, we can give partners a simpler way to expand their offerings through the infrastructure they already use to build and scale their businesses.”
Prediction Market Boom Continues
Alpaca’s possible move into the prediction market space could be additive to the industry’s desire to serve more professional and financial services clients while gradually reducing dependence on sports derivatives.
The company’s event contract ambitions also come at a time when some analysts believe annual industry volume could ascend to $1.5 trillion by 2030.
Alpaca, which serves more than 10 million accounts across 40-plus countries, has $400 million in financial backing from investors including Drive, Social Leverage and Tribe Capital, among others.