The Federal Reserve has found that data from prediction markets can be a more effective forecasting tool than traditional economic surveys. In a study of Kalshi markets, the Fed highlighted their real-time, distributionally rich data as valuable for policymakers, sparking discussion within the crypto community. However, a regulatory battle over jurisdiction between the CFTC and state authorities could impact the sector’s growth.
A Federal Reserve study has found prediction markets provide a superior benchmark for economic forecasting compared to established frameworks like the Bloomberg consensus. The Fed hailed these markets for offering high-frequency, continuously updated data.
“Our results suggest that Kalshi markets provide a high-frequency, continuously updated, distributionally rich benchmark that is valuable to both researchers and policymakers,” the Fed stated. This endorsement validates prediction markets as a crucial hedging and risk management tool for future events.
The Fed’s acknowledgment that prediction markets could outperform analyst consensus or Fed Fund Futures sparked mixed views. Fundstrat’s Tom Lee stated he agreed that such markets are helpful for market insights.
Prediction markets trader Benjamin Freeman hailed the study as a great recognition of the sector’s predictive power. The growing traction is evidenced by asset managers like Bitwise filing for ETFs tracking bets on the 2026 election.
A regulatory battle is ongoing between the Commodity Futures Trading Commission and states over who holds jurisdiction. TD Cowen’s Jaret Seiberg said states have a slight edge historically as regulators of sports gambling.
“We continue to give a slight edge to the states in this legal fight primarily because the states have historically been the regulators of sports gambling,” Seiberg noted. It remains unclear how these jurisdictional developments will impact the sector’s future growth.
