What is a prediction market? A clear guide for 2026
A prediction market is an exchange where people trade on future events, and the price works as a probability. How it works, who runs them, why they matter.
Read the articlePrediction markets vs. polls: which predicts elections better?
Polls measure what voters think today; prediction markets price what will happen. Which forecasts elections better, what Brexit and 2024 taught us.
By Kristian FagerlieFounder & CEO, Sikt Intelligence
Polls and prediction markets answer different questions. A poll asks voters what they think today. A prediction market asks traders what will happen, and lets them weigh polls, history and everything else they know. On average, markets have been closer to the final result, but they have also failed spectacularly, and they depend on polls more than their fans admit.
What each one measures
| Polls | Prediction markets | |
|---|---|---|
| Question | Who would you vote for today? | Who will win? |
| Output | Vote shares (e.g. 48% to 46%) | A probability (e.g. 62%) |
| Inputs | A sample of voters | Polls, history, news, money at stake |
| Main errors | Sampling, non-response, turnout | Thin trading, herding, long-shot bias |
| Updated | When a poll is published | Continuously |
A common mistake is comparing the two directly. "48% to 46%" in a poll is not a 48% chance of winning. A two-point lead can mean a 60–70% chance of winning, depending on uncertainty. Markets, and forecast models, translate vote shares into probabilities.
What the evidence says
Markets usually beat polls
The longest comparison comes from the Iowa Electronic Markets. Across 964 polls and five US presidential elections, the market was closer to the final result 74% of the time, and its advantage held even months before election day (Berg, Nelson and Rietz, 2008).
2024: markets beat the polling averages
A Vanderbilt study of the 2024 US presidential election found that Polymarket outperformed FiveThirtyEight's polling aggregates, on a race where about $3.7 billion was wagered on that platform alone (Cutting et al., Vanderbilt).
But markets can be badly wrong
Before the 2016 Brexit referendum, Betfair put Remain at around 88% shortly before polls closed, far more confident than the polls (The Conversation, Cambridge Judge Business School). Leave won. Money at stake does not guarantee better judgment when traders share the same assumptions.
And accuracy varies by market
For the 2024 cycle, another Vanderbilt study found that the share of markets that beat chance ranged from 93% on PredictIt to 67% on Polymarket, and that Polymarket's price moves were barely correlated with the other platforms' (Clinton and Huang, via DL News).
Why markets and polls need each other
Markets are not a replacement for polling. Traders get much of their information from polls, so if polls disappeared, markets would lose one of their best inputs (Undark, 2026). The strength of a market is combining polls with everything else: early voting data, fundraising, history and turnout patterns.
A third option sits between them: forecast models, which turn polls and fundamentals into probabilities using explicit rules. They are transparent in a way markets are not, and less prone to herding.
How to use both, well
- Read polls as a snapshot, and averages rather than single polls.
- Read markets as a probability, and check the volume: a thin market can be moved by a few traders.
- Watch for disagreement. When markets and polls diverge sharply, one of them is missing something. That is the most interesting moment, not a reason to trust whichever you like.
- Discount long shots. Candidates trading at a few percent are usually overpriced (the favorite-longshot bias).
- Remember the base rate. In US midterms, the president's party has lost House seats in almost every election since World War II (base rates).
You can compare live market odds for the 2026 midterms and the 2028 presidential election on our odds pages.
Where Sikt comes in
Sikt Intelligence is building an AI superforecaster that reads polls, history and news, checks every source, and gives an honest probability, then shows it next to the market price. When the evidence and the market disagree, that gap is worth a closer look. Nothing here is financial advice.
Key takeaways
- Polls measure opinion today; markets price the probability of an outcome.
- A poll lead is not a win probability; markets and models do that translation.
- Historically, markets were closer to the result than polls about 74% of the time.
- Markets can be confidently wrong (Brexit), and accuracy differs by platform.
- Use both: polls as input, markets as a probability, and watch where they disagree.
FAQ
Are betting odds more accurate than polls?
On average, yes: the Iowa Electronic Markets beat polls in 74% of comparisons, and Polymarket beat the polling averages in the 2024 presidential race. But markets have also failed, notably on Brexit in 2016.
Why do prediction markets and polls disagree?
They measure different things. Polls capture current voting intentions from a sample; markets estimate the probability of winning using polls plus other information, and can also be moved by thin trading or herding.
Should I trust polls or prediction markets?
Use both. Treat polling averages as a snapshot of opinion and market prices as a probability, check how much is being traded, and pay attention when the two diverge.
Sources
- Berg, Nelson and Rietz (2008): Prediction market accuracy in the long run
- Cutting et al. (2025): Are Betting Markets Better than Polling in Predicting Political Elections?
- The Conversation: Betting on Brexit: stakes high, but the big money backs Remain
- Cambridge Judge Business School: Was there a bubble for Remain on the night of the EU referendum?
- DL News: Are Polymarket and Kalshi as reliable as they say?
- Undark: Prediction Markets Aren’t Likely to Replace Polling (2026)
