There have been many twists and turns in the Presidential betting over the last month.
I’ve been following them all closely, because I run ElectionBettingOdds.com, so I’ll share what I’ve observed:
Trump first gained in the odds, then lost some of his lead
Here’s where the betting odds stand right now, along with the graph over the last month:
Looking at the start of the graph, bettors bid up Trump’s odds for a while, front-running the polling changes.
The VP debate was held on October 1, and from then through October 25, bettors raised Trump’s odds from about 47% to 57%.
Some were skeptical, and worried that “market manipulation” was at play, especially after it was revealed that a single French trader had bet $25 million on Trump on Polymarket.
But bettors’ predictions were soon confirmed by polling. See the graph for how bettors correctly anticipated Trump’s rise in polling-based models:
In the raw polling, one could see a shift as well. Trump at one point was leading in all the swing states, according to the RealClearPolitics average, which has the best historical track record among the different polling averages.
In last week, however, Trump has slipped slightly in the polls. RealClearPolitics now has him losing slightly in Michigan and Wisconsin.
Also, a poll in Iowa came out this weekend showing Trump losing Iowa — which had been considered a safe red state. That poll had a respected methodology, and it spooked markets this weekend, briefly sending Trump’s odds of winning Iowa down to below 80%, and sending his odds of being President down as much as 5 points.
NBC News correspondent Steve Kornacki explains how the new Iowa poll hints at a possible narrative where abortion policy is key:
The poll might still be way off — a different poll the same day had Trump up 10 points in Iowa — but the bettors think there’s about a 20 percent chance that the poll with Harris leading is right, based on the odds they give for Iowa:
The betting odds still give Trump an ultra-slight edge for becoming President — now essentially the same as what Nate Silver gives him.
The bettors are much more hesitant about predicting a Trump win than they were just a few days ago.
Was there market manipulation?
Before Trump’s slide in the odds last week, one French trader’s $25 million on Trump had moved the markets slightly. Were his trades “manipulation”?
For comparison, over $2 billion total has been traded on the election, so $25 million is a little more than 1% of the total bet.
Looking at changes in individual markets always suggested that Trump’s odds were rising, regardless of any “whale” making trades:
PredictIt is a good “sanity check” to look at if you ever fear market manipulation, due to strict regulatory trading limits. Because of the way PredictIt was given government permission to operate way back in 2014, it alone among the major markets has to limit traders to $850 per contract. It must also limit the number of traders per race to 5,000.
As a result, PredictIt combines aspects of a poll which tracks the same people over time, and also a betting market.
Because of that, PredictIt is really difficult to manipulate. It’s also very hard to make real money doing arbitrage with it, so manipulating another market won’t automatically move PredictIt.
So whenever one worries about manipulation, you can compare PredictIt to the other markets, and see if it is moving similarly. If it is, then manipulation probably isn’t the only factor.
Note that the above does not mean PredictIt is a pure, unbiased, indicator, or that it’s any better than the other markets. PredictIt has its own biases and weakness. In particular, it has a specific user base, which may lean more towards political “nerds” then do the other markets. In general, PredictIt has leaned more Democrat for the whole election cycle.
But it’s good to have slightly different markets. And it’s a reason that ElectionBettingOdds.com’s average is useful; the average of truly different markets is likely to be more accurate than any single market, just as averaging polls is more accurate than any single one.
Trump’s odds, as I write this, show the following:
Note also that, while the above provides general evidence that Trump’s rise was not due to manipulation, the French trader did eventually talk with the press, and he made that clear as well:
Polymarket’s volume appears to be inflated
In the screenshot above with the five markets, one stands out: Polymarket reports $3 billion traded.
But on Wednesday, Fortune revealed that as much as a third of Polymarket’s volume is due to fake “wash trading”:
In separate investigations completed by the blockchain firms Chaos Labs and Inca Digital and shared exclusively with Fortune, analysts found that Polymarket activity exhibited signs of wash trading, a form of market manipulation where shares are bought and sold, often simultaneously and repeatedly, to create a false impression of volume and activity.
They go on:
Chaos Labs found that wash trading constituted around one-third of trading volume on Polymarket’s presidential market
So while my odds screenshot above shows that Polymarket’s volume is $3 billion, the real number is probably $2 billion or less.
The good news is the wash trading doesn’t impact the odds, as prediction market pioneer Robin Hanson notes:
I had some suspicions about whether Polymarket’s volume was of the same quality as volume on other exchanges, and that’s one reason ElectionBettingOdds.com has not volume-weighted the odds this cycle. A further reason is related to what I noted above about PredictIt; a market’s predictive value can be due to not only volume, but also to having different trading rules.
More betting markets have entered the space
Thanks to a court ruling on October 2, betting on elections is now legal in the United States (for now, pending a final court ruling.) On October 4, Kalshi, the company which won the injunction against the government, listed their first Presidential betting markets.
On October 5th, I added Kalshi to the ElectionBettingOdds.com average.
Since then, more exchanges have come online with election trading, such as Interactive Brokers, and the even more famous Robinhood. Those are very streamlined markets, are fully legal, and have relatively low fees. They were launched too close to the election for me to add them to the ElectionBettingOdds.com average this cycle. But next time, they’ll be there.
Polymarket still has by far the most creative and liquid markets (notwithstanding the wash trading) but Americans aren’t supposed to trade there — anyone who does is using a VPN to access the site.
Manifold Markets is a formerly all-play-money site that recently also added an element of real-money trading in the form of “sweepstakes.”
In sum, the election trading space is more vibrant than ever, and there are plenty of legal sites where Americans can trade.
It’ll be interesting to see how the markets do on Tuesday. They have a good track record in the past.
one anecdotal case comment.
in Brexit, the polls suggested toss up with very slight advantage to remain.
but in the referendum day I recall some betting markets giving remain like 85%. huge delusionary miss it felt then