Introduction
In the quickly-evolving landscape of political analysis, traditional polls are no longer the only game in town. For newcomers seeking a data-driven way to navigate the noise of campaign cycles, prediction markets, like Kalshi, Polymarket, PredictIt, and Robinhood, have emerged as a powerful, real-time alternative. By treating political outcomes like commodity futures, these markets transform collective sentiment into actionable data that prediction market traders and non-traders alike can utilize.
While polls offer a snapshot of what voters say they will do, prediction markets reveal what people are willing to put real money on what will happen. Because participants have "skin in the game," market prices often react faster to breaking news, such as a debate performance or a sudden scandal dropping, than traditional surveys. This article explores how these platforms function and how they map probability. It will also explain why they are increasingly viewed as a gold standard for understanding elections, and why you should care about them, regardless of whether you trade or not.
What election prediction markets are
At their core, prediction markets (e.g., Kalshi, Polymarket, PredictIt, and Robinhood) are exchanges where individuals trade contracts based on the outcomes of future events. Unlike sports betting or gambling at sportsbooks, where you wager or gamble against "the house,” these prediction markets function like a stock exchange or futures trading floor: prices are determined by the supply and demand of the participants themselves. While some might consider the prices to be akin to political betting odds, they are different because the prices are constantly moving based on trader behavior, while political betting odds are set by the house.
Simple contract example: The presidential race
Imagine a Kalshi market with a contract titled: "Donald Trump to win the 2024 US Presidential Election." If you believe Trump will win, you buy the "Yes" contract. If you believe Trump will lose, you buy the "No" contract.
Price and probability mapping
The most critical concept in prediction markets is that the price is a direct proxy for probability.
Most contracts are priced between $0.00 and $1.00 (or 0¢ to 100¢).
If the contract for a candidate is trading at $0.65, the market is signaling a 65% probability that the event will occur.
So if the price for a “Yes” contract on Donald Trump winning the Presidential election is priced at $0.38 on Kalshi and “No” is priced at $0.62, this means the market is signaling that Trump has a 38% chance of winning the Presidential election in 2024, and a 62% chance of not. (The “Yes” and “No” price should roughly add to $1.00, and Kamala Harris's chance should equal Donald Trump "No").
This allows observers to see a clear, fluctuating percentage of a presidential election outcome in real-time based on the trading activity
Payout structure
The math is "binary." If the event occurs (e.g., Trump wins the presidential election), the Kalshi contract expires at $1.00. If the event does not occur (e.g., Trump loses and Harris wins), it expires at $0.00. Your profit is the difference between your purchase price and the final payout. For example, if you paid $0.38 for Trump to win the presidential election on Kalshi, and he does win, you would profit $0.62 ($1-$0.38) times however many shares or contracts you bought at that price. This structure ensures that as the presidential election draws closer and the outcome becomes more certain, the price gravitates toward $0 or $1.
How trading aggregates information
How do prediction markets achieve such high accuracy? The answer lies in the "wisdom of the crowd." Every time a participant trades, they inject their private knowledge and analysis into the price. Whether it’s an expert analyzing demographic shifts or a local observer recognizing anecdotal voter behavior before an election, the market aggregates these disparate pieces of information into the market price. This collective intelligence often filters out the "noise" of biased media coverage, leading to a forecast that historically rivals, and, in most cases, beats traditional polls.
Major platforms for political prediction
Several platforms have pioneered the space for US prediction markets, each operating under different regulatory frameworks.
1. Kalshi
Kalshi is the largest federally regulated exchange overseen by the CFTC (Commodity Futures Trading Commission) in the US. Following a landmark legal victory in September 2024, Kalshi became the first platform to offer fully legal, regulated election trading to US citizens on a federal level. It uses a transparent, fiat-based system and is often integrated with mainstream financial tools.
2. Polymarket
Polymarket is a decentralized crypto-based platform using USDC. In 2025 and 2026, it is navigating complex federal CFTC regulatory requirements for US-based users. Polymarket is launching its CFTC-regulated US exchange with just sports markets. (Technically, Polymarket is not currently legal in the US, due to regulators banning US users from accessing it in 2022).
3. PredictIt
Operated as a research project by Victoria University of Wellington, PredictIt has long been a favorite for political junkies. PredictIt was first launched in 2014 and was known for a wide variety of "niche" contracts, such as cabinet appointments or legislative votes. However, due to its academic nature, PredictIt often has lower investment caps than commercial rivals like Kalshi or Polymarket. Since 2014, PredictIt was the only prediction market that Americans could use before Kalshi came online with election markets in 2024.
How to interpret election prediction markets
For those looking to move beyond monitoring the probabilities, interpreting market signals requires a blend of data literacy and political awareness. Trading on these political futures requires a blend of knowledge of politics, election market-specific know-how, and some basic trading education.
1. Start with risk awareness
Prediction markets involve real financial risk, even when stakes seem small.
Only trade what you can afford to lose. Political outcomes are uncertain, and markets can be volatile, especially near debates, scandals, or breaking news.
Expect sharp swings. Prices can move quickly on rumors or incomplete information before you are able to react
Diversify your exposure. Avoid concentrating all your trades on a single race or outcome to best manage your risk
2. Read price movements, not just levels
Changes in prices often matter as much as the prices themselves.
Sudden jumps may signal new information entering the market (polls, legal rulings, candidate withdrawals). The size of the movement can signal how much this new information impacts the race
Gradual trends can reflect shifting fundamentals, such as demographic re-alignment or campaign momentum.
Overreactions are common after news events; prices may overshoot before correcting. Savvy traders can recognize an overreaction.
3. Watch liquidity and volume
Not all markets are equally informative.
High-volume, high-liquidity markets (e.g., presidential races) tend to be more efficient and harder to outsmart (this is a general rule, but this is not always the case.)
Thinly traded markets can be easily distorted by a few large trades and should be treated with caution. Low volume means prices may reflect noise rather than consensus.
4. Integrate outside information
Prediction markets are most useful when combined with other data sources.
Polls: Compare market prices with polling averages. Large gaps indicate there is likely information that polls have not or cannot capture
Demographics and fundamentals: Factors like turnout history, partisan lean, and economic conditions often change slowly but greatly impact prediction market odds
Historical patterns: Markets sometimes underweight base rates (for example, how rarely certain upsets occur in a specific state/district, or the historical polling error)
5. Think in probabilities, not narratives
Markets reward probabilistic thinking rather than compelling stories.
Avoid overreacting to anecdotes or viral moments
Ask whether new information truly changes the odds, or just the headlines or narratives
A candidate can be “likely” to win and still lose; that doesn’t mean the market was wrong or irrational. Remember, a $0.20 fairly priced event will still happen 20% of the time
6. Consider who is trading on the prediction market
Because prediction markets are exchanges, your trade will always have a counterparty taking the opposite side of your trade.
Always think through why your counterparty is making a trade
If you can clearly identify why your counterparty is likely wrong, then you should feel reasonably confident in making your trade
If you do not understand why a rational trader would be your counterparty, proceed with caution; you might be missing a key piece of information
Understand what biases the average user on the prediction market platform might hold; for example, Polymarket users might overestimate the odds of a pro-crypto candidate
For beginners, the goal isn’t to beat the market, it’s to learn how markets process political information in real time. With careful risk management and thoughtful integration of outside data, prediction markets can offer a valuable perspective on electoral uncertainty.
Conclusion
Election prediction markets offer a revolutionary way to view the world through the lens of probability rather than rhetoric. By turning complex presidential dynamics into simple, tradable prices, these platforms provide a transparent, real-time tool for anyone from casual observers to serious data analysts.
Whether you are tracking the latest political odds for a midterm election or analyzing the presidential landscape years in advance, these exchanges provide a level of clarity that traditional media often lacks in politics. As the industry matures under the watchful eye of the CFTC, prediction markets are set to remain a permanent fixture in politics.