- Kalshi says it's more than just betting and that it offers high-quality forecasts.
- Now, a research paper from a group of Federal Reserve economists is backing that up.
- The researchers found that Kalshi can sometimes be even better than traditional forecasting methods.
Kalshi may be good for more than just making a quick buck.
A new research paper published by a trio of Federal Reserve economists suggests that the prediction market platform is a useful method for measuring macroeconomic expectations — and it may even be better than some traditional methods.
"Our results suggest that Kalshi markets provide a high-frequency, continuously updated, distributionally rich benchmark that is valuable to both researchers and policymakers," the researchers wrote.
The researchers found that Kalshi actually beat traditional methods for two different purposes.
The first was on forecasting inflation. The researchers found that when it comes to headline consumer price index (CPI), Kalshi's expectations represented a "statistically significant improvement" over the Bloomberg consensus, an oft-cited aggregation of financial analysis forecasts.
The second was on predicting Fed rate decisions. The researchers found that the median and mode of Kalshi's prediction markets have a "perfect forecast record" on the day before the Fed meeting, which is a "statistically significant improvement" over Fed Funds futures.
Kalshi is also useful because it provides real-time responses to events, offering more up-to-date information than typical survey and forecasting methods, according to the researchers.
The paper was greeted as welcome news by Kalshi, which has long pitched itself as a source of useful information about future events, rather than just a betting platform. CEO Tarek Mansour touted the paper on X on Wednesday.
"The Federal Reserve just put out an incredible paper about Kalshi's data," Mansour wrote.
Investors have been on the hunt for reliable economic events forecasting tools recently, as the reliability of government data has repeatedly been called into question.
Now they may be able to ascertain valuable information from a platform that has achieved undeniable popularity. Goldman Sachs CEO David Solomon revealed in January that the bank is considering an expansion into prediction markets, which may compel similar institutions to do the same
The paper comes as public scrutiny of prediction markets like Kalshi and Polymarket picks up, with lawmakers raising concerns about potential insider trading and the proliferation of gambling.
