- Prediction markets missed badly in Los Angeles. More than $47 million was traded on whether reality TV star Spencer Pratt would advance in the Los Angeles mayoral race, the most heavily traded mayoral contest of the cycle, and markets gave him a 78% chance on the eve of the vote. He finished third.
- Price spikes are common. The Anti-Corruption Data Collective found that of 167 congressional markets on Polymarket International and Kalshi with more than $100,000 traded, 38, or about 23%, had price spikes of 30 cents or more. It also found that 88% of the roughly 18,000 active congressional markets could be moved 10 cents by a single bet of less than $1,000.
- One small market shows how. In a Kalshi market on whether Juliana Stratton would be the Democratic nominee for the Senate in Illinois, where the median order was just $12, a $5,000 purchase pushed the price from 47 cents to 79 cents before it fell back after three seconds, and $3,000 more about a minute later drove it to 99 cents. The price eventually settled at 52 cents after about $8,000 in spending.
- The odds can shape what voters believe. A study funded by the Brennan Center for Justice found that 1,994 registered voters were 10 to 20 points more likely to think a candidate would win when prediction markets favored them, regardless of polls. Wagers on 2026 congressional races have more than tripled from 2024, according to ACDC.
What Happened?
CNBC, working with ACDC, examined trading on election contracts at Kalshi and Polymarket, the two largest prediction market operators, ahead of next week’s midterms. Kalshi says that since 2024, candidates its markets favored have won roughly nine times out of 10, while a Washington Post analysis found that about three-quarters of 268 candidates given 70% to 80% odds went on to win. Kalshi said that, as is common on its platform, “the market corrected quickly to a price near fair value.” CNBC disclosed that it has a commercial relationship with Kalshi.
Why It Matters?
Prediction markets are growing fast and operate under Commodity Futures Trading Commission oversight, but thin election markets can be pushed around cheaply and the prices are increasingly cited as signals of who will win. Kalshi has added labels for thinly traded markets and live trade feeds, while Polymarket uses market surveillance and a partnership with Chainalysis, and a joint investigation with Polymarket helped identify a US soldier charged with using classified information to bet on Venezuela-related events, who moved about $400,000 in winnings and has pleaded not guilty. More than half of US states have laws that make betting on elections illegal, according to Pew, setting up a legal fight over whether the CFTC’s authority overrides them.
What’s Next?
Jared DeMarinis, administrator of the Maryland State Board of Elections, asked the state prosecutor in July to investigate whether prediction markets break state election-betting laws, and in September barred election staff, including election judges, from trading in election markets; the state employs 26,000 election judges. New Jersey has asked the Supreme Court to weigh in on whether states can regulate the markets. Tuesday’s midterms will be the biggest test yet of how election contracts trade and how much voters and candidates rely on them.
Affected Tickers and Coins: HOOD, CME, DKNG
Source: CNBC
