Donald Trump’s Secretary of Defense pick showed how well prediction markets respond to new information – and how limited public knowledge can be.
On Tuesday evening, Trump selected Pete Hegseth to be his Secretary of Defense. Hegseth is a former combat veteran and a Fox News co-host. His nomination surprised pundits and prediction markets alike.
Originally, neither Kalshi nor Polymarket had Hegseth listed. Kalshi didn’t offer Hegseth until 6 pm ET, shortly after his nomination became public. After midnight in the early hours of Wednesday, Hegseth was still missing from Polymarket.
Prediction markets grapple with uncertainty
Prediction markets can aggregate many opinions, but markets still exist in an uncertain world. Events that have little public information available can lead to strange trading patterns.
For example, prediction market prices usually add up to 100%, or close to it. After Trump announced Hegseth’s nomination, Polymarket’s Secretary of Defense prices added to about eight percent because of Hegseth’s absence.
Kalshi added Hegseth to their market quickly, leading to the small squiggle that represented Hegseth’s recent addition.
Both approaches satisfy the markets’ settlement terms. Kalshi will settle the market based on the first candidate confirmed by the Senate by the end of 2026. Polymarket’s Secretary of Defense market is settled based on who Trump nominated first. Since Trump nominated none of Polymarket’s listed candidates, all of the markets on those figures resolved to no.
Kalshi and Polymarket also listed different candidates in their Secretary of Defense markets. Both platforms listed Mike Waltz, Mike Pompeo, and Tom Cotton. However, only Kalshi offered odds on Tulsi Gabbard and Keith Kellogg. Polymarket had Christopher Miller, Robert O’Brien, Joni Ernst, and Mike Gallagher.
Trump aims to give his Senate Majority Leader as much time as possible to lead Cabinet confirmations when the new Congress convenes. Not only does the public have to keep up with likely candidates. Prediction market platforms also have to decide how to react to surprises that come from tightly guarded backroom decisions.
While many Cabinet markets have functioned normally, Trump’s unpredictability has caught even the most inclusive sources of information off guard.
