US Prediction Market Trading Volume Increases Tenfold Amid Controversy

The use of prediction markets is on the rise in the United States. The trading volume on Kalshi and Polymarket increased from $4.7 billion in November 2024 to $48.4 billion last month. The trading volume for the 2024 U.S. presidential election on Polymarket reached approximately $3.7 billion, while the trading volume related to the 2026 midterm elections exceeded $133 million. Prediction markets operate by trading the likelihood of specific events occurring, with prices reflecting the judgments of market participants. However, in markets with low trading volumes, a small amount of capital can lead to significant fluctuations in probabilities, raising concerns about reliability. For example, a single account betting $44,000 on candidate Mayhun caused his chances of winning to surge to 36%. There are also risks associated with trading on insider information, and regulatory issues remain. Prediction markets can reflect information faster than opinion polls, but they may rely on the financial power of a few investors when trading volumes are low.

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