Prediction markets may be developing an audience significantly larger than the group of customers buying and selling their contracts.
- Kalshi cofounder Luana Lopes Lara said more than 75% of the platform’s users have never traded and instead visit to consume information.
- A Kalshi working paper examining more than 2.2 million resolved markets found its aggregate Brier score improved to roughly 0.02 at closing.
- Prediction market prices could shape news, financial decisions, and public perceptions, expanding the potential impact of forthcoming CFTC rules.
More than 75% of Kalshi users have never traded on the platform and instead visit to consume information, cofounder Luana Lopes Lara said during the Commodity Futures Trading Commission’s (CFTC) Aug. 20 Innovation Advisory Committee meeting. Prediction platforms are also developing into real-time information sources whose prices could shape news coverage, financial decisions, and public perceptions, Lopes Lara added.
“It’s multiples larger on the people that use these markets for information and to have a way to have an unbiased view of what’s going to happen in the future, especially in a world so polarized by the news,” Lopes Lara said.
Study examines market accuracy
Leading prediction market platforms, including Kalshi, Polymarket, and a growing number of additional operators have argued that financial incentives make market-generated probabilities more useful than polls, punditry, or individual forecasts. Traders who believe a market is incorrectly priced can take a position and potentially profit if their assessment proves accurate.
Lopes Lara said Kalshi was created in part to let customers hedge risks tied to events such as elections and Brexit. However, she argued the information generated by those trades has become more widely used than the hedging product itself.
Kalshi released what Lopes Lara described as the largest study of prediction market calibration to date on the day of the committee meeting. The company said its findings demonstrated that market probabilities have accurately forecast outcomes over time.
The August working paper analyzed more than 2.2 million resolved Kalshi markets across 11 categories from the platform’s 2021 launch through mid-2026. The paper found that Kalshi’s aggregate Brier score - a measure of forecasting accuracy in which lower scores are better - improved from approximately 0.08-0.09 three months before resolution to roughly 0.02 at market close.
Influence beyond trading
Prediction market data could eventually become a significant commercial product of its own, industry leaders maintain.
Leading news organizations have already begun using probabilities to illustrate changing expectations around elections, sporting events, and economic reports. Financial institutions can incorporate event prices into risk models, and established financial and technology companies including CME Group, Robinhood, and Coinbase have moved into the prediction market space with customer-facing offerings.
Sports event contracts have typically generated the most volume on prediction market sites, in part motivating leading sportsbook operators DraftKings, FanDuel, and Fanatics to launch their respective platforms as well. But while sports may be the industry's largest volume driver, prediction markets' relationship to current events and major financial decisions could have the most sweeping impact, industry executives argue.
In last week’s CFTC panel, Robinhood CEO Vlad Tenev reiterated his view that prediction markets could have massive impacts well beyond sports and that continued improvements could turn prediction markets into something more consequential than another retail trading product.
“It’s going to be a truth engine, a truth machine that’ll make it easier and clearer for people to make important decisions,” Tenev said.
Meanwhile, the growing participation of major companies from a variety of industries could deepen liquidity and improve the informational value of certain contracts. It could also amplify weaker markets by distributing their prices to significantly larger audiences.
As the industry grows, the CFTC’s regulatory efforts have been engulfed in legal challenges, mainly involving state-level gambling regulators concerned with sports event contracts. But forthcoming rules involving product governance, market design, and consumer protection may also have to consider not just those risking money, but a larger audience treating market prices as signals of what is likely to happen.
