Kalshi's Macro Forecasting: A Liquidity-Driven Tool

Kalshi's macro contracts demonstrate high forecasting accuracy, often matching or exceeding professional economists. A recent NBER working paper and independent analyses validate this performance, showing the platform's real-time, probability-based approach captures the "wisdom of the crowd" with precision that rivals traditional surveys, even during volatile surprise moves like the Fed's unexpected 50 basis point cut in September 2024.

The real-time probability distribution offered by these markets is a valuable complement to traditional forecasts. Unlike single-point estimates, Kalshi's contracts-priced as probabilities like 32 cents implying a 32% chance-allow traders to express nuanced views, capturing a full range of outcomes. This distributionally rich data provides a continuously updated gauge of inflation and rate expectations that researchers say can open new avenues for studying monetary policy.

The critical caveat is that prediction markets require stable participation and deep liquidity to function as forecasting tools. As one industry observer noted, these markets only work as real-time gauges if informed actors can participate without fearing abrupt regulatory shutdowns or jurisdictional conflict. The recent regulatory pushback in states like Nevada underscores this vulnerability, creating a tension between the Fed's endorsement of the tool and the uncertain legal landscape that could disrupt the very liquidity needed for accurate forecasts.

The Liquidity Engine: Market Makers and Incentives

The forecasting power of Kalshi's markets is built entirely on a foundation of liquidity. This liquidity is not organic; it is created by a specific group of traders known as market makers. These individuals place resting orders-offers to buy or sell contracts at set prices-that populate the order book. Market takers then remove this liquidity by trading against those offers, executing their positions instantly. The depth and competitiveness of these resting orders directly determine how easily and cheaply other traders can enter or exit positions.

Kalshi actively subsidizes this creation through its Liquidity Incentive Program. This initiative rewards market makers for placing resting orders that improve market depth, paying them even if their orders never get filled. The program operates on a daily basis, with a reward pool distributed based on a complex scoring system that favors larger orders placed closer to the best available prices. This creates a powerful financial incentive for participants to add and maintain liquidity, directly funding the market's operational engine.

The critical implication is that the quality of the forecast is not a product of broad, public participation. It is instead a function of the incentives and behavior of a relatively small, specialized group of traders-the market makers. Their participation, driven by fee exemptions and direct subsidies, is what ensures the tight bid-ask spreads and deep order books necessary for the market to function as a real-time forecasting tool. Without this engineered liquidity, the platform's accuracy claims would collapse.

Volume Concentration and Market Structure

The industry's explosive growth is built on extreme concentration. In 2025, total notional trading volume across major platforms surpassed $44 billion, with Polymarket and Kalshi generating around 85%–90% of that total. This leaves a fragmented remainder for all other competitors, creating a duopoly that dominates the macro forecasting segment.

Kalshi holds a commanding but not absolute position within this duopoly. Based on a snapshot from late November 2025, its weekly notional volume was roughly $1.1 billion, or 54% of the combined total with Polymarket. This share indicates it is the clear leader in the macro-focused category, but the market structure remains vulnerable to the fortunes of a single platform.

The critical vulnerability is that this concentration creates a single point of failure. The forecasting accuracy of these markets is not a product of broad, public participation but of the deep, liquid order books maintained by a few key players. Regulatory actions targeting either Kalshi or Polymarket could abruptly disrupt this liquidity. As one industry observer noted, these markets only work as real-time gauges if informed actors can participate without fearing abrupt regulatory shutdowns. The recent pushback in states like Nevada underscores this tension, where a legal challenge against one platform could jeopardize the very liquidity needed for accurate forecasts.