Prediction markets are eating politics

Prediction markets, such as Polymarket and Kalshi, have become increasingly prevalent in politics, allowing insiders and analysts to profit from their knowledge. As the 2026 midterm elections approach, these markets are being used to assess candidates' standing and gauge their performance in real time. Campaign staffers, operatives, and strategists are now monitoring betting-market odds with equal seriousness as traditional polls.

However, the use of prediction markets in politics raises ethical concerns. Individuals with inside information may be encouraged to act for financial gain rather than democratic values. The issue has been highlighted by former progressive strategist Sean McElwee, who advocated for the use of prediction markets to provide unbiased data points.

McElwee left his firm, Data for Progress, after allegations emerged that he used insider information for personal bets. This controversy raises the question of how many silent power players are now operating within the political sphere, influenced only by their own conscience.

While prediction markets can provide exceptional intelligence, they also create an environment where unethical behavior can flourish. Elected officials are divided on how to regulate these markets. U.S. Representative Seth Moulton, for example, announced that he and his staff would refrain from trading or holding positions based on official information.

However, this stance drew mixed reactions from colleagues. Moulton's Democratic colleague introduced legislation to ban campaign insiders from using confidential information in prediction markets, but faced opposition from powerful lobbying groups associated with the markets and a bipartisan coalition advocating for their interests.