Why The Midterms Could Be A Defining Moment For Prediction Markets

America’s political class is hurtling toward an election that some fear could turn into yet another public opinion polling flop.

Enter the prediction markets.

Wall Street’s buzziest startups — Kalshi and Polymarket chiefly among them — have long held themselves up as paragons of the forecasting business, arguing that voters will be more truthful with money on the line. Now, the midterm elections are about to test whether their predictive chops hold up when on display.

Hundreds of millions of dollars are being wagered through prediction markets tied to Senate, House and gubernatorial races across the country. And while both the markets and the polls suggest that Democrats are likely to be celebrating a return to power, next Tuesday’s elections could prove to be a defining moment for the industry. The festering anxiety around the trustworthiness of polls is creating an opening for the markets to prove themselves as the so-called truth machines they’ve set out to be and much more than sports betting platforms.

“This is truly the first prediction-market election,” Kalshi CEO Tarek Mansour said in an interview. “The best way to get informed about what’s happening with our elections is not giving the microphone to a select few. It’s just to let the market speak. It’s to let the people speak. And that’s what the prediction markets do.”

The companies were catapulted into the limelight two years ago when, just weeks before President Donald Trump won back the White House, they were allowed to legally begin offering wagers on U.S. elections. The polls had the 2024 presidential contest as a toss-up throughout much of the race, but the prediction markets were among the first to decisively point to Trump’s return to power on election night.

The upstart industry has since become one of the hottest corners of finance, courting the backing of major Silicon Valley investors, Wall Street heavyweights and the Trumps themselves. (Donald Trump Jr. is a Kalshi adviser.) But it’s also locked in a fierce fight with a bipartisan collection of political professionals over whether the markets are, as they claim, the next frontier of financial exchanges or, as their detractors protest, nothing more than newfangled gambling platforms.

A repeat of 2024 — with early and accurate predictions on races across the country — could hand the markets new credence within the political world, where, following a string of high-profile misses over the last decade, public polling is already very much under a microscope.

“On the night, [the markets are] going to feel like they’re calling these races faster,” said Chuck Todd, the former NBC News political director and “Meet the Press” host who counts Kalshi as a sponsor for one of his podcasts. “Ultimately, you get a big enough crowd then, yeah, the crowd’s going to be smarter about politics than us trying to project the vote count before we’re finished counting the votes.”

“If the markets end up being as prescient as we think they will be for this cycle,” he added, “then that should start speeding up acceptance.”

The prediction markets are not polls, to be clear — and pollsters doubt they’ll ever supplant them, in part because the markets aggregate polling information. GOP pollster Brent Buchanan said polling is built on talking to voters and “the science of statistics.”

Kalshi, on the other hand, “operates on vibes,” he said.

And yet, the prediction markets say the wisdom of crowds is a powerful force. It can quickly collect information and filter out noise in the news. And it helped fuel the industry’s rise in the wake of 2024.

Mansour isn’t worried about the accuracy question. He said Kalshi has a “big responsibility” to ensure that its market is operating fairly and safely — but that the matter of accurately forecasting the elections is up to its traders and bettors.

Still, with the prediction markets and polls largely aligned on the prospect of a blue wave next week, there is a potential risk that, should a big Democratic victory fail to materialize, the markets could take a hit in the court of public opinion alongside the polls. Aristotle CEO John Phillips, whose company runs the political prediction market PredictIt, said that even if the markets are being stacked up against the polls unfairly, “credibility is always on the line.”

“This will be the first election where you have prediction market odds and so forth being part of the conversation,” said Pratik Chougule, a longtime prediction market trader who leads the Coalition for Political Forecasting. “The question is: Do we wake up the day after [or] the week after the election and view the prediction markets as something that is now a necessary, important staple of how we follow elections, or are they just seen as another form of gambling?”