Can Kalshi Take On Inflation, Too?

The prediction market Kalshi Inc. just publicized the results of a study demonstrating its ability to generate more accurate inflation forecasts than the consensus of Wall Street analysts. The study itself has not been released so we don’t know which Wall Street consensus estimate was used or how Kalshi extracted a forecast from the betting patterns of its customers.

The latter point is crucial as it will go a long way to answering how useful such platforms can be for investors and the market overall. Kalshi and prediction market boosters claim these betting apps can aggregate the wisdom of crowds, vacuuming up small bits of highly dispersed information unavailable to traditional financial markets. This could improve real economic decisions.

Detractors call the sites playgrounds for sharpies to extract profits from recreational gamblers. They explain away any apparent advantage in prediction accuracy as cherry-picking or exploiting well-known biases in expert forecasts.