Exclusive: Kalshi launches an "S&P 500 for politics"
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Prediction market platform Kalshi is rolling out a new index to measure which political party has a firmer grip on power in Washington, the company shared exclusively with Axios.
Why it matters: Kalshi is wading deeper into politics even as prediction markets are coming under a spotlight in Washington.
Driving the news: Kalshi is launching the American Power Index, aiming to offer a holistic view of which party currently holds more power and where the tide may be turning.
- The index blends current control of the House, Senate and White House with Kalshi's real-time market forecasts on future electoral outcomes.
- The index, based on prediction market data, weighs the sitting president's party at 18%, the Senate and House control at 16% and 17%, respectively, with the remaining weight tied to victory margins and shutdown risk.
- The initial reading shows Republicans outpacing Democrats by 2.5 points.
Between the lines: It is not a tradable index.
- It's more of a vibes meter, similar to CNN's Fear and Greed index, but for political parties.
Friction point: Prediction markets are navigating shifting winds in Washington.
- Several bills aimed at regulating prediction markets have been introduced in Congress this year.
- The regulatory push came after a U.S. soldier was charged with using classified information to net over $400,000 after placing a bet via Polymarket on an operation to capture Venezuelan leader Nicolás Maduro.
Follow the money: Hedge funds have been turning to prediction markets more frequently to inform investment decisions.
- An index tracking political power could be helpful for investors, who broadly tend to prefer gridlock, as it prevents policy changes that could impact their investing choices.
- Investors could layer stock charts on top of this index to look for clearer correlations between market performance and political power, for example.
Flashback: While platforms like Kalshi were early to call the results of the 2024 presidential election, broader political predictions have been more mixed.
- A study of more than 2,500 political prediction markets across multiple platforms found that Kalshi was accurate 78% of the time on the eve of election night.
- While the company says it has the most accurate forecasts on political outcomes, its economic forecasting is typically more accurate, according to the National Bureau of Economic Research.
What we're watching: Whether other platforms double down on political metrics as the 2028 election gets closer.
Editor's note: This story has been corrected to show the American Power Index's weightings as 18% (not 30%) for the sitting president's party, and respectively 16% and 17% (not 22% each) for Senate and House control.
