Prediction markets have experienced extraordinary growth over the past two years, but the upcoming midterm elections is giving the industry something it has yet to fully secure: a permanent foothold in a major sector.
Kalshi, Polymarket, and other operators have expanded rapidly through sports event contracts, even as legal disagreements with state regulators threaten their operations. Politics offer a different opportunity entirely.
Politics offer what sports haven’t
With substantial sums being traded on Senate, House, and gubernatorial races, the November 3 elections could help prediction markets establish themselves as the leading source of political information instead of a divisive gambling-adjacent product that many officials want to shut down.
Prediction markets were largely unknown to the general public during the 2022 midterms. That changed a couple of weeks ahead of the 2024 presidential election, when they received legal approval to offer contracts on political outcomes.
Much of the industry's growth since then has come through sports event contracts, which allow users to trade on professional and amateur sporting outcomes, including in states without legalized sports betting. But that success has also generated resistance. State gaming regulators have challenged prediction market operators over contracts they argue constitute unauthorized sports wagering, creating uncertainty about their long-term position in sports.
Politics could provide a more dependable foundation.
Rather than competing directly with traditional sportsbooks, political prediction markets have an opportunity to establish themselves as forecasting tools alongside polls and other election analysis. News sources such as CNBC and CNN already have prediction market partners to provide up-to-the-minute data during shows and live broadcasts.
The midterms will test whether prediction markets can develop from just serving a niche to becoming a permanent part of how Americans follow political races.
Prediction markets need midterm elections
Kalshi and Polymarket attracted considerable attention during the 2024 presidential election, when their markets indicated that Donald Trump was bound to return to Pennsylvania Avenue when many polls believed the race was still a toss-up.
Trump ultimately defeated Democratic challenger Kamala Harris with 312 electoral votes to her 226, providing prediction market supporters with a prominent example of the value of prediction forecasts. The midterms will offer another opportunity to demonstrate that value across numerous congressional and gubernatorial contests.
Former NBC News political director and "Meet the Press" host Chuck Todd, who has a podcast sponsored by Kalshi, believes that election night could showcase the value of prediction data, supported by millions of users and even more money.
“On the night, [the markets are] going to feel like they're calling these races faster,” Todd said. “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, then that should start speeding up acceptance.”
That acceptance could be especially important for an industry still fighting to define its place beyond sports trading.
Can Politics Help Prediction Markets Shed the Gambling Label?
The opportunity comes as prediction markets continue facing questions about their broader business model.
Beyond sports contracts, controversial markets involving sensitive subjects, including potential criminal charges against members of the “Cornell 7,” have generated scrutiny over what operators should be allowed to offer.
Despite that, prediction markets could solidify their position in the political world and completely oust polls as the primary source of public confidence if Tuesday goes to their plans.
“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?”
The Trade Handle Prediction Markets Take
Prediction markets are expecting a blue wave during the midterm elections on Tuesday, following two years of an all-red House, Senate, and President. Tracking individual races will be key to determining the staying power of Kalshi, Polymarket, and other trading hubs in politics. That would give them a solid and unthreatened foothold in at least one industry, unlike sports, where many regulators are trying to have them shut down because of operational disagreements.