Fed Research Paper Highlights Significant Analytical Value of Prediction Markets

Odaily News According to a latest research paper released by Federal Reserve researchers, prediction markets are highly praised for their role in economic analysis, with a specific mention of the performance of the prediction platform Kalshi.

The report points out that Kalshi's predictions regarding the federal funds rate and the U.S. Consumer Price Index (CPI) statistically outperformed federal funds futures and professional economists' forecasts. It also provides continuously updated complete probability distributions, rather than traditional intermittent point forecasts.

The research also suggests that prediction markets offer unique market-based distribution data for areas such as GDP growth, core inflation, unemployment rates, and non-farm payrolls. These variables previously lacked comparable market-pricing tools. Since 2022, Kalshi's predictions for Federal Open Market Committee (FOMC) meeting outcomes have been completely consistent with the actual results.

The report notes that a major advantage of prediction markets lies in the participation of retail investors, distinguishing them from traditional financial markets dominated by institutions. This gives them unique value in information aggregation and real-time reflection of market expectations.