Prediction Markets Emerge as Critical Tools for Geopolitical Forecasting
New York, Sunday, 11 January 2026.
By January 2026, prediction markets managing $40 billion in volume have superseded traditional polling. These platforms now actively shape, rather than just reflect, global geopolitical narratives and corporate strategies.
The Quantified Geopolitical Landscape
As of January 11, 2026, the financialization of forecasting has reached a pivotal scale, with trading volumes across major platforms like Kalshi and Polymarket estimated between $35 billion and $40 billion throughout 2025 [1]. This surge in capital has transformed these markets from niche speculative venues into primary data sources for assessing global stability. For instance, current market sentiment on Polymarket assigns a 47% probability to the Iranian regime falling before the end of 2026, while the likelihood of Supreme Leader Khamenei departing by January 31, 2026, stands at 25% [2]. These figures do more than reflect passive observation; as noted in an analysis published yesterday by Mikhail Liublin, they actively “broadcast” belief, influencing media narratives and public expectations even when rooted in sentiment rather than verified intelligence [3].
Institutional Adoption and Media Integration
The legitimacy of these platforms has been bolstered by significant institutional backing and media integration. In 2025, the owner of the New York Stock Exchange (NYSE) invested approximately $2 billion into prediction market infrastructure, signaling a major shift toward mainstream financial acceptance [1]. Furthermore, major outlets such as CNN and CNBC have begun incorporating prediction market data directly into their news coverage, validating market-based sentiment as a standard economic indicator [1]. To support this growing ecosystem, Kalshi launched ‘Kalshi Research’ on January 8, 2026, aiming to provide public data and foster academic study into how these beliefs are formed [4]. This move aligns with the vision of economist Friedrich Hayek, cited by researchers, who proposed decades ago that such mechanisms could solve the central economic problem of utilizing dispersed knowledge [4].
The Double-Edged Sword of Insider Information
Despite their utility, the rapid expansion of these markets has introduced complex regulatory challenges, particularly regarding insider trading. Unlike traditional equity markets regulated by the SEC, prediction markets in the U.S. largely fall under the Commodity Futures Trading Commission (CFTC), creating a regulatory environment where insider trading rules are more ambiguous [5]. A recent controversy highlighted this vulnerability when an anonymous bettor reportedly profited $400,000 using information related to a U.S. attack on Venezuela [5]. While some industry leaders, such as Coinbase CEO Brian Armstrong, argue that insider trading in this context is a feature that improves signal accuracy for the public, legislative efforts are mounting to curb the practice [5]. As of January 5, 2026, a bill has been proposed to ban federal officials from trading on these platforms using nonpublic information [5]. Meanwhile, the sector continues to diversify, with markets now covering even speculative geopolitical scenarios, such as a 16% probability of Donald Trump acquiring Greenland before 2027 [2].