What are U.S. election prediction markets?

U.S. election prediction markets are platforms where people trade contracts tied to political outcomes—like who will win the presidency, which party will control Congress, or whether a candidate makes the ballot.

Each contract pays a fixed amount (usually $1) if the political event happens and $0 if it doesn’t. The price of the contract in cents can be read as the market’s implied probability of that outcome.

Examples of platforms involved in election prediction include:

  • Iowa Electronic Markets (IEM) – academic, low-stakes markets run by the University of Iowa since 1988, often used in research.

  • Kalshi – a CFTC-regulated U.S. exchange offering event contracts on many topics, including congressional control and other political outcomes (subject to ongoing legal and policy fights).

  • Polymarket – a crypto-based prediction market that runs large U.S. election markets globally and has recently received CFTC clearance to return to the U.S. via a licensed derivatives exchange.

These markets are sometimes called election betting markets, event contract markets, or simply political prediction markets.

How election prediction contracts work

Most U.S. election prediction markets use binary contracts:

  • Question: “Will [Candidate X] win the 2028 U.S. presidential election?”

  • You can buy YES or NO shares, each worth $1 if correct and $0 if wrong at settlement.

If YES trades at $0.30, the market is effectively saying:

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“There’s about a 30% chance this candidate wins.”

Key mechanics:

  • Price = implied probability:

    • $0.30 = 30% odds, $0.70 = 70% odds, etc.

  • Paired outcomes: YES + NO ≈ $1 total, reflecting the $1 max payout.

  • Profit and loss:

    • Buy YES at $0.30 → max profit $0.70 (if the candidate wins), max loss $0.30.

    • You can also sell early, before Election Day, as prices move.

Some markets have multiple candidates instead of just YES/NO—for example, a 2028 presidential market with separate contracts for each potential winner. Traders buy or sell each candidate’s contract, and the prices across all outcomes sum to around 100%.

How U.S. election markets are created and settled

1. Writing the market question

Platforms define a precise question plus rules, like:

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“Who will win the 2028 U.S. presidential election?”
Resolution source: Associated Press, Fox News, and NBC. The market resolves once all three call the race for the same candidate.”

This specification matters. It tells traders:

  • Exactly which office and which date

  • Which news outlets or official sources decide the winner

  • How edge cases are handled (recounts, withdrawals, party switches, etc.)

2. Trading before the election

As news breaks—polls, debates, scandals, fundraising, economic data—traders adjust their positions. Prices move tick-by-tick, turning the market into a live forecast of the election.

  • A surge in polls for a candidate usually pushes their contract price higher.

  • A damaging scandal or weak debate performance can cause a fast sell-off.

Research on the Iowa Electronic Markets and similar platforms finds that election markets often match or beat traditional polls, especially when forecasting weeks or months in advance.

3. Election night and resolution

After voting ends:

  1. Data arrives: Networks and wire services project winners; official vote counts update.

  2. Platform applies its rules: It watches the specified sources (e.g., AP, major networks, or an official election site).

  3. Outcome is locked in: When the conditions in the rules are met—say, AP, Fox, and NBC all call the race for the same candidate—the market is resolved.

  4. Payouts occur automatically:

    • Winning contracts pay $1 each

    • Losing contracts pay $0

On crypto platforms like Polymarket, the resolution is encoded on-chain via an oracle system; on regulated U.S. venues like Kalshi, the exchange and its clearinghouse handle settlement under CFTC rules.

How traders use U.S. election prediction markets

People participate in election markets for different reasons:

  • Forecasting and information: Analysts, journalists, and everyday voters watch market odds as an alternative to polls and pundit takes. Recent studies suggest markets like Polymarket provided more accurate state-level forecasts for the 2024 presidential election than polling averages.

  • Speculation: Traders try to profit by being more accurate or faster than the crowd about shifts in the race.

  • Hedging: Someone whose job or portfolio is exposed to a certain political outcome might use markets to hedge (for example, buying contracts that pay if a policy they fear becomes more likely).

A typical trader workflow looks like:

  1. Pick a platform that’s legal where they live (e.g., Kalshi for regulated U.S. users, academic IEM with small stakes, or global crypto platforms where permitted).

  2. Deposit funds (USD on regulated exchanges; stablecoins on crypto platforms).

  3. Choose an election market and read the rules carefully.

  4. Buy or sell contracts based on their assessment of the true odds.

  5. Adjust positions as new information arrives, or hold through election night and settlement.

U.S. election prediction markets sit at the awkward intersection of derivatives law and gambling law:

  • At the federal level, the CFTC regulates event-contract exchanges like Kalshi as Designated Contract Markets under the Commodity Exchange Act.

  • Crypto prediction markets such as Polymarket have sought CFTC no-action relief or licenses by acquiring regulated exchanges, like QCX, to operate legally in the U.S.

  • Several states (e.g., Connecticut and Nevada) argue that many event contracts, especially on sports and sometimes politics, are essentially unlicensed gambling and must comply with state gaming rules.

Because of this tug-of-war, availability of election markets can vary widely by state, and legal interpretations are still evolving. Always check local law; this article is not legal advice.

Risks of trading U.S. election prediction markets

Even if a platform is regulated, trading election markets carries real risk:

  • Market risk: Prices move quickly; you can lose 100% of the money you stake on a given contract.

  • Legal risk: In some states or countries, participating may be restricted or treated as gambling.

  • Information asymmetry: Some traders may have better data, faster access to news, or sophisticated models.

  • Platform and rule risk: Ambiguous contract wording, recounts, court challenges, or platform outages can create unexpected outcomes or delays.

The bottom line

U.S. election prediction markets turn questions like “Who will win the next presidential election?” into tradeable, real-time probabilities. Prices on platforms such as IEM, Kalshi, and Polymarket condense the beliefs (and money) of thousands of traders into a single number that many researchers now view as a powerful forecasting tool.

If you ever consider using these markets, focus on understanding:

  • How contracts are defined and settled

  • What the prices really mean as probabilities

  • The legal status of the platform where you live

And remember: even the most accurate election prediction market is still a market—not a guarantee.