Rich by Coin

U.S. Federal Reserve researchers are praising prediction markets as a tool for economic analysis. Kalshi’s forecasts for the federal funds rate and the U.S. CPI provide statistically significant improvements over fed funds futures and professional forecasters, all while providing continuously updated full distributions rather than infrequent point estimates, according to the paper published on Thursday. The markets, in which retail investors can buy contracts in virtually any yes-no question in such diverse fields as economics, politics and sports, are looking at topics on a live basis that other sources of information don’t. Prediction markets provide unique insights—particularly for variables like gross domestic product growth, core inflation, unemployment and payrolls, for which no other market-based distributions currently exist.

Kalshi predictions perfectly matched the realized federal funds rate by the day of each meeting since 2022, a feat not achieved by either surveys or futures. Part of the secret sauce that sets prediction markets apart as a useful tool may be the inclusion of retail participants, which makes them distinct from institutionally dominated markets, the paper noted. Separately, sources familiar with talks on stablecoin yields say the White House urged bankers to get on board with a deal that lets the market structure bill advance. The banking representatives at Thursday meeting were said to actively work on language to that end, though a final draft will still have to be circulated and weighed by the banks.