As the countdown to the expiration of Jerome Powell’s term begins, the prediction markets have narrowed the field for the next leader of the Federal Reserve to a two-man sprint. In what traders are calling the "Battle of the Kevins," former Fed Governor Kevin Warsh has narrowly overtaken former Council of Economic Advisers Chairman Kevin Hassett as the favorite to receive Donald Trump’s nomination. On PredictIt, Warsh is currently trading at 43¢, a slim but significant lead over Hassett’s 41¢, marking a dramatic shift in a race that appeared settled just weeks ago.
This market is drawing unprecedented interest due to its direct impact on global monetary policy and the escalating tensions between the White House and the current Fed leadership. With the Federal Reserve's independence at the center of the 2026 political discourse, prediction markets have become the primary venue for pricing in the "loyalty vs. credibility" debate that characterizes the administration's search for a successor.
The Market: What’s Being Predicted
The central prediction market revolves around the identity of the individual who will be confirmed as the next Chair of the Federal Reserve Board of Governors. While the primary action is concentrated on PredictIt, related contracts are trading with high volume on Polymarket (where Warsh leads 41% to 38%) and Kalshi (which shows a tighter 39% to 40% split in favor of Hassett).
Trading liquidity has spiked in early January 2026, with over $15 million in combined volume across platforms. The resolution criteria for most of these markets require the individual to be officially nominated by the President and confirmed by the Senate. The timeline is fixed by the calendar: Jerome Powell’s term officially expires on May 15, 2026. However, the market also prices in the possibility of an "Acting Chair" scenario should the confirmation process stall—a contingency that has kept odds for darker-horse candidates like Christopher Waller (13¢) from hitting zero.
Why Traders Are Betting
The sudden surge for Kevin Warsh can be traced back to a mid-December interview President Trump gave to The Wall Street Journal, owned by News Corp (NASDAQ: NWSA). In the interview, the President explicitly narrowed his shortlist to "Kevin and Kevin," effectively ending the hopes of several other candidates. While Hassett was the initial frontrunner—peaking at nearly 85% on some platforms due to his perceived loyalty—traders began pivoting toward Warsh following reports of a successful 45-minute private meeting between Warsh and the President.
Traders are increasingly betting that Warsh offers the "Goldilocks" solution for the administration. Having served as a Fed Governor from 2006 to 2011 and holding a background at Morgan Stanley (NYSE: MS), Warsh possesses the "market credibility" that institutional investors demand. Conversely, Hassett’s odds have softened amid concerns that his nomination might face a more difficult path in a Senate wary of installing a Chair perceived as too politically compliant. The "Warsh Trade" is essentially a bet that the administration will prioritize a candidate who can simultaneously appease the President’s desire for lower rates and Wall Street’s need for stability.
Broader Context and Implications
The "Battle of the Kevins" is unfolding against a backdrop of extreme institutional friction. Jerome Powell is currently under a Department of Justice investigation regarding alleged cost overruns in the renovation of the Fed’s headquarters, a situation Powell has characterized as political intimidation. Prediction markets are currently pricing a 30% chance that Powell resigns before his May 15 deadline, though his recent public vows to stay on have seen that probability drop from a December high of 70%.
This market reveals a deep public skepticism regarding the traditional nomination process. By tracking the odds in real-time, we see that the market is currently more influenced by "vibe checks" and reported private meetings than by official White House press releases. Furthermore, the "Shadow Governor" strategy—where Powell might remain on the Board of Governors even after his Chairmanship ends to prevent an additional Trump appointment—has become a key variable that traders are now forced to calculate. This demonstrates how prediction markets have evolved to incorporate complex procedural maneuvering that traditional polling often misses.
What to Watch Next
The next major volatility event for this market will be the formal announcement of a nominee, which is expected no later than mid-February to allow for the confirmation process. Key dates to monitor include the resolution of the DOJ’s probe into the Fed's renovation budget; if the investigation is dropped or escalated, the odds for an interim or "Acting" Chair could fluctuate wildly.
Additionally, watch for public comments from Senator Thom Tillis and other members of the Senate Banking Committee. Tillis has signaled he may block any new nominee until the Powell investigation is concluded. If a legislative "roadblock" becomes the consensus expectation, we could see the odds for both Kevins decline in favor of a "Field" bet or a scenario where the current Vice Chair for Supervision takes the reins temporarily.
Bottom Line
The narrow lead held by Kevin Warsh suggests that prediction markets are betting on a "return to normalcy" within the context of a disruptive administration. Traders are signaling that while the President wants a change, the structural need for a Chair with deep ties to the financial establishment—like Warsh’s history at Morgan Stanley (NYSE: MS)—will ultimately outweigh the desire for a more partisan appointment.
Ultimately, these markets serve as a real-time barometer for the tension between political will and institutional inertia. Whether it is Warsh or Hassett who takes the gavel on May 16, the volatility of these contracts highlights just how much the "independence" of the Federal Reserve is currently being re-priced by the world's most informed speculators.
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