Kalshi prediction market data earns vote of confidence in Fed paper
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Researchers hailed Kalshi's prediction market data in a new Federal Reserve paper, delivering a significant vote of confidence in the emerging platform as it weaves its way into the economic mainstream.
Why it matters: It's a credibility win for Kalshi and the broader prediction market industry — and a setback for state regulators, gambling groups and critics who argue these platforms are little more than speculative betting.
Zoom in: The researchers found Kalshi markets may outperform traditional derivatives and survey forecasts on key economic data.
- "Our study highlights the promise of prediction markets as a new benchmark for measuring expectations and informing monetary policy decisions," wrote the Fed's Anthony M. Diercks, Northwestern's Jared Dean Katz and Jonathan Wright of the National Bureau of Economic Research.
What they found: The platform's prices update in real time — unlike surveys released periodically, they note.
- On Fed rate decisions, Kalshi had a "perfect forecast record" the day before FOMC meetings, beating fed funds futures forecast, the researchers found.
- On core inflation and unemployment, Kalshi data performed similarly to Bloomberg consensus — and did better on headline inflation.
What they're saying: Kalshi CEO Tarek Mansour touted the paper on X, calling it "incredible."
- A spokesperson for the Coalition for Prediction Markets wasn't immediately available for comment.
- The American Gaming Association — which is lobbying against prediction markets — did not immediately respond to a request for comment.
Yes, but: Not everyone is convinced that Kalshi's markets are perfectly calibrated.
- Researchers at Europe's Centre for Economic Policy Research found evidence of "favorite–longshot bias" — a common betting-market quirk in markets where traders tend to overvalue unlikely outcomes and undervalue heavy favorites.
- While contract prices on Kalshi "broadly reflect their probability of winning," the pattern showed up across politics, entertainment and economic contracts — and across markets with different trading volumes, they note in the report Wednesday.
Follow the money: Prediction markets are immersed in a regulatory battle — with the Commodity Futures Trading Commission asserting federal authority, while certain states attempt to block them from operating.
- CFTC chair Mike Selig this week signaled the commission will "defend its exclusive jurisdiction over these derivative markets."
- Dustin Gouker, a gambling industry consultant, said papers like this Fed report help Kalshi's cause: "Right now, I think the most important currency for prediction markets is legitimacy, whether that comes from the CFTC, or partnerships, or data that shows that prediction markets are more than just gambling on things," Gouker tells Axios in an email.
The bottom line: Prediction markets are building a foundation of data respectability.
