tech
When are prediction markets most helpful? Evercore ISI has a formula
Evercore ISI strategists provide insight for when prediction markets are useful for forecasting.
TL;DR
- High volume and short-term prediction market contracts with clear resolution rules are considered most helpful for forecasting.
- Contracts with higher volume and those closer to their termination date produce more reliable probabilities.
- Most prediction market contracts have low volume, with only about 8% on Kalshi and Polymarket clearing $1 million.
- Prediction markets can be more responsive to chaotic macro events than traditional forecasting tools.
- Limitations include revealing crowd beliefs rather than discovering the future, contamination from diverse trader motivations (entertainment, hedging, political views), and manipulation in thin markets.
- Ambiguous contract resolutions and oversimplified questions can also impact accuracy.
- Prediction markets have seen growth due to institutional attention, infrastructure, contract breadth, and regulatory decisions.
- Trading volume on Kalshi and Polymarket grew significantly, particularly in fall 2025.