Prediction markets mostly nailed the midterms, then sparked a fight over what drove the calls

Markets got a lot right, thanks to uncompetitive races

A CNBC analysis found that more than 87% of election markets across Kalshi and Polymarket assigned at least a 90% chance to the eventual winner the day before voting night. That high score benefited from many races that were not close.

Wake Forest University economist Koleman Strumpf said, "I'd say prediction markets did pretty well,". "But they didn't outperform the best," he added, comparing them with traditional forecast polls that tracked results as they came in. These wagering venues aren't based on polling and shouldn't be seen as stand-ins for political surveys.

Prices moved with the tape, and the bets got big

As results started rolling, traders chased the news. After returns from Indiana began arriving before 7 p.m. on Nov. 3, market activity picked up and prices leaned toward Democrats. Just after 8 p.m. on Nov. 3, a Kalshi market recorded at least $1 million in trades on a forecast that Gov. Greg Abbott, the incumbent, would be reelected.

According to the Associated Press, Abbott ultimately fell to Democrat Gina Hinojosa by over 700,000 votes. A little after 11 p.m. that night, more than $1.4 million changed hands on a Kalshi market asserting Republicans would fail to take control of the House of Representatives.

CNBC's review of Predictions.com data indicates that midterm election contract volume on Kalshi and Polymarket more than tripled between the last week of October and the week of the midterms. Those totals leave out combo markets, which package several contracts together and pay out only when every component resolves as specified. Even so, political trading still trails sports by a wide margin.

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According to Kalshi's site, total midterm contract turnover exceeds $3 billion, a tally that also counts contracts tied to mayoral races. Last week, the two Polymarket venues recorded nearly $700 million in trading tied to midterm contracts.

Who gets credit: markets or models?

After the midterms, Polymarket CEO Shayne Coplan and Kalshi CEO Tarek Mansour used X posts to credit prediction markets with calling key races. Nate Silver pushed back, arguing that forecast models shaped market moves. Silver, who became an advisor to Polymarket in 2024, wrote: "Prediction market probabilities strongly converged toward [our models] in individual Senate and gubernatorial races." He added: "I was tracking this stuff closely, precisely because I envisioned that we might wind up in this sort of debate where prediction markets are low-key stealing valor from the models."

Even as markets broadly leaned toward Democratic control of Congress, the post election conversation took another turn.

What it means for your portfolio

In plain English: the markets tracked the scoreboard and moved fast, but the knife fight over whether models led prices - plus pushback on what contracts regulators allow - will shape how useful these platforms become for investors. Volume is growing, sports still dominate, and politics can move order flow and rules at the same time. Keep an eye on liquidity, data sources, and regulatory tone if you use these markets as a signal in your process.

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