Federal Reserve Researchers Find Prediction Markets Deliver Forecasting Value Comparable to Professional Surveys and Futures

A new working paper from the Board of Governors of the Federal Reserve’s (Federal Reserve) Finance and Economics Discussion Series (FEDS) provides the most rigorous empirical validation to date of prediction markets as a tool for measuring macroeconomic expectations. The February 12 paper systematically compares prediction market-implied forecasts against established benchmarks, including the Bloomberg consensus estimates and data,[1] the Federal Reserve Bank of New York’s Survey of Market Expectations, and federal funds futures.^[2] The central finding: prediction markets perform as well as, and in some cases better than, the traditional forecasting instruments that central banks and market participants have relied on for decades.

The FEDS paper arrives at a moment of heightened regulatory and political attention to prediction markets. Courts, regulators and Congress have spent the past two years debating whether and how these platforms should operate.[3] That the Federal Reserve’s own research staff has now produced a detailed empirical case for their informational value carries significant weight for those debates.

What the Paper Finds

The authors examine prediction market contracts covering consumer price inflation (headline and core), the unemployment rate, nonfarm payrolls, gross domestic product growth, and Federal Open Market Committee decisions at individual meetings, drawing on several years of trading data.

Federal funds rate. Prediction market forecasts for the federal funds rate perform on par with the Federal Reserve’s own primary dealer survey, when measured roughly three Federal Reserve meetings ahead. The prediction market has correctly identified the most likely rate outcome on the eve of every Federal Reserve meeting since 2022, a track record that represents a statistically significant improvement over federal funds futures.

Consumer prices and other macro variables. For headline consumer price inflation, prediction markets produce significantly smaller forecast errors than the Bloomberg consensus. For core inflation and unemployment, the results were comparable, but in no case did prediction markets perform significantly worse than Bloomberg consensus estimates. The FEDS paper also notes that prediction markets are the only source of market-based forecasts for gross domestic product (GDP) growth, core inflation, unemployment and nonfarm payrolls, all variables for which no liquid financial derivatives have ever existed.

More Than a Forecast: A Full Picture of Market Expectations

The FEDS paper argues that forecast accuracy alone understates the value of prediction markets. Unlike surveys, which offer a snapshot every few weeks, and unlike futures, which produce a single implied rate, prediction markets provide a continuously updating view of the full range of outcomes the market considers plausible and how much weight it places on each. That means not just a best guess about where rates are headed, but a real-time read on how uncertain the market is and where it sees tail risks.

The FEDS paper illustrates this with several examples. In the lead-up to the July 2025 Federal Reserve meeting, the probability of a rate hold fell below 80 percent after remarks from Governors Christopher J. Waller and Michelle Bowman, then snapped back above 90 percent following a strong June jobs report. Prediction markets captured these shifts as they happened. Surveys and futures did not.

What This Means

For regulators weighing the permissibility of event contracts tied to economic indicators, the Federal Reserve’s own research staff has now documented that these markets produce useful forecasts, fill gaps left by existing instruments, and respond efficiently to news. 

These are the core informational properties that proponents have long asserted but that have lacked this level of institutional validation. For market participants, the paper positions prediction markets as a credible, real-time complement to surveys and derivatives for tracking macroeconomic expectations. The Federal Reserve authors intend to make the underlying data publicly available, a step that will further normalize prediction market data as a standard input to policy and investment analysis.