By Jack Such
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The opinions and perspectives presented in this article belong solely to the author, and do not necessarily represent the opinions or positions of the author's employer.
This past election season was the first of its kind in modern American politics. I’m not even talking about the multiple assassination attempts or the endless memes about coconut trees and what JD Vance does to couches in his free time — no, what really made the 2024 election special was that, for the first time in living memory, you were legally allowed to bet on it.
In early October, just a month before the election, a U.S. district court ruled that elections do not fall under the prohibited category of “gaming,” opening the door for companies like the one I work for, Kalshi, to host financial markets (otherwise known as “prediction markets”) on their outcome.
This decision was controversial, to say the least. There were many people against the decision; detractors had a few different reasons for opposing the ruling, such as a baseline resistance to more betting entering American society, or concerns about who is participating in these markets.
Some detractors even went as far as claiming election markets are a direct threat to democracy since they would financially incentivize people in the markets to try to rig the election for their candidate. I am admittedly a biased source, but this argument always struck me as particularly devoid of logic — there are a million reasons why people want elections to go one way or another, and money is the least of those. Plus, what could people even do to change the outcome of an election that isn’t already being done through campaigning or prevented through election safety procedures? I completely understand being upset about money in politics, but the key fight on that front is overturning Citizens United, not banning prediction markets.
Proponents, such as myself, believe that prediction markets are a great benefit to society. People who trade in the markets can profit from their opinion, and people and businesses that are affected by the outcome (so, basically everybody) can use the markets to hedge the outcome in case it doesn’t go their way.
However, the most compelling reason to support the widespread adoption of prediction markets is that they produce information that is incredibly accurate. More on how this is possible later, but the fact that prediction markets produce accurate probabilities of future events (that are free to look at!) means that everyone, not just the people who use them, benefit from their existence. In this regard, they are a true public good.
