Election Markets Could Shape The Outcomes They Predict, Experts Warn

(Source: MIRS.news, Published 10/05/2026) Putting money on an election could change more than a trader’s bank balance. It could influence whether someone votes, whom they support and how they react when their candidate loses, according to researchers watching the growth of election prediction markets.

Platforms such as Kalshi and Polymarket let users buy contracts tied to election outcomes, giving them a financial stake in who wins. Kalshi describes its markets as a complement to polling, offering a view of expectations that changes as news breaks.

But Peter Wielhouwer, an associate professor of political science at Western Michigan University, said those expectations could also shape voter behavior.

Someone paying little attention to a campaign might see a candidate given a 75% chance of winning and gravitate toward the apparent favorite, he said. Others might stay home if they believe the outcome is already settled.

“Nobody likes to vote for a loser,” Wielhouwer said.

Betting on elections is illegal in Michigan, but that hasn't stopped Michiganders from engaging in prediction markets, a modern-day speculators paradise that allows consumers to put their money on a projected outcome. The industry insists these are not gambling operations. There is no “house” money involved.

Consumers buy and sell “contracts” tied to who is projected to win an election, among other things. In 2024, a favorable court decision allowed electronic markets and Kalshi to explode in popularity.

Attorney General Dana Nessel won a preliminary injunction against Kalshi, one of the prediction markets, in September requiring a block on Michigan residents regarding betting on sports while the lawsuit plays out in court.

The Michigan Gaming Control Board also withdrew from a national organization after Kalshi was allowed on the board.

However, the decision didn't stop everything . . . like buying a contract on who you think will win Michigan's U.S. Senate election – Abdul El-Sayed, Mike Rogers or someone else.

Kalshi makes it easy, launching a “Midterms Hub” that allows people to “market trade” as news breaks about the various elections.

“Prediction markets don’t care about spin or partisanship. They cut through polarization and show you what the wisdom of the crowds actually believes, backed by real money, not rhetoric. That kind of clarity is rare right now and that’s what people are getting with the Midterms Hub,” Kalshi CEO Tarek Mansour said.

Millions of Americans use the site, and it is “a leading indicator” of the elections because it is a live view of where the race stands, said Kalshi spokesperson Jacki McGavick.

She also said that Kalshi is under federal law and that insider trading is banned. She said the company surveils, investigates, and doles out punishment. She said Congressional members, candidates and government officials are blocked from the site and data from the Federal Election Commission is screened for employees.

Unlike a poll, an election contract pays based on whether a specified outcome occurs. Prices change as traders buy and sell, reflecting their expectations rather than a survey of voters’ intentions.

It all raises a concern for Shane Kraus, an associate professor of psychology at the University of Nevada, Las Vegas: Losing money on an election could intensify the disappointment and suspicion that already accompany political defeat.

Kraus, who researches sports betting and problematic gambling, said adding a financial loss could make some people more receptive to claims that an election was rigged.

Those concerns describe potential effects. Neither Kraus nor Wielhouwer presented evidence in these interviews that election prediction markets have caused changes in voting behavior or acceptance of results.

Election markets predate the current platforms. The Iowa Electronic Markets and PredictIt operated under federal regulatory accommodations for academic research, with limits on participation and investment. Kalshi pursued a different route as a federally regulated commercial exchange.

The Commodity Futures Trading Commission authorized Kalshi to operate an event-contract market in 2020. But in 2023, the agency blocked its proposed contracts on which party would control Congress, concluding they involved gambling and unlawful activity.

Kalshi sued and won a federal district court ruling in September 2024 overturning that decision. On Oct. 2, 2024, a federal appeals court denied the CFTC’s request to halt trading while its appeal proceeded, allowing the congressional-control contracts to trade ahead of that year’s election.

Cyrus Chan, CEO of Saperity, a company seeking to use prediction markets commercially, said the contracts could serve a business purpose beyond wagering on a winner.

A company expecting financial losses from policies enacted by either El-Sayed or Rogers, for example, could buy contracts that pay if that candidate wins, potentially offsetting some of those losses, he said.

Chan, a former Wall Street trader, compared that use to hedging in commodity markets. But he said institutional participation remains limited, with individual traders driving the current market.

He wants stronger oversight to prevent insider trading.

“Do I think that it should be stopped? I think it should be properly regulated,” Chan said.

He also acknowledged why the platforms look like gambling to many people.

“The payoff and the wagers look like sports betting. So, I do agree with you that there is a certain undertone of gambling in these,” he said.

Also, it's dangerous for prediction markets to frame themselves as “investments," Kraus said.

“It’s not deemed right now as gambling because it’s contracts. It’s somehow been reframed as investments or something, which is complete total garbage. So this is now legal,” Kraus said.

He said he wasn’t for a ban, but wanted them to be regulated in a state-by-state basis, not as an investment platform.

“There’s no money for treatment. There’s no research. There’s nothing. It’s just like it’s being marketed as an investment. It’s not an investment. Betting on whether it’s going to rain today. How’s that an investment strategy? It’s just gambling,” he said.

Kraus said the framing for ads was also appealing to a younger audience. Without regulation, it becomes easier for someone under the age of 21 to gamble online, which is the current age for online sports betting. In casinos, the age is 18, which is the age set by prediction markets.

Gambling on events gave people the illusion of control, that they could accurately predict the outcome because they studied the subject and watched CNN religiously, he said.

It ratchets up the individual's emotions, which can end up coming out in different ways: From calling up a losing candidate and threatening them with violence, to possible suicide.

“When we start putting that into other things that emotional connection, that ‘why did you disappoint me? Why did I lose something?’ People start to personalize their experience and project it onto someone else. That’s very scary,” he said.