Discover How Kalshi Outsmarts the Fed: You Won’t Believe the Results!

In a thrilling twist that would make any financial analyst weep with envy, prediction market data from Kalshi has outshone traditional futures and surveys in its divine accuracy concerning macroeconomic trends.

Ah, prediction markets! The darlings of macro forecasting, now strutting their stuff like peacocks at a garden party. Federal Reserve economists, bless their hearts, have taken to singing the praises of Kalshi’s rate contracts, which have been as predictable as clockwork since 2022, aligning splendidly with U.S. monetary decisions. It seems this bewitching platform has been quite the overachiever, outperforming both futures markets and those well-heeled economist surveys. One might say it’s become the belle of the ball in discussions about how markets interpret economic signals-if only it had a fetching gown.

Fed Economists Sing Kalshi’s Virtues: A Reliable Forecasting Tool

The ever-watchful Federal Reserve economists decided to scrutinize the forecasting prowess of prediction markets with all the seriousness of a cat contemplating a sunny spot. In a groundbreaking paper aptly titled “Kalshi and the Rise of Macro Markets,” researchers Anthony M. Diercks, Jared Dean Katz, and Jonathan H. Wright threw their magnifying glass over Kalshi’s data, comparing it against the drab offerings of Fed funds futures and the usual suspects in economist surveys.

To the shock of no one who has been paying attention, Kalshi has correctly predicted every interest rate decision made by the Federal Open Market Committee since 2022. Its forecasts boasted smaller errors than the futures-derived opinions, while the economists’ surveys-bless their souls-were found to be rather less accurate across several key economic measures. One could almost hear a collective gasp from the ivory tower.

Kalshi also managed to outshine Bloomberg’s CPI forecasts, and its brilliance didn’t stop there; it extended its illuminating rays into unemployment and GDP estimates as well. With prices updating in real time, Kalshi shows off shifting probabilities like a show-off child displaying their latest art project-ever fluid, never stagnant.

In a delightful twist, the authors noted that these prediction markets are as quick on the uptake as a fox in a henhouse when it comes to reacting to economic data and central bank signals. Traders scramble to reprice contracts as news breaks, reflecting the ever-changing expectations of the market. Such high-frequency pricing provides policymakers with another feather in their cap as they try to assess market sentiment-if only they could catch up with the pace of modern life.

Wall Street’s Cheers for Fed’s Paper on Prediction Market Accuracy

Fantastic paper by the Fed about Kalshi’s data 🤝🤝

– Luana Lopes Lara (@luanalopeslara)

Support came pouring in from Matt Huang, founder of Paradigm, who pointed out that Kalshi’s forecast errors are far more modest than those of its futures counterparts, particularly regarding recent U.S. inflation data-proof that sometimes, the underdog rises to the occasion.

Of course, regulatory backing remains the pièce de résistance of this ongoing debate. Michael Selig, Chair of CFTC, has argued convincingly that prediction markets should fall under federal oversight. The agency even filed an amicus brief, throwing its support behind jurisdiction over platforms such as Polymarket and our charismatic friend Kalshi.

And as if that weren’t enough, growing academic support may just sway policymakers into seeing the light regarding market-based forecasting tools. Evidence suggests that prediction markets can serve as a real-time complement to surveys and futures pricing, much like a fine wine enhances a meal-if only one could drink it in moderation.

2026-02-19 16:09

Fed Economists Sing Kalshi’s Virtues: A Reliable Forecasting Tool

Wall Street’s Cheers for Fed’s Paper on Prediction Market Accuracy

Read More