Prediction Market Odds Are Shaping Political Narratives, Raising Manipulation Questions
Days after a federal jury convicted short seller Andrew Left of moving stock prices through public commentary for personal profit, CFTC Chairman Mike Selig said the same logic applies to prediction markets. “If somebody is engaging in behavior to drive up the price artificially, of course, we’re gonna consider a manipulation action,” Selig said Tuesday on CNBC’s Squawk Box.
Political prediction markets are increasingly moving beyond trading screens and into the political narrative itself. Odds from platforms like Kalshi now circulate through X posts, cable-news segments, campaign statements and political analysis. A sharp move in a candidate’s market price can be treated as evidence of momentum, even though the move may reflect trading activity more than actual voter sentiment.
Eric Zitzewitz, a Dartmouth College economics professor who studies prediction markets, told DeFi Rate that the markets can provide useful information because traders have financial incentives to back their views.
“Prediction markets aggregate the information and opinions of many individuals, weighted by their willingness to back their views with money,” Zitzewitz said.
Richard Warr, a North Carolina State University finance professor who has written about prediction markets as information tools, made a similar point. He told DeFi Rate that asking people to back opinions with money changes the incentive structure.
“Research has shown that peoples’ predictions tend to be more accurate when they have to ‘put their money where their mouth is,’” Warr said.
That is a core case for prediction markets: money changes the incentives, potentially making forecasts more accurate than ordinary opinion-taking. But that also creates a reflexivity loop. Market odds are supposed to forecast political outcomes. But once those odds become public signals, they can also help shape perceptions of the race. A candidate whose odds suddenly rise can point to that move as proof the campaign is gaining traction. Donors, supporters, voters and other traders may then react to the perceived momentum.
Once those odds travel beyond the platform, they can create a second concern. Traders may be able to profit from the narratives they help create. If a large trade moves the odds, and social media or traditional media turns that move into a momentum story, a trader with a position may benefit from attention that pushes the market further.
That is where the debate shifts from political narrative to possible market manipulation.
How market moves become political signals
The reflexive dynamic starts with how little it can sometimes take to move a political market. In a thin market, a large trade, coordinated buying or a push from supporters can lift a candidate’s odds, even if little has changed in the race itself.
Warr said that the reliability of market odds depends heavily on the size and liquidity of the market.
“For a large national election, where the volume of contracts traded is high, then I think they are probably about as good as we could get,” Warr said. “But for smaller races, where the volume is low, the opportunity for manipulation is much greater and so I would put a lot less stock in them.”
That market move can then become political material. Social media accounts may flag the swing. Political reporters or cable news segments may treat it as evidence that a candidate is gaining ground or extending a lead. Campaigns and allies can then cite the odds to donors, voters and supporters as proof of momentum, viability or electability.
That dynamic is becoming more practical as prediction market odds move into political coverage. Kalshi has fostered partnerships with mainstream media outlets, including CNN, which uses Kalshi odds in election-related segments. The more widely odds circulate, the more likely market prices are treated as political signals rather than just trading prices.
Matthew Wein, founder of Secure Stakes and a former Department of Homeland Security policy adviser and congressional staffer, raised a similar concern in a February Atlantic Council piece. He wrote that media coverage can turn market prices from data points into perceived “arbiters of reality,” while thin markets can give actors with capital and incentives “disproportionate narrative power.”
“This emerging ecosystem blurs the line between genuine probabilistic forecasts and engineered narratives,” Wein wrote.
Candidates turn odds into campaign material
Once a market move becomes part of the public narrative, campaigns can help push it further. The San Francisco Chronicle reported in March that Rep. Eric Swalwell cited his Kalshi position as part of his pitch in the California governor’s race.
“We have built the biggest coalition. We sit on top of every poll, every predictive market,” Swalwell said at an Equality California forum, according to the Chronicle.
Swalwell also promoted his odds on X, posting a Kalshi chart showing him leading the market.
The example does not suggest market manipulation. It shows how a favorable market signal can become campaign messaging once odds move into public view.
Swalwell later suspended his campaign after sexual assault allegations surfaced, which he denied. But the promotion of his odds still shows how they can become campaign material while a race is unfolding. A favorable market price can help create a momentum narrative, even if that narrative later falls apart.
CFTC previously warned odds could influence voters
The idea that election markets could shape political perception is not new.
The Commodity Futures Trading Commission (CFTC) raised a version of the concern during its legal fight over Kalshi’s congressional party control contracts. Kalshi self-certified contracts tied to which party would control each chamber of Congress, but the CFTC disapproved them in September 2023.
Kalshi sued and won in federal district court in September 2024. When the CFTC asked the D.C. Circuit to pause that ruling, the agency argued election contracts could be used to create “the impression of likely electoral success or failure” for a candidate or party. The agency also warned at the time that market signals could affect “fundraising, campaign morale, voter preferences, and turnout,” according to the appeals court’s order.
The D.C. Circuit declined to pause Kalshi’s win, saying the CFTC’s concerns were not backed by enough concrete evidence at that stage. But the court did not reject the underlying concern outright. It said evidence that campaigns or proxies encouraged supporters to buy contracts, or that market prices confused voters about candidate viability, could change the analysis.
The case ended in May 2025, when the CFTC voluntarily dropped its appeal. That left Kalshi’s district-court win in place and helped clear the way for election contracts to become a larger part of the regulated prediction market industry.
When narrative-shaping raises manipulation questions
The CFTC’s earlier court argument focused on whether election market odds could shape campaigns and influence voters. A newer question is whether traders can deliberately exploit that same feedback loop for profit.
Zitzewitz said the concern that campaigns, allies or supporters could help create a misleading sense of momentum is most plausible early on in a campaign, when candidates are still trying to become the leading option for a faction of voters.
“The greatest risk of this is probably at the early stages of a primary,” Zitzewitz said.
In two-candidate races later in primaries or general elections, he said there is less evidence that voters, especially swing voters, are swayed by probabilities. Zitzewitz said some observers have argued prediction markets can have the opposite effect, making supporters of a favored candidate complacent.
CNBC’s Andrew Ross Sorkin raised the market-conduct version of that concern to CFTC Chairman Selig Tuesday on Squawk Box, shortly after short seller Andrew Left was convicted in a securities fraud case. Prosecutors said Left used public commentary, including social media and television appearances, to move stock prices while trading in ways that let him profit from the reactions.
Sorkin asked whether a similar concept could apply if someone went on X, urged followers to back one side of a sports event contract, then traded the other side. According to Selig, “In the context of a sports derivative, we’d look at it in the same way as an oil derivative or any other type of commodity derivative.”
Sorkin pushed further, asking about someone with a large online following and a reputation whose comments could influence other traders. Selig did not draw a clear line around social media promotion, but he said the agency would focus on abusive conduct.
“We are going to be tough on manipulation, fraud, insider trading, and abuse,” Selig said. “We’ve brought a handful of actions already. We have more in the pipeline. We’re sending out subpoenas. We are not going to tolerate any sort of manipulation.”
Political markets raise bigger questions
The market-conduct question is only one part of the issue. As prediction market odds become part of campaign coverage, they also raise questions about who benefits from those markets and how voters should interpret them.
Warr said the voter-perception concern could become especially important late in a campaign, when prediction markets can keep updating in real time.
“Most of the reputable polling companies don’t post polls in the final stretches of the election, particularly on the voting day,” Warr said. “But prediction markets follow no such rules.”
Warr said that could matter if prediction markets provide “second-by-second predictions” after some polls have closed but others remain open.
“This could change voting behavior,” Warr said.
That voter-perception concern is separate from whether traders or influencers are trying to move prices for profit. But both point to the same underlying shift. Prediction market odds are no longer just prices inside a trading venue. They are increasingly part of the information voters, donors, campaigns and media outlets use to evaluate political races.
Neil Malhotra, a Stanford Graduate School of Business professor, said the debate goes beyond whether prediction market odds are accurate. He recently told Bay Area public media outlet KQED voters now have to decide how much market prices should influence them when they fill out a ballot.
“A big social question we have to ask: Is the price discovery about things that are important to us as a society — like who’s going to win an election — should that be put in the same category as what’s the price of an apple?” Malhotra said.
“That’s something we have to struggle with,” he added. “What are the pros and cons of these prediction markets on our democracy?”
That is where the debate over political prediction markets is heading. As election odds move further into news coverage and campaign messaging, they become harder to treat as neutral numbers on a trading screen. They can become campaign signals, media narratives and potential tools for shaping voter perception, leaving platforms, regulators and news outlets to decide where forecasting ends and influence begins.
Kalshi has not responded to DeFi Rate’s request for comment. The story will be updated if a response is received.
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