Election prediction markets are gaining popularity

Bettors are pouring billions into prediction markets after a recent court ruling lifted a domestic ban on election betting, allowing Kalshi, a betting platform, to take wagers on the November 5 election.

Over $12 million was wagered on Kamala Harris and Donald Trump in the initial days post-ban, according to Kalshi cofounder.

How does it work?
These prediction markets let users buy contracts that pay $1 if they’re right and none in case they’re wrong. People must bet on specific outcomes. The election contracts on each site are binary.

Apart from Kalshi, PredictIt and Polymarket are also taking wagers. The latter, a blockchain crypto site, has seen $1.9 billion in US election bets.

However, the government, specifically the Commodity Futures Trading Commission (CFTC), is trying to shut down such betting services. This might stop some investors from getting involved until the legal issues are resolved.

Election prediction markets work like futures; payouts are based on election results. However, their low liquidity and unclear legal future limit their use.

Nevertheless, they offer a new way to hedge political outcomes, though some worry about manipulation, especially on election day.

Concerns exist that a few big players could manipulate the market to influence voters. Others think these markets might help people stay more informed, similar to how polls work.