Episode summary
Prediction Markets in Focus After Democrats' Midterm Sweep | Bloomberg Businessweek
Bloomberg Businessweek Daily
· · Hosts: Carol Massar, Tim Stenovec · Guests: Nicole Kagan
Summary
Prediction markets drew fresh attention after the midterms, with Kalshi saying its platform handled more than $2.5 billion in trading volume for the cycle, up from $1.3 billion for the 2024 election. The host and Nicole Kagan argued that the markets were not just active, but unusually accurate: Kagan said Kalshi was directionally right in 479 of 487 races processed by 6:00 this morning, or about 98% accuracy, and that performance improved as election day approached.
Kagan said the markets often moved faster than traditional media calls because traders incorporated new information as polls closed and results came in. She pointed to late shifts in South Carolina and Texas as examples of rapid repricing, and said early blue results in some states influenced other House and Senate markets. She also said the platform’s probabilities should be viewed as calibrated forecasts, not simple win-or-lose picks, and argued that single missed elections should not outweigh a large sample of correctly priced outcomes.
Beyond elections, Kagan said prediction markets can serve as price discovery and hedging tools for policy risk, especially for businesses exposed to elections, tariffs, AI, and other state-level decisions. She said the same logic applies to macro markets, where traders can express a view on outcomes like jobs data or elections more directly than through stocks or broad indexes.
Key takeaways
- Kalshi said it saw more than $2.5 billion in midterm trading volume, more than double the $1.3 billion it reported for the 2024 election cycle.
- Nicole Kagan said Kalshi was directionally accurate in 479 of 487 races processed by 6:00 this morning, or about 98%.
- Kagan said accuracy improved as election day neared because traders incorporated more polling, candidate information, and early vote data.
- She said prediction markets can move faster than networks, citing South Carolina and other races that flipped within minutes of polls closing.
- Kagan argued the value of prediction markets is probabilistic pricing and hedging, not just picking winners and losers.
Notable quotes
“the answer to that question is extremely accurate. So, of the 487 races that had been processed by 6:00 this morning”
“Kelsey was directionally accurate in 479 of those 487. So, we're talking about accuracy in the realm of about 98 plus%”
“accuracy increases as a function of time to the election. you know, as more information comes out about the candidates”
“what markets are providing to you is a probability of an event happening, right”
“there's a really useful price discovery component of the probabilities that we're producing from our markets”
How the episode opens
Bloomberg Audio Studios podcasts, radio news.
You're listening to Bloomberg Business Week with Carol Masser and Tim Stenc on Bloomberg Radio. Well, President Trump may have misread voters. Prediction marks, however, did not.
Cali is out with some research today that says the platform saw more than $2.5 billion dollars in trading volume for its midterm markets. midterms markets up from 1.3 billion for the 2024 election cycle. And then our own Joe Weisenthal, the co-host of Odd Lots, writing in his newsletter today that quote, "The only thing I want to say about the election is that I think the prediction markets were huge winners last night for two reasons.
The first is that unim ambiguously there was no better way to understand the state of the race in real time than following the prediction markets. Beyond that, he says the prediction markets move decisively towards the Dems in the final days of the race. Again, that's from our own Joe Weisenthal of OddLots.
Here with more and an analysis of the accuracy of the markets on Kali is Nicole Kagan, head of research at KHI. She joins us here in the Bloomberg Business Week studio. Welcome. Welcome. Uh, how accurate were the prediction markets?
Yeah, well, thank you so much for having me. Uh, well, the answer to that question is extremely accurate. So, of the 487 races that had been processed by 6:00 this morning, if we look at what the markets were saying before the closure of polls, Kelsey was directionally accurate in 479 of those 487. So, we're talking about accuracy in the realm of about 98 plus% across the elections we saw last night.
How did the accuracy change as you got closer to the election? — Yeah, so accuracy increases as a function of time to the election.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- prediction markets
- democratic midterm sweep
- regulation of betting
- sports betting legal fight
- us supreme court
Companies and tickers mentioned
- Kalshi
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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