The Market Knows What the Experts Don’t

There is a particular kind of person in Washington whose job is to know what’s going to happen. He has a degree from somewhere expensive, a subscription to several newsletters, and a remarkable ability to explain why events that completely surprised him were, in retrospect, inevitable. He appears on television to tell us what voters are thinking, what the economy is doing, and who will win the next election. If he’s wrong, nothing much happens. He comes back next Tuesday, wearing a different tie, to explain what everyone else got wrong.

Prediction markets have introduced an awkward new character into this arrangement: A man in his pajamas who thinks the expert is an idiot and is prepared to put $500 on it. On platforms like Kalshi and Polymarket, he can buy contracts tied to elections, economic announcements, and an expanding universe of other events. If his prediction is correct, he makes money. If it’s wrong, he loses it. His credentials are irrelevant. His confidence, at least, has a price.

This is a genuinely radical development, although not necessarily in the way its Silicon Valley evangelists imagine. Prediction markets offer something more significant than a new way to gamble on elections. They threaten the peculiar arrangement by which modern American institutions have managed to separate authority from accountability. For decades, an enormous professional class has been permitted to make predictions about the future without suffering any particular consequences for being wrong. The markets propose a rather old-fashioned alternative: people who know things should be rewarded for knowing them.

The 2024 presidential election helped bring this idea into the mainstream. After a federal court victory allowed Kalshi to offer election contracts, Americans could legally trade on the outcome of the presidential race through the exchange. While national polling suggested a close contest, betting markets at various points assigned Donald Trump a considerably stronger chance of winning. Trump ultimately won, although that result alone did not prove that the markets were more reliable than the polls.

Still, the appeal was obvious. The markets were offering something that polling averages and political panels could not: a constantly changing assessment of the future, generated by people who stood to lose something if they got it wrong.

Conservatives ought to find this appealing, and not merely because the markets sometimes produce results they prefer. The deeper principle is almost embarrassingly conservative. Knowledge is dispersed throughout society, and no central authority possesses enough of it to dictate the correct answer. A pollster in Washington might understand the statistical composition of a congressional district, while a car salesman in rural Pennsylvania knows that half his customers have become furious about the cost of living. Neither has the complete picture. A market gives both the opportunity to act on what they know.

Friedrich Hayek made much the same argument about prices in his famous 1945 essay, The Use of Knowledge in Society. Economic information is scattered among millions of people, most of whom possess knowledge that could never be captured by a central planner. The price system coordinates that information without requiring anyone to understand the whole economy. Prediction markets attempt something similar with the future itself.

And this is where they become genuinely threatening to the people who run things.

The modern administrative state depends on the assumption that sufficiently educated specialists can understand society better than the people living in it. We have experts to forecast inflation, experts to determine public health policy, experts to assess geopolitical risks, and still more experts to explain why the previous experts were mistaken. The ordinary citizen is expected to absorb these conclusions with appropriate humility. It is an extraordinary inversion of democratic government: the public supplies the authority, but the professionals supply the acceptable opinions.

Prediction markets threaten to interrupt this ceremony. They do not require a committee to determine whose view deserves to be heard. They do not care whether a trader attended Harvard or never finished high school. A person with a useful piece of information can express it in the market, and other participants can respond. Over time, correct judgments can be rewarded and incorrect ones punished.

Of course, money is not a perfect measure of truth. A rich fool can place larger bets than a poor genius, and thinly traded markets can be pushed around by participants with enough capital. Prices reflect the behavior of traders, not some supernatural faculty for seeing the future. Markets can also become self-referential, with participants wagering on what they expect other participants to believe rather than on the underlying event.

But the existence of these flaws hardly distinguishes markets from the alternatives. Expert forecasts can also be distorted by institutional loyalties, ideological assumptions, and professional incentives. The difference is that prediction markets make at least some of those incentives visible. They produce a public price that can be scrutinized, challenged, and traded against.

There is, however, a second problem that conservatives should take much more seriously. The same system that allows ordinary people to profit from possessing valuable knowledge also allows powerful people to profit from possessing knowledge that the public has no right to be excluded from.

Consider a government official who knows that a military operation is imminent, or a political insider with advance knowledge of a consequential announcement. In an ordinary market, informational advantages are part of the system’s usefulness. In government, certain informational advantages exist only because an individual has been entrusted with public authority. Turning those privileges into private trading profits is not an example of free enterprise. It is corruption with a more efficient interface.

This is no longer a hypothetical concern. A Congressional Research Service analysis published in 2026 described suspiciously well-timed trading around major geopolitical events, including contracts tied to the capture of Nicolás Maduro and military strikes on Iran. Such trades have raised questions about whether people with access to confidential information were using prediction markets for personal gain. The allegations have not established that particular traders committed insider trading, but they illustrate a vulnerability that regulators and Congress cannot simply ignore.

Congress has already begun considering legislation to restrict trading by public officials and others with access to sensitive government information. Such proposals deserve serious consideration. The public has no obligation to provide government employees with a lucrative side business in forecasting the consequences of their own decisions.

The conservative position should therefore be neither to ban prediction markets nor to treat them as sacred expressions of the free market. It should be to protect their ability to challenge established authority while preventing public authority from being converted into private profit.

There is another reason to resist the more extravagant claims made on behalf of this technology. Prediction markets may be excellent at estimating what people expect to happen, but they are incapable of telling us what ought to happen. This is an elementary distinction, yet it is one that modern political culture seems increasingly determined to abolish.

A market might tell us that a particular candidate is likely to win, that a war is likely to begin, or that a government is unlikely to survive the year. It cannot tell us whether the candidate deserves to win, whether the war is just, or whether the government deserves to survive. Those are political and moral questions, and no quantity of trading volume will turn them into mathematical ones.

Indeed, the danger is that prediction markets will eventually become another institution demanding the very deference they were supposed to overthrow. Already, their growing visibility creates the possibility that a market price will be treated not as an estimate but as an authoritative verdict. A candidate who loses an election despite favorable market odds may find supporters claiming that the result is suspicious. A journalist who once quoted polls as gospel may simply replace them with betting prices, without becoming any more skeptical about what those numbers mean. Researchers at the Brennan Center have warned about precisely this danger as election markets become more prominent.

In other words, Americans may succeed in dismantling one priesthood only to construct another, this time staffed by quantitative analysts and cryptocurrency enthusiasts. The expert in the television studio will be replaced by the trader staring at six monitors, who is no less certain that his preferred method of measuring reality entitles him to explain it to everyone else.

The distinction matters because conservatism, properly understood, has never meant the worship of markets. Markets are enormously useful institutions precisely because they coordinate human activity without requiring a central intelligence. But they are instruments, not sovereigns. They can help establish the price of wheat, the expected path of inflation, or the likelihood of an electoral victory. They cannot determine the value of a family, a constitutional principle, or a country.

There is something refreshing, nevertheless, about the emergence of an institution that allows ordinary people to challenge the predictions of their supposed betters. America’s credentialed classes have spent years insisting that expertise is an entitlement to authority, even when the experts themselves have been spectacularly mistaken. Prediction markets offer a modest corrective. They remind us that knowledge and status are not the same thing, and that confidence becomes considerably more interesting when the person expressing it has something to lose.

The old American suspicion of experts was never really a suspicion of knowledge. It was, instead, a suspicion of people who claimed a monopoly on it. There’s a world of difference between respecting someone because he knows what he’s talking about and respecting him because an institution has certified that he does.

Prediction markets are useful insofar as they restore that distinction. Their greatest achievement will not be teaching Americans to gamble on their government, but teaching them that the people who govern, advise, and interpret their country are not necessarily the people who understand it best.

The market will sometimes be wrong. But at least, when the man in his pajamas makes a terrible prediction, he has to pay for it. The expert on television can still expect his appearance fee.