A trader placed well-timed bets on Polymarket and Kalshi in two Senate races. It was unclear if the person had access to inside information or simply made good trades.

© The New York Times

A trader placed well-timed bets on Polymarket and Kalshi in two Senate races. It was unclear if the person had access to inside information or simply made good trades.

© The New York Times

Studies have shown that the betting sites can predict races correctly, but their ability to forecast U.S. midterm elections is an important proving ground.

© Hilary Swift for The New York Times

Studies have shown that the betting sites can predict races correctly, but their ability to forecast U.S. midterm elections is an important proving ground.

© Hilary Swift for The New York Times

The company said it was looking into hundreds of new accounts that had placed wagers in two markets related to the election on Tuesday.

© Chris McGrath/Getty Images

Betting markets like Polymarket and Kalshi have transformed America’s democracy into a new kind of casino.

© Hilary Swift for The New York Times

The prediction market raised $1 billion in a new funding round and landed a market value almost double that of rival Polymarket. But legal challenges to its business persist.

© Jeenah Moon/Reuters

The prediction market raised $1 billion in a new funding round and landed a market value almost double that of rival Polymarket. But legal challenges to its business persist.

© Jeenah Moon/Reuters

In Congress and in several states, officials have been questioning online gambling companies about their use of artificial intelligence.

© Tony Luong for The New York Times

Prediction market boosters often tout the platforms as barometers of public opinion, or even “truth machines” offering a clearer picture of where things are headed than polling or other data. In 2024, for example, Kalshi beat many pollsters in forecasting the outcome of the US presidential race. But their trading activity can also tell more perplexing stories.

Two global election markets on Polymarket’s offshore platform, for instance, generated over $600 million in trading volume, far more than most political markets typically attract. Most of the activity took place buying and selling contracts tied to long-shot candidates who ultimately did not win.

This summer, Ethiopian Prime Minister Abiy Ahmed’s Prosperity Party cruised to victory in federal elections, winning 438 parliamentary seats and paving the way for him to serve another five-year term. The closest competitor won 13 seats. On prediction markets, trading volume—the total value of contracts bought and sold—typically tracks roughly with the odds of a given outcome; frontrunners attract far more volume than long shots. But in this case, the trading patterns deviated sharply from the norm. Just $173,000 was wagered on Ahmed winning, compared to more than $41 million traded on his chief of staff, Shimelis Abdisa, becoming the country’s next leader. Altogether, the volume traded added up to over $285 million, nearly all on losing candidates.

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