By Douglas Gillison and Michelle Price
WASHINGTON, November 3 (Reuters) – With more than $1.48 billion wagered on Tuesday’s US midterm elections, prediction markets such as Kalshi and Polymarket are facing their biggest test yet of how reliably they can forecast political races amid growing scrutiny of their businesses.
The platforms rose to prominence in 2024 when they bucked traditional opinion polls in signaling that Donald Trump would win the presidency, and have since amassed a global following among media outlets and investors.
On Monday, prediction market prices aggregated by analytics firm BetInt implied Democrats had a 95% chance of taking the House of Representatives and a 76% chance of taking the Senate.
Though the markets tout high accuracy rates in providing betting odds, some high-profile misses during the US primaries and in Brazil’s presidential election have shown they are fallible.
If the midterm results diverge sharply from prediction-market odds, the industry’s reputation could suffer, analysts say, especially given the record sums being wagered for such US election betting.
Kalshi and Polymarket, the biggest platforms, are also under pressure to guard against misconduct after several candidates bet on their own races, and research from Washington nonprofit the Anti-Corruption Data Collective (ACDC) found political markets can be shifted with relatively small bets.
“Tuesday does, in fact, represent a real test for the new wave of prediction markets,” said Yesha Yadav, associate dean at Vanderbilt University Law School, adding that this year’s many congressional races could help contribute to the industry’s overall scorecard.
“Many of these contests are close,” she added.
Polymarket and Kalshi say they have ramped up controls and are well equipped to guard against misconduct. Kalshi blocks politicians and campaign workers from political wagers. The companies also say their markets quickly correct when large bets move prices.
“The point is not that prediction markets are perfect, it’s that in an imperfect world full of chaos and biased news sources, it’s important to have another way to forecast important events,” said Sean Patrick Maloney, CEO of the Coalition for Prediction Markets.
STUDIES SAY MARKETS ARE WELL-CALIBRATED AT SCALE
The platforms allow traders to buy and sell “yes” or “no” contracts on an array of race outcomes and variables. Kalshi on Monday reported $1.33 billion in trading volume across all midterm bets, while about $145 million has been wagered on Polymarket’s congressional markets, according to ACDC.
More than 28,000 midterm markets have been opened so far, with a fraction of individual contests, including Senate races in Texas, Michigan, Maine and South Carolina, accounting for most of the trading volume, the nonprofit said.
Academic studies, including a 2025 Vanderbilt University paper which analyzed nearly 2,500 markets on the 2024 election, have generally found prediction markets to be well calibrated at scale.
But what that means about their overall accuracy is harder to interpret because most races are not competitive, said Joshua Clinton, professor of political science at Vanderbilt University, who led the 2025 research.
Accuracy measures whether the market picked the winner. Calibration measures whether odds are reliable.
Overall, across all markets, contracts priced at a certain probability tend to come true about as often as that probability suggests. “But how accurate the price is for any specific market is impossible to know,” Clinton said.
A small proportion of sophisticated profit-seeking traders appear to account for a large chunk of the capital in prediction markets, according to Harry Crane, professor of statistics at Rutgers University, and also to ACDC data. Such traders, using polling and other data, help to correct prices, which is why the markets should be taken seriously, said Crane.
Still, even the most expert traders can get it wrong, Clinton said.
Prices on Kalshi and Polymarket implied a 20% chance, for example, of Brazilian President Luiz Inacio Lula da Silva defeating his right-wing rival Flavio Bolsonaro, which he did last month. That may have been because sophisticated traders overcorrected for the risk that polls often underestimate the pull of right-wing candidates, said Clinton.
Company spokespeople said that events with a 20% chance of occurring happen all the time and political upsets are no different.
Carlos Hardenberg, partner and portfolio manager at MCP Emerging Markets, said the lesson for investors was that the markets are a useful gauge. “But they should not be confused with certainty.”
(Additional reporting by Hannah Lang in New York and Johann M Cherian in Bengalaru; Editing by Jonathan Spicer)
