The world of election forecasting is undergoing a major transformation, and cryptocurrencies are at the centre of this evolution. Recently, the Commodity Futures Trading Commission (CFTC) filed an emergency action to prevent the Kalshi platform from listing contracts based on election forecasts. This action comes amidst an increasingly uncertain regulatory environment in which the relationship between financial markets and election forecasts based on cryptocurrencies is under scrutiny.
While Kalshi faces obstacles, another platform is consolidating its position as a leader in the industry: Polymarket. This cryptocurrency-based forecasting marketplace has surpassed $100 million in open interest, marking an exponential growth of 1,429% since the beginning of the year. The growing demand for political predictions seems to be fuelled by the upcoming US presidential election, which accounts for as much as 77% of Polymarket’s weekly volume. The platform allows users to bet on different future scenarios, ranging from political events to economic outcomes, creating an increasingly attractive ecosystem for investors.
This rapid rise in the prediction market is taking place against a backdrop of macroeconomic instability. Recent US payroll data show limited growth in the private sector, with only 99,000 jobs created in August, the lowest figure since January 2021. Uncertainties over Federal Reserve policies and negative flows from Bitcoin-related ETFs are contributing to further volatility. Indeed, markets are anticipating potential interest rate cuts, which could favour risky assets such as cryptocurrencies. However, should the economy weaken too much, these cuts could be less pronounced than expected, negatively affecting the price of Bitcoin as well.
As we mentioned in our article, the cryptocurrency-related prediction market is booming, but remains heavily influenced by economic and regulatory factors. Polymarket continues to thrive, signalling that interest in blockchain-based political and financial forecasting has all but waned. How long will it last?
