Prediction Markets and the 2024 U.S. Elections

The biggest math story of 2016 was the failure of political polls to accurately predict the outcome of the U.S. presidential election. Eight years later, they failed again, suggesting the presidential race would be tight and could go in favor of either candidate. It wasn’t.

Expecting a tight race, political fanatics watching established mainstream news outlets for the latest election returns were in for a long night. The slow pace at which states reported their results meant it would be hours after the polls closed before these observers would have any good sense of which candidate won the race.

But election watchers in Las Vegas had a very different election night experience. Kalshi, the only prediction market in which Americans could directly bet on who would win the U.S. presidential race, took out massive electronic billboard ads providing real-time updates on the market’s prediction of who would win the race in Las Vegas. Because they did, everyone within sight of these billboards, or for that matter, anyone with a mobile device who could access Kalshi’s elections web site for the race, knew early in the evening of 5 November 2024 that Donald Trump was very much on track to beat Kamala Harris to win the election. The die had been cast.

By the time our lead photo was taken the following morning, the final results of the election die toss were clear. The odds had swung and they swung decisively. Even though many states were still reporting election results, Kalshi’s prediction market outperformed both the polls and the official reporting of election results to confirm Donald Trump had locked up a sweeping victory hours before it became official. What’s more, Americans who had put money on a Trump victory in the prediction markets won money. The following chart shows how Kalshi’s odds for each candidate changed throughout the election before being effectively settled shortly after election day voting ended in the western United States.

Kalshi’s 2024 U.S. presidential prediction market begins in early October 2024 because the firm only won the right to operate its prediction market in the U.S. on 2 October 2024, following an year-long legal battle with the U.S. Commodity Futures Trading Commission who blocked it from operating in September 2023.

The success of prediction markets in anticipating the outcome of the 2024 U.S. presidential election raises several good questions, starting with “what is a prediction market?” Robin Hanson’s 18-minute video introduction to prediction markets provides an excellent overview of the ideas behind what they are and how they work:

Prediction markets can deliver superior performance because they directly address many of the inherent shortcomings of traditional political polling. While not perfect, they represent a significant advance over the kind of political polling that has repeatedly come up short in accurately predicting major election outcomes during the past eight years.

There’s more to the story of prediction markets, particularly with the best known one, Polymarket, which is still making headlines for reasons other than it success in anticipating the outcome of the U.S. elections. We opted to focus on Kalshi for this article because its operator cleared the hurdles needed to operate in the U.S. during the 2024 election.

We predict prediction markets will be much more visible when the 2028 election rolls around. If their success continues, they may very well replace traditional political polling.