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Polymarket users have bet .2 billion on the election outcome – and most of the bets are on Trump's victory

Polymarket users have bet $3.2 billion on the election outcome – and most of the bets are on Trump's victory

3 minutes, 37 seconds Read

The 2024 election was full of new and unprecedented developments in the history of American electoral politics: an incumbent president was forced out of the race by his own party. About three months before Election Day, a mixed-race woman of black and Native American descent took his place. And her opponent, a former president who was running for non-consecutive terms, was convicted of 34 felonies during the campaign.

As the melodrama unfolded, each candidate's ups and downs were tracked not just in the polls but, for the first time in modern history, by the prediction markets.

Prediction markets are, for lack of a better term, just betting lines. Bettors can bet on who they think will win, by how much, and in which states. On Polymarket, which only takes bets in cryptocurrencies, bettors could even have bet on whether or not Taylor Swift would attend Vice President Kamala Harris' rally on Monday. (She went to the Kansas City Chiefs game instead.)

The central question of whether Harris or former President Donald Trump would win the presidential election preoccupied Polymarket with $3.2 billion in bets on Election Day. Most bets were on Trump, with $1.3 billion placed on the former president and $827 million placed on Harris. Polymarket did not respond to a request for comment.

The rise of betting markets signaled a significant shift in the way elections were reported in the press and observed by the public. Pundits, analysts, and Wall Street investors began incorporating prediction markets into their election predictions. The reason for this was that they reflected people's true feelings because they were putting their own money at risk. In reality, this was only partially true: all betting lines fluctuate due to both betting volume and the external factors affecting the race.

In late July, for example, Trump's chances skyrocketed following President Joe Biden's abysmal performance in the debate. However, the spike in Trump probabilities at the end of October was the result of divergent betting behavior by just 1% of Polymarket users Bloomberg.

The financial world was as attached to the prediction markets as politicians were. “Various assets were impacted by Polymarket’s results,” said Lukman Otunuga, senior market analyst at online trading platform FTXM. “This was reflected in global markets as the “Trump trade” boosted the US dollar, Bitcoin and financial stocks in October. It appears investors have used the prediction markets to gain an advantage ahead of Election Day.”

In the final days of the campaign, there appear to be signs that some of Trump's business deals are being unwound. In part because the volatility of the former president's electoral prospects suggested he could lose after being considered the favorite for most of the race.

In this election cycle, the volatility of the prediction markets counterbalanced the stability of the polls. Traditional voter surveys continued to show a statistical dead heat. While the betting markets fluctuated regularly – rising and falling based on Harris' strong debate performance, Trump's recent offensive comments and yes, even star Iowa pollster Ann Selzer's late, dramatic polls.

For some bettors (or are they investors?) the volatility is the appeal. In prediction markets, bettors purchase contracts that pay out $1 if the outcome they bet on occurs. The price of this contract changes with the probability of the outcome. But bettors can also sell contracts on these platforms. So if you time the market correctly, you can theoretically profit even if the outcome you bet on doesn't happen. For example, on July 21, the day Biden exited a Harris victory, the price was 29 cents. A week later the price was 39 cents. A spread large enough to make a significant and guaranteed profit if one had bought at a low price and sold at a high price.

But for all the truth-telling abilities of the market claimed by prediction market proponents, they can still stumble: People make bad investments all the time. A heavily favored Trump could lose. The delicious win of an underdog bet on Harris may never happen.

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