A new study by the Anti-Corruption Data Collective (ACDC) has found that prediction markets tracking U.S. congressional elections are highly vulnerable to manipulation, with even small-dollar bets capable of shifting odds significantly.
The report, published on September 7, analyzed over 11,000 markets across platforms including Kalshi and Polymarket, revealing that 94% of congressional race markets would experience a 10% probability shift following a single bet of less than $1,000. In hundreds of cases on Polymarket, these altered odds persisted for up to four days.
Prediction markets, which allow users to bet on outcomes ranging from elections to sports and global events, have grown in popularity among media outlets and investors. However, the ACDC’s findings raise concerns about their reliability and susceptibility to manipulation, particularly in high-stakes political contexts.
Key Findings
- $3,500 bet can move 97% of midterm-related prediction markets by at least five cents, according to the report.
- Underdog markets are the most vulnerable, with 806 of 1,094 markets priced at five cents or less costing less than $100 to manipulate by the same margin.
- The report suggests that manipulated prices could distort public perception, creating the appearance of real momentum where none exists.
Industry Response
Representatives from Kalshi and Polymarket disputed the findings, arguing that market forces naturally correct distortions by incentivizing traders to bet against mispriced odds. They contend that the financial incentives in prediction markets ensure accuracy over time, despite short-term volatility.
Policy and Public Concerns
The study has intensified scrutiny from Democrats and consumer advocates, who argue that political betting undermines public confidence in elections. Critics warn that insider trading risks and undue influence could erode trust in democratic processes.
The ACDC, which describes its mission as exposing corruption, has called for greater oversight of prediction markets, particularly those tied to elections. The report stops short of alleging specific instances of manipulation but suggests that the conditions for such activity are widespread.
Prediction markets have become a growing segment of financial and media discourse, with some outlets incorporating market odds into their election coverage. However, the ACDC’s research underscores the potential fragility of these systems when exposed to even modest financial incentives.