Predicting the future for prediction markets
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Suddenly popular prediction markets, flush with new users from the U.S. presidential election, believe they can keep the momentum going with new intriguing markets.
Why it matters: The idea of gleaning wisdom from the betting crowd through giant markets of bettors got a major boost on election night, but presidential races come only once every four years.
By the numbers: Kalshi tells Axios that it got a million new sign-ups, $275 million is new deposits, and facilitated over $1 billion in betting volume.
- An exchange run by Interactive Brokers saw $650 million traded in both its own election markets and the presidential market initiated by Robinhood, launched just nine days before the election.
- And Polymarket, the biggest prediction market out there — though not legally open to U.S. users — saw $2.5 billion in volume in October, according to Blockworks. (It's the only blockchain-based platform of the bunch.)
Meanwhile, in a sign of retail interest, both Kalshi and Polymarket's apps surged in the Apple app store as the election neared.
What's next: Kalshi expects that political junkies will continue to appreciate markets on questions like presidential nominations and winners in future elections.
- But new users might also get interested in their quarterly markets for things like Fed decisions and CPI numbers, it says.
- And Interactive Brokers, which mostly serves users outside the U.S., also has economic markets and offers bets around climate change indicators.
Yes, but: It's far from clear whether bettors will stick around now that the weirdest, most dramatic U.S. presidential election in living memory has been put to bed: Will users that came for Trump vs. Harris pop back in to put a bet on monthly inflation data or the level of atmospheric carbon dioxide?
- "If people have money on Polymarket they may take some time getting it off. We don't have enough data on stickiness of deposits yet," Meltem Demirors, founder of the venture firm Crucible Capital and a Polymarket investor, tells Axios.
Reality check: Right now, the election surge is being viewed as a unique event for the popularity of prediction markets.
- "I know there's a lot of attention on it over the last few weeks, and I do think there could be a place for it outside of elections, but that's really where the interest seems to be now from a customer demand side," Jason Robins, CEO of sports betting site DraftKings, told investors earlier this month when asked about prediction markets.
The intrigue: Robins said DraftKings plans to look at offering markets ahead of the next presidential election "for sure."
Context: Sports betting is still much, much larger than political betting — much less other event betting — and that's unlikely to change.
- Most bettors like contests that resolve fairly quickly, rather than waiting a year to find out the final result.
What we're watching: Sports betting is also on much sounder regulatory footing. Unlike sports gambling which is governed by states, non-sports event predictions are licensed as a financial market.
- Prediction markets in the U.S. are overseen by the U.S. Commodity Futures Trading Commission, which a year ago had sought to block political event contracts being offered by Kalshi.
- A district judge in September sided with Kalshi's argument that the CFTC exceeded its authority, and a circuit court denied the regulator's request for an emergency stay, which cleared the way for U.S. election markets on Oct. 2.
- The circuit court, however, has yet to issue a decision on the CFTC's appeal.
The bottom line: Regulated event markets were somewhat sleepy in the U.S. before a green light from the courts opened up election betting a month before the election. The question now is whether millions of new users will go back to bed.
