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Polymarket Odds on Trump’s Election Chances Spark Debate
The recent surge in Polymarket odds favoring Donald Trump’s chances of winning the presidential election has sparked a heated debate, with some accusing the platform of being manipulated for political purposes. Mainstream media outlets have been quick to jump on the bandwagon, with headlines like "A French gambler’s $50m of bets inflated Trump’s odds — and is threatening democracy" grabbing attention.
However, experts in prediction markets interviewed by CoinDesk see little to no evidence of such manipulation and believe that any attempts to rig prices would likely be short-lived. The debate surrounding Polymarket’s accuracy has brought to the forefront the concept of expected value, where investors take advantage of a trade that would be profitable in the long term.
The French Whale: A Trader with Multiple Accounts
Polymarket confirmed to the New York Times that a single French national controls several accounts that have been making large bets on Trump winning. The trader told the Journal that he had "absolutely no political agenda" and was just trying to make money. Polymarket also stated that it has found no evidence of manipulation.
Experts in prediction markets, such as Flip Pidot, co-founder and CEO of American Civics Exchange, believe that the French trader’s use of multiple accounts suggests an attempt to minimize slippage, or prices moving against a trader placing a large order. "If the goal was to move the price, you’d do the opposite," said Pidot.
The Role of Big Firms in Prediction Markets
According to Mike van Rossum, CEO of quantitative trading firm Folkvang Trading, Trump’s outperformance on Polymarket has also coincided with increased participation from larger trading firms. These firms would be expected to pounce on an obvious trade and have the necessary infrastructure around poll/reporting data per (swing) state.
Buying shares on prediction markets is not the only "Trump trade" that has been popular lately. In the stock market, private prison and cryptocurrency companies have been among the beneficiaries of bets that the GOP nominee will win.
Liquidity: A Key Factor in Polymarket’s Odds
While most of the speculation about manipulation has focused on Trump bets, it would be far easier to inflate Polymarket odds in Harris’ favor due to an imbalance in liquidity between the candidates. Currently, Polymarket has racked up $2.5 billion in trading volume on its U.S. election market.
Order book data shows that there are more than $50 million worth of resting sell orders in the order book for Trump and $20 million worth for Harris. This means wannabe buyers have that much inventory to trade with for each candidate. As a result, the amount of capital required to move the needle for Harris by 1 percentage point is around $70,000.
Cross-Market Arbitrage: A Force for Efficiency
The fragmentation of betting across multiple venues, including Betfair and Kalshi, means that prices get knocked back in line with other markets because there is near-instantaneous money to be made by selling the higher price on one platform and buying a lower price on another.
Polymarket’s waiver of trading fees has been cited as a reason for its high odds. By contrast, regulated markets like Kalshi deduct a "vigorish" of 5% to 10% from the winning bettor’s payout.
A Theory of Manipulation: Why It Might Not Work
While some experts believe that Polymarket’s user base is systematically exposed to different information about the election, others argue that potential cognitive bias of participants doesn’t undermine the informational value of these markets. The weighted average of these markets together is likely closer to truth than any are individually.
A Theory About Legacy Media’s Attempt to Discredit Prediction Markets
Harry Crane, a statistics professor at Rutgers University in New Jersey, has a theory about why there have been so many news stories alleging manipulation. "I believe the narrative about manipulation is an attempt by legacy media to discredit these markets, which threatens their ability to control the narrative," he said.
Conclusion
The debate surrounding Polymarket’s accuracy and potential manipulation has highlighted the complexities of prediction markets and the forces that drive their prices. As the election approaches, it will be interesting to see how Polymarket’s odds evolve and whether they reflect a shift in public opinion or a more calculated attempt to influence the outcome.