The prediction markets company Kalshi, which has the Brazilian as one of the co-founders and director of operations, has reached a point of maturity and scope in real-time economic forecasts above other competing platforms and could be incorporated into the Federal Reserve’s decision-making process. The conclusion is in a document signed by researchers at the Fed and Johns Hopkins.
The article praises Kalshi’s forecast accuracy and compares the results with already established references, such as the Survey of Market Expectations and the Bloomberg consensus. And he says it has comparative advantages with competing prediction market platforms, such as Polymarket, PredictIt and Interactive Brokers.
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“Among these, only Kalshi and Interactive Brokers operate with regulatory approval. Polymarket operates in a legal gray area and, together with PredictIt and Interactive Brokers, offers fewer contracts, lower liquidity and lower individual position limits. Kalshi’s maximum exposure per market currently reaches US$7 million”, compares the study.
The article argues that prediction markets offer high-frequency, continuously updated forecasts that can complement central banks’ decision-making processes.
“High-frequency data allows us to apply an event study methodology to see how news shapes beliefs about macroeconomic indicators. For indicators like CPI (consumer inflation) and unemployment — two pillars of the Federal Reserve’s dual mandate — market-based forecasts enhance the Fed’s ability to communicate policy direction and assess the market’s perceived reaction function under various scenarios,” they explain.
In the case of monetary policy, such as the FOMC’s future decisions, prediction markets offer a valuable counterweight to assess the effectiveness of the Fed’s communication, the study says. “These markets can also reflect the entire distribution of expectations, helping policymakers understand tail risks, asymmetries, and market uncertainty — information that is lost when only modal or median expectations are provided.”
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Authors Anthony Diercks, Jared Dean Katz, and Jonathan Wright argue that, in many cases, platforms like Kalshi provide unique insights — especially for variables like GDP growth, underlying (core) inflation, unemployment, and payroll, for which no other market-based distributions currently exist.
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They also argue that the platform provides the only credible measures of distributional beliefs about decisions at specific FOMC meetings. “Our results highlight several central advantages. First, Kalshi’s forecasts for the Fed Funds rate and CPI provide statistically significant improvements over fed funds futures and professional forecasters, while providing continuously updated full distributions rather than sparse point estimates,” they say.
They highlight in the article that Kalshi’s distribution method perfectly corresponded to the actually realized Fed Funds rate on the day of each committee meeting since 2022, a feat not achieved by either research or futures contracts. “These markets capture rich distributional dynamics — such as tail risks and asymmetries at higher-order moments — that are not available from traditional sources.”
They add that Kalshi’s accessibility to retail investors introduces a distinct perspective from that of institution-dominated markets, potentially offering a complementary lens on expectation formation.
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“This evidence suggests that prediction markets can serve as a valuable complement to existing forecasting tools, both in research and policymaking. By providing transparent, continually updated, and economically interpretable measures of expectations with competitive predictive performance, they open new fronts for studying the transmission of monetary policy, market sentiment, and macroeconomic uncertainty.”
At the end of last year, Kalshi’s market value jumped to US$11 billion after a US$1 billion Series E investment round, led by Paradigm and with participation from giants such as Sequoia Capital, Andreessen Horowitz and Y Combinator. This made Luana Lopes Lara, 29 years old, the newest member of the “self-made” billionaires club.
