Election Betting Markets in U.S. Gain Traction Amid Concerns
Presidential forecast according to bets compiled by Polymarket, Oct. 16, 2024. X/ @MJTruthUltra
October 17, 2024 Hour: 6:16 am
Betting platforms mark a significant shift in U.S. politics, opening the door for citizens to gamble on political outcomes freely.
As the U.S. presidential race between Vice President Kamala Harris and former President Donald Trump intensifies, a new player has entered the political arena: legal election betting markets.
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These platforms allow Americans to wager on who will occupy the White House in January after a lawsuit concluded by the U.S. Court of Appeals for the District of Columbia Circuit early this month, sparking both excitement and controversy.
The ruling on Oct. 2 lifted a temporary injunction that had blocked Kalshi, a New York-based financial exchange and prediction market, from offering event contracts on the elections including the presidential race, the popular vote and Electoral College margins of that race, and individual Senate contests. The new contracts were added to Kalshi and other brokerage giant Interactive Brokers’ platforms within days.
Tarek Mansour, founder of Kalshi, was quoted by the Financial Times that in the first days since the ban was lifted that more than US$12 million had been wagered, and the company was in the process of setting up several institutional players on the platform.
The Barron’s, an American magazine, reported that more than US$6.3 million had been put on the line for the Harris-Trump matchup as of Tuesday. The emergence of these betting platforms marks a significant shift in U.S. politics, opening the door for citizens to gamble on political outcomes freely.
Before that there are only two real-money prediction markets/futures markets operated by not-for-profit organizations for educational and research purposes. They are the Iowa Electronic Markets and the PredictIt.
Proponents argue that these markets provide a regulated way for investors to hedge against potential policy changes while also offering valuable insights into public sentiment. However, critics warn of risks such as election manipulation and the gamification of democracy.
“Our democracy is fragile enough without being gamified. There’s a real possibility of gamblers trying to shape the reality that they’re betting on,” Public Citizen co-president Robert Weissman told Politico.
The U.S. Commodity Futures Trading Commission (CFTC) has long opposed such markets, citing concerns about their legality under federal and state laws. However, the ruling on Oct. 2 has paved the way for a new tool to predict and analyze the race, especially the current betting odds tell a different story from traditional polling data.
While polls from sources like The New York Times showed that Harris was leading Trump by 50 percent to 47 percent, prediction markets offered a contrasting view. As of Wednesday, Kalshi assigned Trump a 55 percent chance of victory, with Harris at 45 percent.
Similar trends are visible on other platforms, such as Interactive Brokers, Polymarket and PredictIt. Contracts for a Harris victory were trading at 53 percent Wednesday morning at Interactive Brokers.
On offshore site, Polymarket, where more than US$1.9 billion was placed on the Harris-Trump matchup, Trump held a 59 to 41 advantage over Harris Wednesday morning. Social media has also influenced these markets. A post from Elon Musk recently caused Trump’s odds to jump on Polymarket.
“Trump now leading Kamala by 3 percent in betting markets. More accurate than polls since real money is on the line,” Musk wrote on social media X on Oct. 6. The day after Musk’s post, Trump’s lead on the platform increased by nearly 10 points.
Rajiv Sethi, an economics professor at the Barnard College of Columbia University, cautioned that while prediction markets may offer insights, their accuracy is still debated. He noted that platforms with stricter regulations and lower trading volumes, such as PredictIt, may be less susceptible to manipulation than unregulated platforms like Polymarket.
Historically, betting odds have been reasonably accurate in predicting election outcomes. According to the Bookmakers Review, betting odds have correctly predicted the winners in 77 percent of elections over the past 35 years. Since 1980, the only time a candidate with lower odds won the presidential election was in 2016, based on a Newsweek analysis.
Although these markets have demonstrated predictive power, they are not without flaws. The CFTC has identified instances of attempted manipulation, including a fabricated poll in 2012 that influenced betting on a Senate race and a trader who placed large bets on Mitt Romney to skew the 2012 presidential election odds. Mike Rothschild, an author on conspiracy theories, also warned that regardless of their accuracy, these markets could be used to bolster claims of election rigging or fraud.
teleSUR/ JF Source: Xinhua