7 Myths About Political Betting Markets
Markets are more accurate than polls, without any substantial evidence of manipulation or nefarious uses.
Political betting markets have emerged this election cycle as an alternative to punditry, polling, and, yes, even the 13 keys to the White House. The rise in popularity comes at the same time the U.S. Commodity Futures Trading Commission (CFTC) is trying, and failing, to regulate betting on U.S. elections out of existence. Of course, even if the CFTC were to succeed in making election markets illegal within the U.S., these markets will continue to thrive offshore and overseas, just as they have for decades. Those fighting alongside the CFTC in favor of outlawing election markets have begun a public relations campaign attempting to (mis)inform the public about the many harms of these markets. Election betting markets have been portrayed in a negative light in two separate Wall Street Journal articles, one after the first attempted Trump assassination and the other alleging market manipulation on Polymarket (a claim that was later debunked in the New York Times). And just within the past week, Time Magazine published a piece titled “Don’t Trust the Political Prediction Markets”.
With so much attention and conflicting information about betting markets being thrown about, it’s worth debunking common myths about election betting markets.
1. Myth: Betting Markets Are a Poll
One of the most persistent myths is that political betting markets serve as a form of polling, directly measuring voter sentiment. High-profile figures like former President Donald Trump have referred to platforms like Polymarket as “Polypoll,” suggesting they represent the views of voters. An October 2024 New York Times article on betting markets was forced to issue a correction after incorrectly describing markets as polls. The correction, itself, was incorrect and had to be further corrected.
Reality: One important reason why markets tend to be more reliable than polls is because participants in markets are being asked to provide an opinion on the more relevant question: who do you think will win instead of who do you want to win. Betting markets are not polls. Unlike polls that gather data by asking prospective voters who they want to win, betting markets reflect the opinions of traders on the question of who they think will win.
2. Myth: Political Betting Markets Are Easily Manipulated
Another frequent criticism is that political betting markets are highly susceptible to manipulation, particularly by wealthy individuals or foreign actors with large sums of money. Critics claim that these participants can artificially move market odds in favor of their preferred outcome, which could impact the outcome by manipulating public perception about the eleciton. A recent case has been documented by the so-called Polymarket Whale, Fredi9999, who has amassed a position on Donald Trump to win the election in excess of $50 million on Polymarket. Despite widespread speculation that this person is manipulating the market, it has been reported in the NY Times that the person is a professional trader is betting based on an opinion that Donald Trump will win the election.
Reality: While betting markets are not immune to manipulation, the claim that they are easily swayed by large, single bets is overstated. By the nature of markets, attempts to manipulate tend to inject liquidity into the market and dislocate the price, which in turn attracts additional trading activity which corrects the market price. Although election betting markets have existed for over a century, there are no documented cases of a widespread manipulation that has had any impact on the outcome of an election.
3. Myth: Political Betting Markets Are Less Accurate Than Polls
Another common myth is that betting markets are less accurate than traditional polling methods. These claims are generally put forward by pollsters, poll aggregators (like FiveThirtyEight and Nate Silver), and legacy media outlets, all of whom are in direct competition with betting markets for the public’s attention and trust.
Reality: Political betting markets have consistently proven to be strong predictors of election outcomes. My research from the 2018 and 2020 election cycles shows that the betting platform at PredictIt has been more accurate overall than polling aggregators like FiveThirtyEight in those cycles. In short, if you use public polling aggregators alone to bet in these markets, you will lose money. Though not analyzed specifically, more liquid markets, such as Betfair and Polymarket, should be even more accurate than PredictIt, which has low liquidity and high restrictions on trading activity.
This, on its own, is not an indictment of polls, but rather an endorsement of markets. The markets are hard to beat, because they incorporate a wide range of information—such as polling data, political developments, and public sentiment—that allows the market price to reflect information more accurately than polls. In addition, bettors have a financial incentive to make accurate predictions, which can reduce bias and improve accuracy.
4. Myth: The Demographic of Traders Is Not Representative of the Voting Population
Critics often claim that betting market prices are inherently flawed because political bettors tend to be young and male (and sometimes foreign), and therefore do not reflect the “diverse” demographics of the general voting population. They argue that markets fail because they are driven by a small, unrepresentative subset of people—primarily affluent, risk-tolerant individuals.
Reality: While it’s true that the demographics of bettors differ from voters, this does not undermine the reliability of betting markets. Just as one does not have to be a professional football player to successfully bet on NFL games, one need not be a “representative voter” to profitably bet on elections. As discussed in Myth 1, the bettors in these markets are betting based on who they think will win, not on who they want to win.
Bettors are not betting based on their “lived experience”, they are betting based on wide range of information sources, including polling data, news, and historical trends, to inform their bets. Furthermore, bettors are financially incentivized to be right in ways that pollsters and pundits are not. As a result, betting markets can offer a more holistic and up-to-date reflection of how an election is likely to unfold, even if the demographics are skewed relative to the voting public.
5. Myth: Political Betting Markets Are Subject to Foreign Interference
In light of concerns about foreign influence in elections, some argue that political betting markets are especially vulnerable to foreign interference. This myth stems from the fear that foreign bettors could place large wagers to artificially sway the odds in favor of certain candidates or outcomes.
Reality: While foreign individuals can participate in some betting markets, the idea that manipulating the odds can change the outcome of the election is unsubstantiated. Even discounting that the decentralized nature of these markets means that attempts at manipulation would likely be offset by other participants, it is by no means clear in what way manipulating the price either in favor or against a preferred candidate would in any way help them secure the election. However, to the extent that such concerns are valid, the antidote is not more restrictions on markets but less. As markets become more liquid and widespread, the amount of money required to successfully manipulate a market for a sustained period of time grows into the hundreds of millions and billions of dollars. An entity willing to invest that amount of money to impact the election would have better options with a higher chance of success.
6. Myth: Betting Markets Are Illegal
Some critics argue that betting markets operate in a legal gray area or are outright illegal, which undermines their credibility and reliability.
Reality: While there have been legal challenges to various betting platforms, those challenges have been consistently denied by the U.S. Courts. For example, platforms like Kalshi and Interactive Brokers have been granted licenses to operate under specific conditions. Although not all platforms can be legally accessed by traders from all jurisdictions, this does not make them inherently illegal or untrustworthy. Moreover, the legality of these platforms does not impact their accuracy or reliability; betting markets can still provide valuable insights into electoral outcomes, regardless of their regulatory status within the U.S. or offshore.
7. Myth: Political Betting Markets Lack the Liquidity Needed to be Reliable
Another criticism of political betting markets is that they are too thinly traded, with low volume and liquidity, making them unreliable predictors of election outcomes. According to this view, a few small bets can significantly move the odds, rendering them meaningless.
Reality: While some markets may suffer from lower liquidity, this issue is often overstated. As my research has shown, even low liquidity markets like PredictIt have proven more accurate than polling in previous cycles. The main presidential election market on Polymarket has had over $2 billion in traded volume, with at least two more weeks to go. While this volume may be small compared to large stock exchanges, the amounts of money traded are more than significant enough to incentivize individual traders.
Conclusion
As always, when reading critiques of betting markets, consider the source. Because these markets are so new, there will likely be a lot of bad information about what they do and how they work. Though much of this can be chalked up to ignorance, some of it, like the recent Time Magazine article, is put out to purposely misinform.
Political betting markets are not perfect, and likely never will be, but they are the single best resource for synthesizing the range of political information available. They are especially valuable as an alternative source of news and information at times, such as now, when trust in the media is at an all-time low.