Prediction markets got Trump’s victory right

This was a breakout election cycle for election wagering, which was legal thanks to a U.S. district court decision last month. 

Betting markets, including platforms like Polymarket, Kalshi and PredictIt, got a lot of attention for their early predictions of a victory by former President Donald Trump, while traditional polls were showing a tossup. Turns out, prediction markets were right. 

While pollsters ask people how they intend to vote in an election, prediction markets have traders gather information, think hard about the likely outcome and place bets, according to Koleman Strumpf, a professor of political economy at Wake Forest University. 

“People don’t get involved in markets typically unless they think they have an edge,” Stumpf said.

At least this time, Strumpf argued that these betting markets knew something traditional forecasters didn’t. 

But Barnard College economist Rajiv Sethi is more skeptical and thinks the jury’s still out. “You can’t just reach that conclusion based on the headline event, which was the winner of the presidency.”

Researchers need to look harder at individual states, down ballot races and future elections to determine if market predictions were more accurate than polls, Sethi noted.

And either way, there’s risk in treating these markets like poll results, because they’re easily manipulated by private money. 

“The belief about a campaign — its viability, its vitality, its momentum — can affect voter turnout, it can affect contributions by donors and so on,” he said. Especially if those voters and donors believe their actions won’t change the result.