Prediction markets are officially on watch when it comes to the data they rely on, specifically when it comes to election event markets. Concern is mounting after Median Strategies, a previously obscure polling company, admitted that their recent survey results in two marquee races were falsified.
Axios, a media company responsible for delivering the initial report on Median Strategies’ admitted snafu, connected the dots to an overarching take on misinformation warping everything we digest. This could create a bigger issue for prediction markets, however, as their meteoric rise may create incentive for market manipulation in politics.
Why We Can’t Ignore Median Strategies
While there is no evidence to suggest Median Strategies created their polls with the sole intent to manipulate prediction markets, they at the very least represent a growing risk.
Median Strategies attempted to calm the storm by claiming the fake surveys were part of a “short-term social experiment” tied to revealing the reach of misinformation, but their actual original intent is irrelevant here.
Intentional or not, Median Strategies is now an example of an entity that can wield some power and potentially shake up prediction market event outcomes on big platforms like Kalshi or Polymarket.
Fake Polls = Easy Manipulation?
The actual process of prediction market manipulation through polls is simple. A trader could first establish a position for a particular political event market, followed by the manufacturing or even just the promotion of illegitimate information that could ultimately benefit only them.
Simple doesn’t mean easy, of course. It’s a straightforward process from position to profit, but whoever is trying to manipulate the masses still needs to convince them the information they’re seeing is real.
Even if that is successful, people need to actually trade on that side of the market. There is still a question in delivery, credibility, and reach. However, someone with enough power and a good strategy could deploy misinformation and use it to their advantage at prediction market sites.
Will Prediction Market Manipulation Work?
Median Strategies is proof that it can, but not a guarantee that it consistently will. And as noted, it’s a simple process, but not one that can always be executed to perfection.
Here’s the other side of the debate; all of the other traders want to make money, too. Anyone can be conned, but people who would regard themselves as serious prediction market traders probably aren’t going to be swayed solely by some poll data.
In that same breath, sharp prediction traders are going to consider only the most reputable data sources, and be careful when it comes to timing and volume in trades.
The easy answer here is that prediction market manipulation can and will work, but probably only to an extent.
The Trade Handle Prediction Markets Take
Just because a small group of people will try to manipulate prediction markets (and an even smaller group will succeed) doesn’t mean it’s a huge concern.
In all fairness, Median Strategies’ public reveal doesn’t mean prediction market manipulation is rampant at top platforms. It just illustrates that it can happen, and introduces another issue that needs to be broached when looking at regulating the prediction market industry.
The nice thing is the top prediction market companies know this is a risk, as Kalshi’s multi-year deal with Nasdaq signals it’s being taken seriously. Nasdaq’s market-surveillance technology should help not just detect suspicious movement, but can catch patterns and potential manipulation in real time.