Kalshi launches pilot prediction markets for clinical trial outcomes and FDA decisions

Kalshi launches pilot prediction markets for clinical trial outcomes and FDA decisions

On July 16, Kalshi and AppliedXL launched a pilot program offering contracts on selected late-stage clinical trials and decisions by the FDA, the US drug regulator. A contract’s price represents the probability that traders currently assign to an outcome.

A biotechnology company’s share price depends on many factors at once, including data from a single trial, available cash, management decisions, and other drugs in development. A Kalshi contract isolates one question in a separate market. The first questions include whether the POLARIS-AD trial of AR1001 in early Alzheimer’s disease will meet its primary endpoint, meaning the main outcome specified in advance, and whether the FDA will approve the anito-cel cell therapy for multiple myeloma.

If a contract trades at 72 cents, traders currently estimate the probability of a “yes” outcome at approximately 72%. Buyers and sellers place different bets, and the price combines their trades into a single estimate. A drug’s efficacy is assessed from trial data, the FDA decides whether to approve it, and the market price reflects current trades. The price is also affected by liquidity, the mix of participants, the timing of trades, and market sentiment.

The rules for determining a contract’s outcome are established in advance. Kalshi specifies the question, deadline, criteria, and either a public source or an order of sources. AppliedXL, a company that analyzes public data on drug development, monitors the specified registries and documents, conducts a human review, and prepares an analysis. Kalshi makes the final decision.

“Clinical trial results and regulatory decisions are rarely compiled in a single definitive document. They must be checked against the primary source and the criteria established before trading begins,” said Francesco Marconi, CEO of AppliedXL.

A public market price could affect how a patient or physician views a study, so the pilot covers late-stage trials only after enrollment has closed. Traders confirm where they work. Kalshi’s rules prohibit trading by people who hold material nonpublic information and by those who can influence the outcome. Such information may be obtained through a consultant, contractor, or professional or personal relationship. Kalshi verifies employer information and monitors suspicious trades.

In June, Robin Hanson proposed a private market in which experts would bet on scientific papers that a company would later use as the basis for a biotechnology project. Kalshi applies a prediction market at the next stage. Once a candidate has been selected, participants trade on the probability of a predefined clinical or regulatory outcome. Before trial results or an FDA decision become available, disagreement about the probabilities receives a public price.