Researchers linked to the Federal Reserve say prediction market data from Kalshi could help policymakers better measure economic expectations. In their paper, “Kalshi and the Rise of Macro Markets,” they argue that managing expectations is central to monetary policy, but traditional tools such as surveys and financial derivatives have clear limits.
Surveys are often slow and reflect past sentiment. Market-based indicators like bond yields or futures contracts can be complex and are not always tied directly to specific policy decisions. The researchers say Kalshi provides a more direct and real-time view of how traders interpret economic developments.
How Kalshi Measures Expectations in Real Time
Kalshi allows users to trade contracts linked to macroeconomic outcomes, including inflation (CPI), payroll data, GDP growth, and Federal Open Market Committee rate decisions. Each contract reflects the probability of a specific event taking place.
Because these probabilities update throughout the trading day, Kalshi shows how expectations change when new information appears. When a Fed official speaks or fresh economic data is released, market pricing shifts immediately.
For example, the implied probability of a July rate cut rose to 25 percent after comments from Fed Governors Christopher Waller and Michelle Bowman. It later declined following a stronger-than-expected employment report. This quick reaction shows how prediction markets adjust faster than many traditional measures.
The researchers suggest that this data could be used to build risk-neutral probability density models, which estimate possible interest rate outcomes and their likelihood for upcoming meetings.
Potential Impact on Crypto and Prediction Markets
Prediction markets have grown rapidly, with platforms such as Kalshi and Polymarket surpassing 10 billion dollars in monthly trading volume. While Kalshi operates under US regulation and is not fully crypto-based, the broader sector overlaps with blockchain platforms.
If the Federal Reserve studies or references prediction market data more closely, it could strengthen the sector’s standing and draw more institutional participation. That could improve confidence in prediction platforms and increase liquidity across regulated and crypto markets.
Greater recognition may also ease regulatory uncertainty, which affects overall crypto market sentiment.
Will the Crypto Market Recover
The research paper does not indicate any immediate policy shift. Federal Reserve papers are meant to encourage discussion, not set policy. However, the view that prediction markets provide useful real-time insight suggests policymakers are exploring more market-based data.
If prediction markets play a larger role, clarity around interest rate expectations could improve. Clearer expectations often help reduce volatility, which may support both traditional financial markets and crypto assets.
Over time, closer use of market signals in policy discussions could help stabilize recoveries after economic shocks. For crypto markets, stronger institutional interest and broader acceptance remain important, and this development could support that trend.
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FAQs
The Fed sees Kalshi data as a valuable tool to measure trader expectations instantly, offering clearer signals on how markets interpret policy comments and economic reports.
Yes, wider adoption of prediction markets could boost institutional confidence and liquidity, potentially stabilizing crypto markets by providing clearer interest rate expectations.
Yes, Kalshi is a federally regulated exchange in the US, allowing it to offer event contracts that comply with financial laws and provide trusted market data.
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