Despite endless debates over where gambling ends and predicting begins, a new Federal Reserve Board paper finds that prediction markets often pick up shifts in expectations faster — and sometimes even more accurately — than traditional tools.
The study, published by the Federal Reserve on Wednesday, Feb. 18, focused on prediction market Kalshi, comparing it with more traditional survey and market-implied forecasts and examining how expectations respond to macroeconomic and financial news.
When compared to standard benchmarks, the paper found that “Kalshi’s forecasts for the federal funds rate and CPI provide statistically significant improvements over fed funds futures and professional forecasters.” The authors also note that for inflation, Kalshi’s numbers often beat the consensus survey forecasts.
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