Key facts
- Betting on US midterm elections has surged on prediction markets like Polymarket and Kalshi.
- Traders have wagered over $220 million on US midterm elections this cycle, a significant increase from $92 million in the 2024 cycle.
- The majority of markets this cycle focus on the margin of victory (58%) rather than just who will win (16%).
- The top 1% of wallets on Polymarket account for 70% of all congressional betting volume this cycle.
- Concerns exist among policymakers and advocacy groups that these markets could undermine faith in US democracy and facilitate insider trading.
- Polymarket claims its election markets have a 98% accuracy rate one day before an election.
Betting on US midterm elections has seen a significant surge this year on prediction markets such as Polymarket and Kalshi, platforms that gained prominence for their accuracy in predicting the 2024 presidential election outcome.
These markets allow traders to buy and sell binary contracts based on various election results, including party control of Congress, individual race winners, and even candidate drop-out dates. While still a small fraction of overall prediction market trading, the growth in election-related wagers has raised concerns among some policymakers and advocacy groups.
Critics worry that these markets could undermine public faith in the integrity of US democracy and create new opportunities for insider trading. Kalshi has reportedly suspended candidates for betting on their own races, and campaign staffers have also been identified as bettors. Both Polymarket and Kalshi assert that their platforms provide accurate, unbiased information and are equipped to prevent misconduct, with Kalshi stating it blocks election trades by politicians and campaign workers.
Despite these assurances, a Reuters/Ipsos poll indicated that most Americans oppose using prediction markets for election wagers. Michelle Kendler-Kretsch of the Anti-Corruption Data Collective (ACDC) described election prediction markets as a disruptive financial technology applied to the democratic process. In contrast, a Kalshi spokesperson highlighted the bottom-up nature of the data, suggesting it reflects public sentiment when financial stakes are involved.
ACDC analyzed over 21,000 markets across Kalshi and Polymarket's platforms for US congressional midterms up to September 30, finding that the number of markets quickly surpassed those in the 2024 cycle. This cycle, betting has focused more on detailed race variables, such as the margin of victory, with 58% of markets dedicated to this aspect, compared to 16% focused on winners. However, the majority of overall trading volume remains concentrated on predicting race winners. Traders have wagered more than $220 million this cycle, significantly higher than the $92 million for the entire 2024 cycle. Trading volume is heavily concentrated on a few key races, notably the Texas Senate race, as well as Senate races in Maine, Michigan, and South Carolina. Data from Polymarket suggests a concentration of volume, with the top 1% of wallets responsible for 70% of congressional betting volume this cycle.