Wall Street’s latest push into political prediction markets is drawing both strong liquidity expectations and warnings of manipulation from industry experts, as major ETF issuers race to launch election-linked funds ahead of the U.S. midterms.
The listed funds cover the 2028 U.S. presidential election and the 2026 congressional midterms, including separate products for whether Democrats or Republicans win the presidency in 2028, and whether Democrats or Republicans control the Senate and the House in 2026.
“Given the level of interest in these event markets, providing liquidity would be very attractive for various hedge funds and quant trading firms,” Ganesh Mahidhar, Investment Professional at Further Ventures, told Decrypt, pointing to surging demand for contracts tied to U.S. election outcomes.
Meanwhile, Kadan Stadelmann, CTO at Komodo Platform, told Decrypt that “political prediction markets create opportunities for insiders to trade on classified information and can also open the elections up to manipulation.”
U.S. midterm elections are widely treated as referendums on the sitting administration, and historically, the president’s party rarely gains seats across both chambers, dynamics that tend to increase hedging and speculative activity around outcome probabilities.
Mahidhar said political polarization and policy uncertainty have supercharged activity on platforms such as Polymarket and Kalshi, where traders already speculate on elections and macro events.
“Regulating these markets and making it accessible to the broader retail audience is the next step in the evolution of event contracts,” he said, adding that market makers are drawn to volatility and tight spreads.
Bitwise is positioning early, he said, to capture opportunity “before regulators catch up with the technology.” He added that demand could still be strong: “In the U.S., gambling has become a part of life’s fabric… I suspect liquidity will be robust.”
Meanwhile, prediction market operators are facing enforcement actions across multiple states.
