Polymarket’s $2.7 billion bet on Trump and Harris raises concerns about manipulation

Less than a week left until Election Day

Donald Trump is traveling to New Mexico and Virginia in the final days of the campaign, taking a risky detour into seven battleground states to spend time in places where Republican presidential candidates haven’t won in decades. The former president will campaign in Albuquerque, New Mexico, on Thursday and Salem, Virginia, on Saturday. LiveNOW from FOX host Josh Breslow spoke with David Becker, executive director and founder of the Center for Election Innovation and Research, about the latest developments.

LOS ANGELES – As Election Day approaches, prediction market Polymarket has attracted attention with its $2.7 billion bet pool on the 2024 presidential race between Donald Trump and Kamala Harris. Polymarket odds currently show Trump has a 66% chance of winning.

However, recent analysis by blockchain experts suggests that nearly a third of this activity may be due to wash trading, calling into question the platform’s reliability as a forecasting tool.

Possible evidence of artificial trading at Polymarket

Blockchain research companies Chaos Labs and Inca Digital, known for their digital market security and data analytics, recently reported findings that cast doubt on Polymarket’s $2.7 billion transaction volume report. According to Fortuna reportThe companies estimate the actual volume to be $1.75 billion, attributing the discrepancy to wash trading, a practice where the same party repeatedly buys and sells assets to increase activity.

This artificial increase in volume, especially in favor of Trump, raises questions about whether the reported odds reflect real market sentiment or whether they have been distorted by manipulation.

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What is Polymarket?

Polymarket is a decentralized prediction market platform where users place bets on the outcome of events such as elections, using blockchain technology for secure, anonymous transactions. Unlike traditional bookmakers, Polymarket does not rely on a central intermediary, allowing users to post predictions directly on the platform.

The platform has gained additional fame thanks to the support of high-profile individuals, including Elon Musk. Musk frequently tweets Polymarket betting odds on X (formerly Twitter), where he recently shared a link to the platform, saying, “It’s crazy how many people are betting on these predictions.”

Thanks to Musk’s huge following on social media, his tweets increased Polymarket’s reach and perceived legitimacy.

Can betting markets influence the outcome of elections?

The popularity of betting on elections has raised concerns about the potential impact on voter perception and turnout. In theory, platforms such as Kalshi and Polymarket reflect public opinion through betting odds, but the consistency of these odds with traditional surveys remains ambiguous. Kalshi, a legally regulated US election betting platform, currently showing Trump has the same lead, while traditional polls point to a tighter race.

NPR recently reported Kalshi CEO Tarek Mansour defends betting on elections as a way to offer ordinary citizens a way to hedge against political risk, noting that federally regulated markets can curb manipulation.

During a live broadcast of former President Donald Trump’s rally at Madison Square Garden over the weekend, the conservative media outlet Right Side Broadcasting Network aired an ad for election betting. The ad promoting Kalshi’s election betting platform came as Trump addressed the crowd, saying, “Bet on the US election. Bet $100 on Trump, get $175.”

Scott Owens points to his computer screen and describes how to hedge a position to predict the US presidential election at his home in Madison, Wisconsin, on October 13, 2024. (Photo by Kayla Wolfe for The Washington Post via Getty)

Meanwhile, some experts argue that betting markets can influence election results by shaping voters’ beliefs and enthusiasm.

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Barnard College economics professor Rajeev Sethi, who studies prediction markets, told NPRinflated odds for one candidate can affect factors such as fundraising, volunteerism, and overall voter morale.

Senator Jeff Merkley (D-Oregon) recently opposed it, proposing legislation prohibit betting on elections.

Merkley argues that betting on elections corrupts democratic processes, turning elections into financial markets rather than civic exercises. “Allowing betting on elections is a huge mistake,” Merkley told NPR. “It is corrupting our American elections by turning principles into wallets.”

Source

This article is based on reporting from the Associated Press, Fortune and NPR, as well as data from blockchain research firms Chaos Labs and Inca Digital.