close
close

Yiamastaverna

Trusted News & Timely Insights

The election prediction market favors Trump by 2/3 odds, despite mixed polls: NPR
Utah

The election prediction market favors Trump by 2/3 odds, despite mixed polls: NPR

Republican presidential candidate and former U.S. President Donald Trump speaks at a campaign rally at Madison Square Garden on October 27, 2024 in New York City.

Republican presidential candidate and former U.S. President Donald Trump speaks at a campaign rally at Madison Square Garden on October 27, 2024 in New York City.

Michael M. Santiago/Getty Images


Hide caption

Toggle label

Michael M. Santiago/Getty Images

During coverage of former President Donald Trump’s rally at Madison Square Garden this weekend on the Right Side Broadcasting Network, a conservative media outlet, an advertisement for election betting played on the screen.

“Bet on the US election,” the ad for Kalshi said as Trump spoke on stage. “Bet $100 on Trump, get $175.”

More than Days before Election Day, $100 million was legally bet on the presidential race on the platform. The explosion in legal betting came after a federal appeals court earlier this month allowed KalshiEX LLC, an online betting company, to open an election prediction market.

The company’s CEO, Tarek Mansour, told NPR about his election market, which showed a 63 percent chance of a Trump win on Tuesday – is a “mechanism for truth” and helps ordinary people protect themselves against unpredictable political risks. But critics like Sen. Jeff Merkley (D-Ore.) call the court decision a “big mistake” that is damaging to American democracy.

Kalshi is still fighting federal regulators in court. But retail investing platform Robinhood also began offering betting on election contracts this week. That gives Americans the freedom to place tens of millions of legal election bets, with little known about what impact they will have on one of the closest and most contentious presidential elections in decades.

TRUMP-KALSHI AD.PNG

Betting on US elections

Betting on the US presidential election is nothing new. Betting on presidential candidates was common at the turn of the 20th century. Betting commissioners in New York City controlled these markets at a place called the New York Curb Exchange.

According to Keith Romer, NPR’s former gambling correspondent and current editor, not only was betting happening, but markets were pretty accurate in a time before scientific political polls.

“Of the 15 presidential elections between 1884 and 1940, the betting market calls the race correctly in 11,” Romer told NPR’s Planet Money. “It’s too close to name three. And they just make one mistake.”

Major newspapers like the New York Times would publish the betting odds as a source of information, Romer said. But in the second half of the 20th century, with the rise of scientific polling and the enactment of a series of prohibitive gambling laws, election betting fell out of favor.

In recent years, prediction markets have brought back election betting. On the social media platform

So far, $2.5 billion has been bet on the presidential election on Polymarket, which also gives the former president a 66% chance of winning the election.

For the first time, Kalshi offers Americans a legal platform for their betting that, unlike political polls, provides voters with accurate information, according to CEO and co-founder Mansour.

Rajiv Sethi, an economics professor at Barnard College who has studied these markets for years, said the jury is still out on whether prediction markets are better than traditional political polls – but it’s close.

“They produce results that are actually quite competitive with the best models,” said Sethi.

Influencing the election results?

Mansour, the CEO, said the goal was to expand election betting to the general public, similar to the creative financial tools available to hedge risks for “high-net-worth individuals” at investment banks like Goldman Sachs, his former employer.

He gave the example of an environmental company protecting itself against the election of a candidate who proposes cuts to climate initiatives.

“People can do something about it now,” Mansour said. “They can reduce their risk and volatility to events that they don’t really have control over.”

Asked about nefarious bets designed to falsely increase a particular candidate’s chances, Mansour said election markets are “self-correcting” because bettors see an opportunity to make money on an inflated result.

“The only result is basically – the people who tried to rig in the first place lost a lot of money,” Mansour said during an interview conducted when Kalshi odds matched those of public polls.

Mansour acknowledged that election betting is not a zero-risk business, but said Kalshi is federally regulated – meaning regulators could intervene if someone tried to manipulate a market.

“Everything is super transparent and everyone can see everything you do and knows your name and address and what you do, and the government is monitoring it,” Mansour said. “It feels like a pretty bad place to try something like that.”

Sethi, the Barnard Professor, largely agreed, pointing to a 2012 case in which an anonymous person bet $7 million to increase then-Republican presidential candidate Mitt Romney’s chances of winning the election and failed when other players caught up. But Sethi said there was still a possibility of tampering.

“Your beliefs about whether a candidate is viable, whether they are doing well, whether they are likely to prevail can impact things like fundraising, endorsements, enthusiasm, volunteerism, etc.,” Sethi said. “These things can actually affect the actual outcome of the election.”

Supporters of Vice President and Democratic presidential candidate Harris wait on the Ellipse south of the White House for her speech in Washington, DC on Tuesday. More than $100 million was legally bet on the presidential race on the first legal election betting platform in the US in years.

Supporters of Vice President and Democratic presidential candidate Harris wait on the Ellipse south of the White House for her speech in Washington, DC on Tuesday. More than $100 million was legally bet on the presidential race on the first legal election betting platform in the US in years.

Andrew Caballero-Reynolds/AFP via Getty Images


Hide caption

Toggle label

Andrew Caballero-Reynolds/AFP via Getty Images

“A big mistake”

A week after Election Day, the Kalshi market favors Trump by over 30 percentage points – while most political polls statistically show a tie between Harris and Trump. This misalignment has raised questions about the accuracy of these markets.

Merkley, the Senator from Oregon, has spoken out against Kalshi from the start and proposed a bill in Congress to ban all election betting.

“Allowing election betting is a big mistake,” Merkley told NPR. “It turns elections from a place where you exercise your principles to a place where you use your wallet. It corrupts our American elections.”

Beyond the moral challenge, Merkley said the law prohibits it. He says it violates Commodity Futures Trading Commission Regulation 40.11, which prohibits trading in “terrorism, murder, war, gambling or any activity unlawful under state or federal law.” The CFTC is fighting Kalshi in court.

“Gambling is betting on the outcome of a competition,” Merkley said. “An election is a competition. These are not goods. That’s not oil. This isn’t silver.”

Kalshi’s Mansour said he knew that election betting was associated with the stigma of corruption, but argued that the criticism was unfounded.

“We fought for these markets not because we believe they threaten the integrity of the elections,” Mansour said. “On the contrary, we believe they encourage it.”

LEAVE A RESPONSE

Your email address will not be published. Required fields are marked *