Prediction markets are basking in their election win. Can it last?

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Subscribe to enjoy similar stories. Prediction markets passed a closely watched test by correctly forecasting that Donald Trump would win the election. Their future is more difficult to predict.

History shows that prediction markets—betting platforms where people wager on the likelihood of future events—have flourished during U.S. presidential elections, then struggled afterward. “They’ve all followed this cycle of overexcitement during the election phase, and then a crumbling realization that elections are their one big thing," said Nigel Eccles, a co-founder of online-betting company FanDuel as well as Hubdub, a prediction market that closed in 2010.

That points to a looming challenge for platforms such as Polymarket, an offshore crypto-based prediction market, and U.S.-based Kalshi and ForecastEx. Such platforms offer bets tied to topics like popular culture, weather and economics, but those categories are far less popular for prediction-market bettors than elections. For the moment, fans of prediction markets are celebrating.

Based on an idea conceived by economists in the 1980s—that harnessing the wisdom of the crowd could lead to accurate forecasts of the future—prediction markets have finally shown signs of going mainstream. That is largely thanks to the tense race between Trump and Vice President Kamala Harris, as well as a recent federal court ruling that legalized U.S. election betting.