Prediction Markets Thought the Clarity Act Was Going to Pass, But Got It Completely Wrong. Here's the Best Way to Use Prediction Market Data.

Prediction markets tend to show how a small crowd of people feel about the odds of outcomes happening at a given moment, which makes them a very unreliable guide for what will actually occur. For instance, in February, the odds on Polymarket were that the Clarity Act, the crypto market structure bill, had an 82% chance of being signed into law this year.

But on Sept. 15, the Senate blocked the bill, and now its path to passage in 2026 looks very, very slim. That failure was a bit dispiriting for the crypto market, especially for holders of Ethereum (CRYPTO: ETH), Solana (CRYPTO: SOL), and XRP (CRYPTO: XRP), as the Act aimed to codify rules pertaining to them.

For those who were making financial decisions based on prediction markets, the vote's outcome may have been quite detrimental. There's a smarter way to use that data and not get stung by its shortcomings.

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Polymarket's Clarity Act odds crashed over seven months

The most forgotten aspect of prediction market odds is that they adjust constantly as new information about the factors affecting the outcome becomes widely known.

Polymarket's odds of Clarity's passage fell to 12% by early September 2026 as the legislative calendar slowly trickled away throughout the year. Then, in a rapid reversal of the trend, they jumped to 30% by Sept. 14 amid reports that the White House was willing to make substantial concessions on the ethics rules, which had been a negotiating impasse between the parties in Congress. On a rival market, Kalshi, the odds of passage before Oct. 1, 2027 leapt from 26% on Sept. 10 to as high as 64%.

Why were these markets so jumpy? The short answer is that it only takes a few participants changing their minds to have a big effect on the overall estimated odds. A 2026 paper by researchers at the London Business School and Yale found that about 3% of Polymarket participants were responsible for most of the price discovery from 2023 to 2025. That means the odds reflect a few people's views, which can be extreme or very volatile in response to new and highly speculative information.

Contracts can also be rigged at settlement -- for example, when holders of Polymarket's five-minute Bitcoin (CRYPTO: BTC) contracts pushed Bitcoin's price in the final seconds to flip outcomes. In a paper released in June 2026, Stanford and Singapore Management University researchers flagged 821 Polymarket accounts that had made off with a haul estimated to be worth $8.2 million by manipulating the prices of the underlying assets that were the subject of predictions.

Like a crypto pump-and-dump scheme, these tactics briefly pushed prices of cryptocurrencies in a certain direction to disrupt the odds pertaining to their future prices as determined on the prediction market, causing ordinary participants to absorb losses.

What's the best way to use prediction market data?

At most, treat the odds as a small extra data point, and never as confirmation of a thesis.

Instead, learn to treat the odds on platforms like Kalshi and Polymarket as a sentiment gauge that reflects what the small group of large bettors of prediction market contracts believe, or as a gauge for what they would prefer others to believe. This can still be useful information to have. For example, Kalshi has a question regarding how high the prices of coins like XRP, Ethereum, and Solana will go before the end of 2026.

Price targets shouldn't matter much to those who invest for the long term, and a bet that Ethereum will top $6,000 this year is a long shot, as it would require a gain of more than 100% from its price near $2,800 today. Still, the fact that some investors are making that bet is a useful prompt to research the bull case. Look up the arguments for why Ethereum could climb that high, and you might find details or technical catalysts worth weighing in your own thesis, without treating the bet itself as evidence.

So don't focus too much on prediction market data, and don't take the data literally if you decide to use it.

Again, using the odds directly is usually a fool's errand. Think of them as quantitative expressions of belief, and then think about whether it's worth drilling down to figure out why someone might actually believe what the odds suggest that they do.

Alex Carchidi has positions in Bitcoin, Ethereum, and Solana. The Motley Fool has positions in and recommends Bitcoin, Ethereum, Solana, and XRP. The Motley Fool has a disclosure policy.