Democrats' Probability of Controlling Both Houses at 75% Reflects Trustworthiness of Midterm Election Results

The U.S. midterm elections are becoming a test of the credibility of prediction market platforms Kalshi and Polymarket. Both platforms reflect a roughly 75% chance that the Democrats will control both the Senate and the House of Representatives, with analyses suggesting that the actual election results could influence public perception of these prediction markets. Axios, a U.S. online media outlet, reported that the midterm election results will significantly impact the market credibility of Kalshi and Polymarket. Although prediction markets operate on a structure that collects fees regardless of trading outcomes, the accuracy of election predictions is directly linked to the platforms' external trustworthiness. Kalshi and Polymarket have gained public recognition in light of the 2024 U.S. presidential election, but their predictions recently missed the mark in the Brazilian and Israeli elections. If the midterm elections yield unexpected results, it could further burden the credibility of prediction markets. Currently, the probability of the Democrats winning both the Senate and the House stands at 75%, but this does not mean the outcome is guaranteed. The political environment is also a concern for the prediction market industry, as even if the Democrats gain control of Congress, the direct regulatory impact on Kalshi and Polymarket may be limited. While the revenue share from political-related trades is smaller than that from sports-related trades, political predictions can serve as a long-term benchmark for assessing the accuracy and credibility of the platforms.

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