The U.S. election cycle is racing to an exciting fish as Donald Trump and Kamala Harris prepare for a showdown on Nov. 5 to determine who'll be the next White House resident.
While candidates look for ways to boost their campaigns, a significant spotlight has fallen on prediction markets—platforms where people trade on the outcome of world events.
The Polymarket Question
Polymarket, a cryptocurrency-based betting platform, has seen a whopping $2.5 billion wagered on the outcome of the U.S. presidency. Thanks to the huge stakes, Polymarket's election betting odds have become one of the most talked about, both in mainstream and social media circles.
Alex Marinier, founder of venture capital firm New Form Capital, which invested in Polymarket's seed round back in 2020, told Benzinga that they were moved by founder Shayne Coplan's "grand vision" of making the platform a source of market-based truth.
Apart from Marinier, renowned angel investor and influencer Naval Ravikant also participated in the startup’s seed-funding round.
But beneath the veneer of big money and the novelty of cryptocurrencies, concerns of market manipulation have begun engulfing Polymarket, affecting the platform’s credibility.
A single trader, using the monicker Fredi9999, and identified as a French national, has been placing large wagers in favor of Trump, whose odds of winning have leapfrogged to 64%, compared to 49% at the beginning of October.
In fact, claims of coordinated activity have been doing the rounds, with the trader allegedly managing three more accounts under different aliases.
Taking note of these concerns, Polymarket conducted an investigation and concluded that the trader's bets were based on personal views of the election outcome with no signs of manipulation.
"The counterargument against prediction markets is that overzealous market participants could wager irrationally on the candidate they support just because they are caught up emotionally in their victory," Marinier said. However, he believes "smart money” would eventually take the other side of these emotionally attached participants to correct for the anomaly.
The other area of concern flagged by skeptics is the potential influence of foreign money.
Polymarket has been restricted from allowing U.S. customers to place bets since 2022, as part of a deal with the Commodity Futures Trading Commission (CFTC).
Prediction Markets Vs. Opinion Polls
The overwhelming odds in favor of a Trump victory were in sharp contrast to national poll surveys that predicted a closer fight.
The New York Times/Siena College national poll finds Trump and Harris tied at 48%, while the CNN/SSRS polls are likewise deadlocked at 47%.
Christian Costa, consultant at strategy and communications firm Wachsman, and a former member of the Fox News Decision Desk team for the 2020 election, told Benzinga that "essential distinctions" must be made to interpret opinion polls and prediction markets.
"Public polling asks respondents who they intend to vote for, while prediction markets ask users to place bets on who they think will win—different questions to which an individual may have different answers," Costa said. "Voting decisions are motivated by personal beliefs, while market forces drive bets."
Marinier went a step ahead and argued that biases in polls are more likely as there is no economic stake compared to prediction markets, which place an “economic bounty on truth.”
But is it fair to say that people who may not vote in the U.S. election or benefit from a U.S. presidency have skin in the game?
Polymarket Not As Foreign As Made Out To Be?
"The United States is not only the strongest military force in the world but also the country with the global reserve currency, the U.S. dollar. U.S. presidential elections have ramifications for everyone around the world and their local economies, so global participation makes sense," Joe McCann, founder and CEO of cryptocurrency hedge fund Asymmetric, opined.
He also questioned the narrative that the American public can't access the platform, arguing that one can easily use a VPN to change one’s location outside of the U.S.
Indeed, a quick search on Google and X for "How to use Polymarket using VPN" throws up hundreds of results on how to bypass the barriers.
However, not everyone was convinced. Dr. Arman Meguerian, Founder & CEO of Bitcoin BTC/USD-based startup Timestamp Financial, called out the bias in the demographic makeup of the user base.
“The typical user of a cryptocurrency-based betting platform skews towards younger individuals with a high-risk tolerance, which could distort the signal. These biases create a selective sample that may overrepresent certain viewpoints while missing others,” Meguerian said.
Polymarket has yet to respond to Benzinga’s request for comment on these developments.
Image via Shutterstock
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