Building the truth machine (Andy Hall and Elliot, Feb 13, 2026, Free Systems)
The central problem is that the political and policy markets—those arguably most core to the social value proposition of prediction markets—are mostly ghost towns today. […]
For the vast majority of political contracts, there’s almost no one on the other side of the trade. One way to see this: the gap between what buyers are willing to pay and what sellers are asking—a standard measure of how active a market is—typically exceeds 20% of the midpoint price, and is often much higher than that. That’s enormous. In a healthy, liquid market, that gap is no more than a few percentage points at most.Interestingly, it’s not the case that less liquid markets are necessarily less accurate at predicting outcomes. Sometimes markets stay illiquid precisely because they’re already accurate, and there’s no incentive for new money to enter. Even quite small prediction markets have historically shown strong predictive performance—Wolfers and Zitzewitz documented accurate forecasts from markets with as few as 20 to 60 participants. More recently, Clinton and Huang’s analysis of over 2,500 political contracts from the 2024 election found that PredictIt—the most restricted platform, with position limits of just $850 per contract—correctly predicted 93% of outcomes, compared with 78% for Kalshi and 67% for Polymarket. Markets with more trading activity were not more accurate, controlling for the types of events being traded.
But thin markets are certainly cheaper to manipulate, as I have argued recently. When liquidity is low, a single motivated actor can move prices without anyone around to push back—and in a world where CNN and CNBC are now broadcasting these prices to millions of viewers, that vulnerability matters more than ever.