Prediction Markets Kalshi and Polymarket Face Midterms Test as Volume Surges

Prediction market operators Kalshi and Polymarket enter the November midterm elections operating at significantly larger scales than in previous cycles, with combined monthly trading volume rising from $26 billion in May to $53 billion in July ¹. Political contracts comprise a modest portion of total activity, averaging roughly $2 billion monthly on Polymarket and under $300 million on Kalshi, according to an analysis by the Pew Research Center ¹. Over $30 million had been traded on House and Senate control by July ¹.

The regulatory climate has shifted notably since 2024, when federal courts opened U.S. election contract trading shortly before the presidential vote ¹. The Commodity Futures Trading Commission (CFTC) previously sought to block Kalshi's congressional control contracts by classifying them as unlawful gaming ¹. However, the regulator withdrew that proposed restriction in February and published a structured framework on June 10 that explicitly excludes election contracts from the gaming definition, citing the forecasting utility of crowd-sourced market pricing, according to Congressional Research Service findings ¹.

Market Depth and Institutional Scrutiny

Despite growing volumes, market depth remains uneven across specific races ¹. A study by the Anti-Corruption Data Collective revealed that a $3,500 position—equivalent to the individual federal campaign contribution limit—moves 97% of midterm-related contracts by five cents or more ¹. Kalshi spokesperson Dani Lever disputed concerns over structural distortion, stating that mispriced contracts in liquid environments present immediate arbitrage opportunities ¹.

Institutional researchers are examining whether order-flow signals outperform conventional polling methodologies ¹. Morgan Stanley's Counterpoint Global examined more than 72 million transactions on Kalshi, concluding that contract pricing closely tracked final outcomes ¹. Media analysts and market operators will assess forecasting accuracy following the Nov. 3 vote ¹. At the time of writing, broader digital asset markets traded steadily, with $BTC changing hands at $82,387.