Karshi and Polimarket.
Gabby Jones Bloomberg | Martin Lelièvre | Getty Images
According to Evercore ISI strategists, a high volume of short-term markets that ask simple questions with clear solution rules make prediction markets a useful formula for prediction.
Led by Julien Emanuel, they found that high-volume contracts produced more reliable probabilities than shallow markets. Similarly, contracts closer to the end date showed higher probabilities compared to long-term contracts.
Despite the growth, they avoided calling prediction markets their North Star.
“Their limitation is that they do not discover the future so much as reveal what the crowd believes,” the strategists wrote in a May 17 report.
There is also another problem. That means most contracts have low trading volumes. According to Evercore research, only about 8% of Kalshi and Polymarket events are worth more than $1 million.
A similar pattern was observed in the live market alone. As of Friday afternoon, nearly 60% of Karshi and Polimarket’s live markets had trading volumes of less than $1,000. Only a small number of markets, about 5.3%, have a trading volume of at least $100,000 or more.
But Evercore noted that prediction markets thrive in chaotic macro events because they react to headlines and real-life moments, compared to traditional forecasting tools that can face “poll flaws, expert bias, or subjective judgement.” It also helps that the market can penalize participants and there can be a mix of macro traders, industry experts, and regional participants.
“Although the resulting price is not a perfect forecast, it is often a useful representation of the live consensus probability,” the analysts wrote.
However, this diversity of traders can also be a stumbling block. Analysts warned that the reasons why everyone trades range from entertainment to hedging, which could “contaminate” market prices. For example, geopolitical markets may more often express political views and fears than predictions.
Strategists also warned that market outcomes could be deceived if thin markets were suddenly moved by large traders.
Having a market with an objective outcome rather than an ambiguous one can impact the market’s ability to detect the probability of an event. Strategists said this was especially true for geopolitical reasons.
For example, “Will there be a ceasefire?” That may be up to interpretation, analysts shared. Once an ambiguous contract is resolved, the focus can be placed on how it satisfies the language rather than what is actually happening.
He says there is also a downside to a market with simple questions. This is because a simplified contract may not capture the full picture of what is actually happening in real life.
“Binary contracts can capture some of that uncertainty while leaving out the part that investors actually need,” Evercore writes.
Strategists said the agency’s attention, its infrastructure, the breadth of the contract and the CFTC’s decision in 2024 to approve an election-related contract for Kalsi caused prediction markets to soar. Leading prediction market platforms Karsi and Polymarket saw an increase in trading volume during the 2024 presidential election, but saw a sharp increase in trading volume in the fall of 2025.
Disclosure: CNBC and Kalsi have a commercial relationship that includes customer acquisition and minority ownership.
