Prediction markets are gaining credibility and controversy at the same time. A recent study suggests that market-based forecasts may now rival traditional economic predictions over several months.
Experts argue that such real-money, continuously updated markets could provide policymakers and researchers with a live, information-rich benchmark for macroeconomic expectations.
Prediction Markets Rising Accuracy Meets Regulatory Showdown
Recent analysis found that Kalshi’s implied forecasts for the federal funds target rate delivered an average absolute error over roughly a 150-day horizon. This is comparable to those from the Federal Reserve Bank of New York’s Survey of Professional Forecasters.
Put simply, the study found that when guessing about 150 days ahead (roughly 3 Fed policy meetings), these crowd bets are just as accurate on average as predictions from top professional economists surveyed by the New York Fed.
However, as Kalshi and similar platforms gain recognition, the regulatory spotlight is intensifying. CFTC Chair Michael Selig declared the agency’s intent to assert exclusive federal oversight over prediction markets.
“See you in court,” the regulator said, filing an amicus brief in the Ninth Circuit Court of Appeals, referring to the case between Crypto.com and the Nevada Gaming Control Board.
The dispute centers on whether federal commodities law preempts state gaming regulations. Last year, Nevada blocked Crypto.com’s sports event contracts, labeling them unlicensed gambling.
Crypto.com countered that its products are federally regulated derivatives under the CFTC’s jurisdiction. While a district court ruled in favor of Nevada, the case now proceeds to the Ninth Circuit.
Former CFTC Chairman Chris Giancarlo also filed a supporting brief. He warns that expanding state intervention threatens the uniform regulatory framework over derivatives markets.
Political Pushback and Institutional Bets Highlight Prediction Market Controversy
Political backlash has been swift. Spencer Cox condemned prediction markets as “gambling—pure and simple.” The Utah Governor pledged to leverage every constitutional tool to challenge federal overreach.
Elizabeth Warren echoed the concern, accusing the CFTC of stripping states of authority. She urged the agency to focus on safeguarding traditional derivatives markets rather than “helping corrupt political insiders.”
Amid the regulatory turbulence, institutional players are racing to capitalize on the sector. Bitwise Asset Management filed with the SEC to launch ETFs tracking election-based prediction contracts under its “PredictionShares” platform. However, experts find this questionable.
“Prediction market ETFs sound mental to me. Bitwise just filed to launch ETFs tied to the 2028 U.S. presidential election outcome. So now we’re packaging election odds into tradable products. At this point, nothing is off-limits. Politics, sentiment, volatility – it all gets financialized. Why don’t we just turn everything into a casino?” Coin Bureau CEO Nic Puckrin stated.
Roundhill Investments and GraniteShares have submitted similar filings. This signals strong demand for regulated, mainstream exposure to prediction markets.
Platforms like Polymarket continue expanding consumer engagement across elections, geopolitics, and sports events.
The outcome of the federal-state clash may determine whether prediction markets evolve into a core financial infrastructure or remain a fragmented, controversial niche.
Meanwhile, as Kalshi data continues to rival traditional economic forecasting, the debate over both credibility and control intensifies. This makes prediction markets a flashpoint at the intersection of finance, law, and politics.