Prediction markets are eating politics

No one used to argue about the phrase “insider trading.”

For decades, those two words connoted a transgression, a crime, something unambiguously tainted. But lately, with the meteoric rise of prediction markets such as Polymarket and Kalshi, leveraging niche information for personal, financial, and even political gain has become, well, commonplace. As the 2026 midterm elections approach, these markets are turning elections into yet another exchange, a place for insiders and analysts to strike it rich—but also for candidates and their advisers to assess their civic standing in real time.

As Americans get set to vote once again, campaign staffers, operatives, strategists, and others who work in politics are frequently monitoring betting-market odds. Some have begun treating the data as seriously as they do traditional polling. Yet with money to be made on candidates’ performance and decisions, obvious ethical issues have emerged. Those who hold inside information about even the most specific and narrow of happenings could be incentivized to act for financial gain instead of democratic ideals. And the warning signs have been there for years.

One of the more well-known progressive strategists of the past decade, Sean McElwee, published an essay on Medium back in 2022 titled “Why Prediction Markets Make the World a Better Place.” He wrote: “By providing an unbiased, market-driven data point about the state of the world, prediction markets offer an alternative to the media that so many low-trust Americans view with skepticism.”

As the essay went on, he couldn’t have been clearer: “Political consultants like myself frequently use these markets to inform tactical decision-making.” One month later, McElwee left the firm he founded, Data for Progress, after questions emerged about his ties to Sam Bankman-Fried and allegations he used inside information to make his own bets. (McElwee did not respond to a request for comment.)

The essential conundrum is that while the prediction markets may yield exceptional intelligence, they also mint an infinite number of silent power players who are policed only by their own conscience. Insider trading violations are rarely enforced. And as with everything in politics, elected officials are divided about what to do.

‘Why do you hate your staff so much?’

In March, U.S. Representative Seth Moulton, a Massachusetts Democrat, announced that neither he nor any member of his staff would “trade or hold positions on political, legislative, regulatory, geopolitical outcomes, or any information that is learned in an official capacity.”

The next morning, after a half-hour CrossFit warm-up with his self-described bipartisan congressional workout group, Moulton received some words of encouragement from his fellow legislators.

“This is pretty fucked up,” he recalls people telling him as he walked into the congressional gym. A GOP rep using one of the cardio machines offered a more sarcastic response: “Seth, why do you hate your staff so much?”

Soon, he went further. Moulton and Representative Ritchie Torres, a New York Democrat, introduced legislation in May to ban campaign insiders from using confidential information to make money on prediction markets. The bill quickly hit headwinds.

Polymarket and Kalshi had collectively spent almost $1 million the previous year lobbying lawmakers, and a third-party bipartisan group called the Coalition for Prediction Markets (CPM) has since emerged as a powerful force in Washington. Led by Sean Patrick Maloney, a former Democratic congressman, it advocates for the interests of multiple companies associated with prediction markets—not just Kalshi but also Crypto.com, Coinbase, Robinhood, and Underdog.

Moulton and Torres’s bill now faces an uphill battle before the midterms. Torres is undaunted. “I see a market experiencing exponential growth that remains dangerously deregulated, and I’m trying to figure out as a legislator how to best regulate it,” he says.

Little may happen before November. In the meantime, voters will have no way of knowing who may be gamifying our political system. In recent conversations with operatives who have worked on congressional races, presidential primaries, and general election campaigns, I heard a mix of reactions to prediction markets: wariness, amusement, doom, skepticism. But to what extent are campaigns actually using odds on platforms like Polymarket or Kalshi today to make decisions?

Moulton tells me that people routinely asked him what prediction markets said about his U.S. Senate race. A few months before the Senate Democratic primary election in Massachusetts, for which Moulton was a candidate, I scrolled his Polymarket odds. At the time, Ed Markey, the incumbent, was trading at 73% on Polymarket. Moulton was in a distant second place, at 24%. In mid-August, Markey was trading at 88% and Moulton at 13%. When ballots were counted, on September 1, Markey had defeated Moulton by around 30 points, taking 65% of the votes to Moulton’s 35%.

Moulton says he never took this data as gospel, calling the markets an “imperfect” source of information, and he senses the public tide turning against the markets in general. In Massachusetts town halls, he tells me, whenever the subject of prediction markets came up, there was “universal support” for government officials cracking down on the industry. “I think people didn’t expect it to be corrupted so quickly,” Moulton says.

One of the reasons that happened, he says, “is that people in the administration, who should have the basic decency and honesty not to take advantage of insider information, clearly don’t have any moral guidelines.” Moulton is referring specifically to a spate of Trump era betting-market controversies, behavior that got so flagrant that in March, the White House sent a memo to staffers warning them about potential insider trading. (“Any implication that administration officials are engaged in such activity without evidence is baseless and irresponsible reporting,” a White House spokesman, David Ingle, told CNN.)

A veteran campaign strategist working on other U.S. House races this cycle, who agreed to talk on condition of anonymity in order to speak candidly, pointed out that prediction markets can have a way of taking over narratives. A candidate with lower odds, for instance, might lament the fact that they’re struggling. Everyone wants to be on the winning team. But lower odds can sometimes be an advantage. Enterprising bettors could theoretically pick a longshot candidate and boost them in a given market, driving up their odds, and, in some cases, amplifying their media coverage.

This kind of market manipulation wouldn’t have to be carried out by online vigilantes in basements. The strategist believes that this could be a game plan for political action committees (PACs). “The tricky part of our democracy is that we deemed money as speech,” the person says, referring to the Supreme Court’s 2010 Citizens United decision, which allowed corporations and other groups to flood politics with incentivized spending, ushering in the era of dark money.

This person also concedes that insider trading by campaign workers is a legitimate concern, particularly since it’s one that seems hard to regulate by law, given that there’s no specific definition of what a “campaign staffer” is. Some individuals may work for the candidate, some may be employees of a contracted third-party firm, many are volunteers.

Elections are another story

Despite what Moulton is hearing at town halls, prediction markets are simply becoming part of the fabric of modern life. See, for example, Pew Research Center polling from last May that found 1,090% growth in total volume on prediction markets since mid-2025; or the fact that Meta unsuccessfully tried to buy Kalshi and is now reportedly developing a prediction market of its own; or the prediction-market advertising blitzkrieg during this past FIFA World Cup. Even stars like Timothée Chalamet are shilling for Kalshi. “Banning prediction markets is like trying to ban the New York Stock Exchange,” John Bivona, Kalshi’s head of government relations, tells me over video chat, citing a growing public mistrust of traditional sources and institutions. (Polymarket did not respond to multiple interview requests.)

Kalshi and Polymarket themselves now form something close to a prediction market duopoly. Kalshi has built the larger sports-betting business, while Polymarket has become the more politically focused platform, with a global user base and a wider menu of election bets. Their business models, though, are largely the same: Traders take opposite sides of a contract, and the platforms collect fees on the transaction.

There are subtle distinctions. Kalshi positions itself as the suit-and-tie version of the casino; it requires users to sign up with proof of their real identity. For a while, Polymarket seemed fine with being the hoodie-and-VPN online gambling site—it allows pseudonymous accounts, is “based” in a reportedly empty office in Panama, and runs on crypto. Currently, Polymarket’s international exchanges are blocked by 39 countries, including the United States. But a separate, smaller U.S.-only exchange does exist for users who agree to register with government IDs. Both Kalshi and Polymarket count Donald Trump Jr. as an adviser and are heavily dependent on sports wagers and the fact that, per a recent Wall Street Journal analysis, the overwhelming majority of their users are losing money every day. (Both companies tend to downplay that fact.)

Of course, few users care about company pedigree. As Bivona says, “These markets are increasing in popularity. I think Democrats and Republicans can both agree that there need to be some serious guardrails in place to police against insider trading to prevent markets like war, terrorism, death, assassination.”

But elections, Bivona says, are another story: “You’ve got campaigns that have unfolded over the course of the past couple of years where [candidates] would look at their Kalshi odds after making a big announcement or after rolling out a policy position,” he says. “And I think you’ll continue to see that evolve. It’s another data source, another point to help folks understand what direction things are going in and what might happen in the future.”

When knowledge is power

Election betting may seem like a novel, tech-driven enterprise, but it’s actually an antiquated endeavor. “We’ve had markets forever,” says Koleman Strumpf, the chair of political economy at Wake Forest University. Americans used to bet on elections before World War I; Italians were betting on elections as far back as the sixteenth century. Strumpf notes that in the early twentieth century, in the month before an election, virtually “every newspaper in the country” would cover election markets for president, Senate, and other races.

Defenders of the platforms tend to argue that political betting is useful because informed traders put their money where their mouth is, making the markets more accurate for everyone. In politics, those informed traders can be the same campaign staffers, consultants, and government employees who have advance knowledge of polls, policy rollouts, or other potentially determinative events. The exact thing that makes these markets valuable is also what makes them an ethical minefield.

Two years ago, Shayne Coplan, the 28-year-old Polymarket founder and CEO, sounded a bit defensive onstage at a conference weeks before the presidential election, when he acknowledged to Nate Silver, the election statistician turned gambling expert, that his customers aren’t, in a word, stupid. “There are people who go to insane lengths to go and get research and understand things and be the first to price it,” Coplan said.

He may have been saying the quiet part out loud.

This past April, Gannon Ken Van Dyke, an active member of the U.S. military, was indicted for trading on Polymarket shortly before President Nicolás Maduro was captured in Venezuela. Van Dyke, a soldier who was part of the team carrying out the mission, is alleged to have earned more than $400,000 from his wagers, on account of his firsthand information. A similar situation took place earlier this year in Israel.

That same month, Kalshi revealed that it had caught three candidates trading on their own primary races in Minnesota, Texas, and Virginia. Recently, there was another, in North Carolina. In May, a former staffer on a statewide political campaign in the South admitted to NPR that they and others placed bets on the back of an unreleased poll, claiming to have made “thousands.”
In July, the disgraced former Congressman George Santos agreed to pay a $35,000 settlement after the Department of Justice investigated an alleged insider bet on Kalshi as to whether he’d attend President Donald Trump’s State of the Union address; by September, Kalshi had banned him from the platform for life and fined him another $71,000. Gabriel Perez, a White House teleprompter operator, stands accused of making roughly $100,000 on Kalshi from betting on Trump’s speeches.

Nevertheless, says Robin Hanson, an associate professor of economics at George Mason University, prediction markets still surface truth better than pundits, polls, or experts.

Decades ago, Hanson developed the concept of “futurarchy,” or a prediction-based system of governance in which governments use forecasting to anticipate public needs and prediction markets to gauge which policies might be most effective. He tells me that he sees Polymarket and Kalshi as “eager to take the industry in the directions I had foreseen and hoped.” (Coplan has cited Hanson as an influence.) Hanson also sees the concentration of knowledge among a relatively small group of traders as a strength of prediction markets, rather than a flaw. “Even if lots of ignorant people trade, the informed traders dominate the prices,” he says, “and that’s why the prices are accurate.”

Perhaps most strikingly—and controversially—Hanson views action on prediction markets through a First Amendment lens, believing that betting should be protected as an “info institution.” He contends that journalism, polls, academic papers, and even gossip all swirl together as sources of information that can (and should) influence each other and, in turn, the markets. In a blog post in April, Hanson argued that if you wouldn’t forbid government employees from talking to reporters for fear they’ll reveal secrets, you shouldn’t forbid them from trading due to similar fears.

This is exactly what troubles Torres, the New York congressman: “We live in a world where every election, from the presidency down to dogcatcher,” can be wagered upon, he says. “Campaign staff is notoriously underpaid and overworked, and the prospect of quick money on prediction markets could be an overwhelming temptation, a corrupting temptation. I worry that someone might join a campaign for the sole purpose of accessing insider information or insider trading.”

Bivona counters that Kalshi monitors markets 24/7 and is quick to freeze accounts when flags arise. But even if they keep playing whack-a-mole, the data is clear: A small number of accounts on these sites are doing almost all the winning, while the overwhelming majority of users are losing.

What we lose if we lose polling

A different question is how prediction market data may be edging out polling, and what the consequences may be.

Pratik Chougule, the executive director of the Coalition for Political Forecasting, sees election betting as complementary to traditional polling. After all, polling and prediction markets ask fundamentally different questions. In a poll, “you’re basically just asking people how you feel today about an issue, whereas prediction markets are asking the question of what will happen in the future,” Chougule says. For instance, you could be a die-hard Republican but nonetheless believe that Democrats will retake control of Congress come November. Put your beliefs and leanings aside—where would you put your money?

Traditional polling is certainly outdated in a lot of respects. Many people simply refuse to answer calls from random telephone numbers. There’s also a lag. Prediction markets, intrinsically tied to future events, are virtually a real-time data source.

But polling has a specific advantage that can’t be overstated, one that affects our country, and its future, in profound ways. If people start making decisions based upon what they think is likely to happen rather than what they want to happen, there’s a palpable risk of cynicism creeping in, nudging out any shred of idealism. If people want universal childcare, for example, but see the odds stacked against it, will they stop trying to make the policy a reality?

The demographics of prediction markets complicate things further. Their growth has been driven, in Chougule’s words, “by nerdy young men.” At the end of March, I traveled to Washington, D.C., to meet some of them at a monthly forecasting and prediction gathering that Chougule and cofounder David Glidden had organized about a mile from the Capitol.

Riding the Metro through the city, it was hard to miss the giant green ads with black text in all caps: “KALSHI RULE #1 WE BAN INSIDER TRADING.” And then, in much smaller text: “Because Kalshi is a federally regulated U.S. exchange.” No ad pointed out that Kalshi successfully fought back against a Biden-era measure blocking election betting, triumphing in the D.C. Circuit Court of Appeals a month before the 2024 election. (To see Kalshi as a “Goody Two-shoes,” Glidden says, would be to miss the sophistication of the company’s game.) Meanwhile, it seems cruelly ironic that Kalshi was trying to boast its anti-insider trading bona fides in the exact city where inside information is most plausibly circulated.

The future of election markets

A recent speaker at one of Chougule and Glidden’s monthly D.C. meetups was Flip Pidot, the cofounder and CEO of American Civics Exchange, a political futures market designed to “help businesses and investors directly hedge their exposure to changes in public policy.” Pidot says that he had been pushing the Commodity Futures Trading Commission (CFTC), which is responsible for regulating prediction markets, to permit political betting since around the time of the 2008 financial crisis. Back then, the agency wouldn’t budge. A favorite phrase, as he recalls, was that the government was not inclined to “turn the ballot box into a casino.”

Under the Biden administration, the CFTC viewed the concept of election betting as off-limits. Trump’s CFTC chair, Michael Selig, has taken a different stance, saying he’ll regulate Polymarket, Kalshi, and others as he would financial markets. This has given people wide latitude to make almost anything a conceivable bet. If someone has an obscure edge on an obscure topic, there’s nothing to stop them from using it. And what happens when political outcomes become a tradable asset to the same people trying to shape those outcomes?

“Today’s campaign staffer may be tomorrow’s government employee. A campaign is often a pipeline into the government, and therefore, the government has a vested interest in proactively protecting the integrity of our campaigns,” Torres tells me.

It’s possible that regulation and enforcement will increasingly be fought state by state, producing a patchwork of restrictions, lawsuits, and conflicting claims of authority. The New York governor, Kathy Hochul, a Democrat, signed an executive order in April barring state employees from using “any nonpublic information obtained in the course of their official duties” to trade on prediction markets. Minnesota’s governor, Tim Walz, also a Democrat, followed with a similar order in late July, as the state and the CFTC battled in federal court over Minnesota’s attempt to restrict the markets.

Elsewhere, states have pursued their own challenges, testing how far their gambling laws can reach into an industry that argues it belongs primarily under federal oversight. The result may be less a clean regulatory outcome than a prolonged jurisdictional dance, with prediction markets expanding in one state just as courts or regulators constrain them in another.

Congressman Moulton, for his part, is trying to cut through what he sees as convoluted justifications and obfuscations. There are people, he says, who try to justify political betting as “a free market opportunity” and warn him not to interfere with it. “But, really,” he says, “it’s a free invitation for corruption.”

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