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Democrats won U.S. Senate seats in Ohio and Texas in Tuesday’s midterm elections, and prediction markets such as Kalshi and Polymarket broadly anticipated the Democratic sweep, according to Reuters. More than $1.48 billion was wagered on Tuesday’s elections, the news agency reported.
Markets got the big picture right
Democrats seized control of both the Senate and the House of Representatives. Reuters said bets on a Democratic midterm sweep largely paid off, despite some mispriced races.
Kalshi traders were assigning a 55% probability to a "blue tsunami" as early as April, according to the report. Kalshi’s total trading volume on election markets reached more than $2.5 billion this cycle, compared with $1.3 billion during the 2024 election cycle. Prediction markets had risen to prominence after signaling a Trump victory in 2024.
Polymarket’s election forecasts were about 98% accurate, according to a person familiar with the matter cited by Reuters.
"Prediction markets priced the midterm outcome within hours," said Kelly Ye, head of research at digital asset trading platform Talos.
Harry Crane, a professor of statistics at Rutgers University, called it "the first true prediction markets election." He said the markets "projected Democratic wins across the board throughout the closing weeks of the campaign, and were quick to react in real time to voting information as it rolled in."
A South Carolina miss and the limits of the markets
A notable miss was South Carolina, where Democrat Annie Andrews defeated Republican Darline Graham to win a Senate seat. Kalshi and Polymarket had implied a 70% chance of a Graham win as of late Tuesday afternoon, Reuters reported.
Brian Jacobsen, chief economic strategist at Annex Wealth Management, said prediction markets "can be useful because they aggregate the views of people who have an incentive to be right, not just to express an opinion."
He added: "They can give a good indication of where the weight of information is pointing, but a prediction isn’t a promise. Whether it’s politics or sports, you still have to hold the election or play the game to know the result."
If you or someone you know has a gambling problem, call the Ohio Problem Gambling Helpline at 1-800-589-9966.
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Source: As reported by Reuters.
