Prediction Markets and the 2026 Elections: When Democracy Becomes a Casino
The numbers are obscene.
Election-season trading on prediction markets is skyrocketing. Combined monthly global trading volumes on Kalshi and Polymarket surged nearly fivefold from September to reach about $24 billion in April. Kalshi alone processed a record $403 million on January 4. By the end of 2025, the exchange had recorded over 97 million transactions.
That's not a market. That's a frenzy.
And election officials are terrified.
They've spent years fighting misinformation and conspiracy theories. Now they have a new problem: Americans betting real money on who wins. The fear isn't abstract. It's concrete. Pervasive financial incentives will further damage confidence in elections and democracy if Americans think they are influencing the outcome.
"This is a troubling trend that election administrators across the nation must deal with," said Jared DeMarinis, the administrator for the Maryland State Board of Elections.
Welcome to the new reality. Democracy meets the casino.
The Numbers Are Staggering
Let's start with the raw data.
Kalshi and Polymarket are the two big players. Polymarket listed 1,293 election-related markets during 2024, with $7.26 billion in trading volume. By April 2026, monthly global trading volume across both platforms hit roughly $24 billion. Kalshi's 2026 year-to-date volume, as of August 29, reached $174.5 billion. Polymarket: $64.9 billion.
These aren't niche platforms for political junkies. This is mainstream.
Users have traded nearly $200 million on midterm elections so far, according to an NBC News analysis of 1,408 open markets on Kalshi and Polymarket. The contracts are typically priced between 1 and 99 cents. You can trade on races for mayor, governor, and U.S. Senate.
It's the stock market, but for politics.
What Exactly Are Prediction Markets?
Here's how it works.
You log onto Kalshi or Polymarket. You see a contract: "Will Candidate X win the U.S. Senate race in Pennsylvania?" The contract trades at, say, 62 cents. That means the market thinks there's a 62% chance. You buy it. If Candidate X wins, you get $1 per contract. If not, you lose your investment.
Simple.
Polymarket, Kalshi, and other prediction markets allow participants to buy and sell contracts tied to the probable outcome of an event. It's betting dressed up in financial jargon. The platforms prefer "trading" over "gambling." The distinction matters legally and philosophically.
But to the person clicking "buy"? It feels like a bet.
The Los Angeles Wake-Up Call
May 2026. Los Angeles mayoral primary.
Spencer Pratt, the reality TV guy, is running. The votes trickle in slowly. On prediction markets, Pratt is doing well. Then the actual results start coming in. They diverge from the market's prediction.
And chaos erupts.
"Crazy how much voter fraud can be done with mail in ballots," one user wrote on Kalshi. "Same old California fraud," said another who had bet Pratt would win. Influencers who posted content for prediction market platforms started questioning the ballot count.
"It's a dead heat on Kalshi," one user wrote. "Is CA cheating to get Spencer Pratt out?"
Kalshi told the influencers to delete the posts. They violated company guidelines. Polymarket directed them to remove the paid partnership label.
But the damage was done.
This was the clearest example yet of how prediction market posts can fuel election misinformation. People with money on the line were spreading fraud claims. Not because they had evidence. Because they had bets.
Election administrators around the country took notice. Los Angeles County officials are now examining steps to respond, including a possible ban on wagering for election workers.
"We're … trying to find our way in this," L.A. County Registrar-Recorder Dean Logan said. "It's opened up a lot of questions that we're grappling with."
Three Things Election Officials Fear Most
1. Voter Confidence
This is the big one.
Election officials have spent years battling baseless fraud claims. Now they have a new front. If Americans see odds shifting on prediction markets and think the markets are influencing outcomes, trust erodes.
"The potential effect on confidence [in elections] is significant," said Carolina Lopez, executive director of the Partnership for Large Election Jurisdictions.
Davina Hurt, director of government ethics at Santa Clara University's Markkula Center, put it bluntly: "Elections are not a game. (If market) probabilities begin influencing donor decisions, media attention, the energy around (campaign) volunteers - at that point, markets aren't just observing the election. They're a part of it."
2. Insider Trading
This is already happening.
Kalshi suspended three congressional candidates in April for betting on their own races. In August, Kalshi disclosed that it gave a three-year suspension and fine to a North Carolina congressional candidate, Republican Laurie Buckhout, for trading on her own race.
It gets worse.
An Army soldier was indicted after allegedly using his knowledge of a planned U.S. operation to capture former Venezuelan leader Nicolas Maduro to make bets on it. He won more than $400,000. Several anonymous users reportedly earned $2.4 million combined by making remarkably prescient bets on the Iran war.
The House Oversight Committee launched an investigation into both Kalshi and Polymarket. Committee Chairman James Comer cited trades tied to elections and U.S. military action in Venezuela and Iran.
3. Manipulation
The markets can be gamed.
Earlier this year, after news broke that a phony company had released fake election polls, there was immediate speculation the stunt was an attempt to manipulate prediction markets.
In Brazil, where prediction markets are also taking off, critics say the markets are easily manipulated and do not reliably reflect voter sentiment.
The concern is straightforward: if you can move the odds, you can shape the narrative. And if you can shape the narrative, you can influence the election.
The Wisconsin Bombshell
Wisconsin threw a wrench in everything.
The bipartisan Wisconsin Elections Commission warned voters that betting on elections they vote in could violate state law. The commission's legal counsel concluded that prediction market trades through Kalshi and Polymarket qualify as bets or wagers.
The implications are staggering. If you live in Wisconsin and you bought contracts on who would win there, you've potentially disqualified yourself from voting.
Wisconsin is the first state where officials are saying people are banned from voting if they use prediction markets.
Kalshi's response? They called it "voter suppression." The company attacked the law as "bananas," "illegal," and a type of "voter suppression."
This is the new battleground. States vs. platforms. Democracy vs. free markets. Voters vs. gamblers.
Maryland Takes It Further
Maryland's top election official isn't just warning people. He's asking for a criminal investigation.
Jared DeMarinis, the state's election administrator, sent a letter to the Office of the State Prosecutor. He believes prediction market platforms violate state law by allowing users to wager on election outcomes.
"From my plain reading of the statute and how the sites operate, I believe they do," DeMarinis wrote.
Maryland law, which predates prediction markets, prohibits wagering on election outcomes. Violations are a misdemeanor punishable by a $50 to $500 fine. The total amount of wagers could also be seized by the state.
During the primary, hundreds of thousands of dollars were spent on Maryland races on sites like Kalshi and Polymarket.
"Maryland has a compelling interest in preserving the integrity and public trust of elections," DeMarinis wrote. "Financial incentives should not influence or [affect elections]."
The Industry Fights Back
Kalshi and Polymarket have a response ready.
They say the activity is neither gambling nor a danger to elections or democracy. It's barely different from people who trade stocks, bonds, or commodities ahead of an election to protect themselves against how the eventual winner's policies might affect their investments.
Joshua Mitts, a Columbia Law School professor, agrees: "One can make the argument that the entire stock market, at some level, is affected by elections and outcomes."
The platforms point to their insider trading protections, required by federal law, that are meant to prevent candidates and campaign staffers from trading on their own races.
Kalshi says its research shows that its markets correlate strongly to outcomes, events given a 60% chance end up happening nearly 60% of the time, and that any effort to manipulate the odds is kept in check by traders who profit by putting money on the correct outcome.
"By shifting focus from 'what people say' to 'where they put their money,' and filtering out social media noise and pundit bias, we are providing a level of clarity and predictive power that cannot be matched," said Kalshi spokesperson Dani Lever.
But prediction markets have suffered black eyes this year. They heavily favored a losing candidate in a primary for Wisconsin governor.
Congress Enters the Fray
Washington is paying attention.
The House Oversight Committee launched an investigation into Kalshi and Polymarket, sending letters to both CEOs. The committee is looking at enforcement efforts against insider trading.
Meanwhile, the CFTC proposed a comprehensive framework for prediction markets in June 2026. The proposal addresses ambiguities over whether prediction market contracts constitute illegal gambling under state laws.
Notably, political elections are explicitly excluded from certain restrictions, they're considered "contests" rather than "gaming." The CFTC's proposed rules would also prohibit wagers on the date by which a political leader might be removed from office.
Senators Raskin and Merkley introduced the STOP Corrupt Bets Act, which would ban prediction market betting on elections, government actions, sports, and military actions.
As Koleman Strumpf, an economist at Wake Forest University, put it: "It's like we're in the 1930s with financial markets, we have some things that we want to regulate and restrict (as a country), and we're sort of in the early stages of trying to lay out what the rules are."
What Happens Next
The 2026 midterms will be the test.
This is the first full election cycle that allows election gambling. The explosion in prediction market trading comes as President Donald Trump has pressed sweeping changes to voter identification and voting by mail procedures.
Election administrators around the country are considering the possible implications of the markets' forecasts, including whether they have the power to affect voter confidence in election results.
"We're … trying to find our way in this," Logan said.
The timeline is tight. The stakes are high. And the questions keep coming.
Can a candidate trade on their own race and still claim victory? Can a voter bet on an election and still participate in it? Can a market predict an outcome, and then help create it?
These aren't hypotheticals anymore. They're happening right now.
Here's the thing about prediction markets.
They don't just observe elections. They change them.
When money is on the line, behavior changes. People spread misinformation to move odds. Candidates trade on their own races. Voters wonder if the fix is in. Election officials scramble to keep up.
The industry says it's just like the stock market. But elections aren't stocks. Stocks represent companies. Elections represent the will of the people. When you commodify that will, you risk something fundamental.
Maryland's election administrator got it right: "Financial incentives should not influence or [affect elections]."
But they do.
And the 2026 midterms will show us just how much.