Something’s Odd About the Political Betting Markets

But more recently, prediction markets have developed an odd sort of problem. There seems to be a feedback mechanism now whereby the betting-market odds reify themselves. . . .

Traders are treating market odds as correct probabilities and not updating enough based on outside information. Belief in the correctness of prediction markets causes them t

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n the days leading up to the US election, pollsters had the race deadlocked. The vote was essentially a coin flip.

But over on the betting platform Polymarket, the odds were much more solidly in former President Donald Trump’s favor. On Monday, Trump led Vice President Kamala Harris 58% to 42% — a lead that, by Wednesday morning, proved to be a muc... See more

I am also a fan of prediction markets, which can help identify the significance of events in real time , before the dust settles and there is consensus on which direction is which. The Polymarket on Sam Altman is very helpful in giving a useful summary of the ultimate consequences of hour-by-hour revelations and negotiations, giving much-needed con... See more

he previously mentioned research finds that an investor with $100,000 in an equity mutual fund has the equivalent of a $2,500 bet on the election already.

Oftentimes with surprisingly little liquidity, prediction markets prove highly accurate and robust in the face of interference. The "wisdom of crowds" phenomenon ensures that these markets frequently outperform traditional forecasting tools like polls. For instance, the University of Iowa operates the Iowa Electronic Markets (IEM) as a research pro... See more