Democratic control of the Senate was trading at 70 cents on Kalshi on Friday morning, which is meant to say the event is about 70% likely. Kalshi alone has taken more than $114 million in trading volume on the question.
By Brett Rowland | The Center Square
Prediction markets spent three weeks heavily favoring Flávio Bolsonaro to be Brazil’s next president. That collapsed Sunday night. Tuesday, the same markets take on the U.S. Senate.
Kalshi and Polymarket put Democratic control of the Senate at 70% and 73% as of Friday morning. Forecaster Nate Silver’s model put it near 75% as of Oct. 29.
The Cook Political Report rates seven Senate races as toss-ups but said Friday it sees Democrats as “the slight favorites,” citing what Senate editor Jessica Taylor called a “dismal national political environment for Republicans.”
In September, the forecasters were further apart: a paper published Oct. 15 in “PS: Political Science & Politics” found the Iowa Electronic Markets and Kalshi pointing to opposite parties taking the chamber.
Kalshi is a federally regulated exchange, designated by the Commodity Futures Trading Commission, the agency that oversees futures and derivatives trading. Traders buy shares in an outcome. Each share pays a fixed $1 if the outcome happens and nothing if it doesn’t, so the price of a share reads as a probability.
Democratic control of the Senate was trading at 70 cents on Kalshi on Friday morning, which is meant to say the event is about 70% likely. Kalshi alone has taken more than $114 million in trading volume on the question.
The Iowa Electronic Markets works the same way at a fraction of the size. Run by University of Iowa faculty since 1988 as a teaching and research tool, it caps what any trader can put in at $500.
A price on Kalshi or Polymarket looks like a probability, but the researchers who study these markets say that is not quite what it is.
Thomas Gruca, the George Daly Professor in Marketing at the University of Iowa and director of the Iowa Electronic Markets, has been comparing his own market with Kalshi. In a July working paper with Thomas Rietz, a finance professor at Iowa, the two found that Kalshi contracts priced to win one time in five actually won less than 1.5% of the time.