Kalshi and Polymarket.
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High-volume, short-term markets that ask simple questions with clear settlement rules – that’s how Evercore ISI strategists say they make forecast markets useful for forecasting.
Led by Julian Emanuel, they found high-volume contracts produced more reliable opportunities than shallow markets. Similarly, contracts closer to their expiration date have shown stronger prospects compared to a long-term contract.
Despite the growth, they avoided calling the prediction markets the north star.
“Their limitation is that they don’t get the future so much as they project what the crowd believes,” strategists wrote in a May 17 report.
There is also another problem: Most contracts have low volume. Evercore found that about 8% of events at Kalshi and Polymarket clear $1 million in volume.
A similar pattern was found in live markets only. As of Friday afternoon, nearly 60% of the live markets on Kalshi and Polymarket are priced below $1,000 in trading volume. Only sliver, which accounts for 5.3%, has markets with at least $100,000 in trading volume.
Evercore noted, however, that prediction markets thrive on large, chaotic events as they respond to topics or real-life moments compared to traditional forecasting tools that can suffer from “polling errors, expert bias or subjective judgment.” It also helps that the market can span participants and can have a mix of big sellers, industry experts and regional participants.
“The resulting price is not a perfect forecast, but it is often a useful reflection of the probability of a live consensus,” the analysts wrote.
But this diversity of traders can also be a hindrance. Everyone’s thinking is trading from entertainment to entertainment, which could “contaminate” the market price, analysts have warned. For example, the geopolitical market may be less about forecasting and more about political opinion or fear.
Strategists also warned that a small market, suddenly shaken by a large trader, could manipulate the market outcome.
Having markets that have a definite outcome rather than an ambiguous one can influence how speculative markets are in finding event probabilities. Diplomats say this is especially true for national reasons.
For example, “will the ceasefire be lifted?” It may come down to interpretation, analysts shared. When implicit contracts are resolved, they can focus less on the actual event taking place and more on the fact that they fill the language.
Markets with simple questions also have their problems, they said. Since simplified contracts cannot capture the full picture of a real life event.
“A binary contract can capture one piece of that uncertainty while leaving out the parts that investors need,” Evercore wrote.
Analysts say that the forecast markets have increased significantly due to the attention of the institution, its infrastructure, the scope of the contract and the CFTC’s decision in 2024 to approve the contracts related to elections in Kalshi. The leading platforms of the prediction market Kalshi and Polymarket saw an increase in trading volume during the 2024 presidential election but the trading volume increased significantly in the fall of 2025.
Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a small investment.
