Election prediction market favors Trump by 2/3 odds despite throwaway polls: NPR

An election betting ad flashed on the screen during coverage of former President Donald Trump’s rally at Madison Square Garden this weekend on the Right Side Broadcasting Network, a conservative media company.

“Put on the American election,” the ad for Kalshi said as Trump spoke on stage. “Bet $100 on Trump, get $175.”

more than $100 million has been legally bet on the presidential race on the platform, days out from Election Day. This explosion in legal betting comes after a federal appeals court earlier this month allowed KalshiEX LLC, an online betting company, to open an election prediction market.

The company’s CEO, Tarek Mansour, told NPR his polling market — which shows a 63% chance of Trump winning as of Tuesday — is a “mechanism of truth” and helps ordinary people hedge against unpredictable political risks. But critics such as Sen. Jeff Merkley (D-Ore.) have called the legal decision a “big mistake” that hurts American democracy.

Kalshi is still battling federal regulators in court. But retail investment platform Robinhood also began offering bets on options contracts this week. That leaves Americans free to make tens of thousands of legal election bets, with little knowledge of how they will affect one of the closest and most contested presidential elections in decades.

Bets on US elections

Betting on the US presidential election is nothing new. Betting on presidential candidates was common in the early 20th century. Betting commissioners in New York City controlled these markets at a place called the New York Curb Exchange.

Not only did betting take place, the markets were pretty accurate in a time before scientific political polling, according to NPR’s former gambling correspondent and current editor Keith Romer.

“Of the 15 presidential elections between 1884 and 1940, the betting market correctly called the race in 11,” Romer told NPR’s Planet Money. “It’s too close to call for three. And they only get one wrong.”

Major newspapers, like The New York Times, would publish the odds as a source of information, Romer said. However, in the latter half of the 20th century, during the rise of scientific polling and a series of prohibitive gambling laws, election betting fell out of favor.

In recent years, the prediction markets have brought back election betting. On social media platform X, the Trump campaign, tech billionaire Elon Musk and pollster Nate Silver often post the latest presidential odds on Polymarket, an offshore prediction market that US citizens can only use illegally.

To date, $2.5 billion has been bet on the presidential election at Polymarket, which also gives the former president a 66% chance of election victory.

For the first time, Kalshi gives Americans a legal platform for their efforts, which CEO and co-founder Mansour argued offers voters accurate information, unlike political polls.

Rajiv Sethi, a professor of economics at Barnard College who has studied these markets for years, said “the jury is still out” on whether prediction markets are better than traditional political polls — but it’s close.

“They generate outputs that are actually quite competitive with the best models,” Sethi said.

Does it affect the election results?

Mansour, the chief executive, said the aim is to expand election betting to the general public, similar to the creative financial instruments available to hedge risks for “high-net-worth individuals” at investment banks such as Goldman Sachs, his former employer.

He gave the example of an environmental company protecting itself against the election of a candidate who proposes to cut climate change initiatives.

“People can now do something about it,” Mansour said. “They can reduce their exposure and volatility to events that they don’t really have control over.”

When asked about dodgy bets designed to falsely raise the odds for a given candidate, Mansour said the election markets are “self-correcting” because bettors will see an opportunity to profit from an inflated result.

“The only result is basically – the people who tried to manipulate in the first place lost a lot of money,” Mansour said during an interview conducted when the Kalshi odds mirrored the public opinion polls.

Mansour admitted that election betting is not a zero-risk proposition, but said Kalshi is federally regulated — meaning regulators would be able to intervene if someone tried to manipulate a market.

“Everything is super transparent and everybody can see everything you do and know your name and your address and what you’re doing and the government is monitoring,” Mansour said. “It feels like a pretty bad place to try to do any of these things.”

Sethi, the Barnard Professor, largely agreed, citing a 2012 case in which an anonymous bet $7 million to increase the odds of then-Republican presidential candidate Mitt Romney winning the election and failed when other players caught on. But Sethi said there is still a potential for manipulation.

“Your belief about whether a candidate is viable, doing well, likely to win can affect things like fundraising, support, enthusiasm, volunteerism and so on,” Sethi said. “These things can actually affect the actual outcome of the election.”

‘A huge mistake’

A week from Election Day, the Kalshi market favors Trump by over 30 percentage points — while most political polls show Harris and Trump statistically tied. This misalignment has raised questions about the accuracy of these markets.

Merkley, the Oregon senator, has opposed Kalshi from the start and proposed a bill in Congress to ban all election betting.

“Allowing election betting is a huge mistake,” Merkley told NPR. “It turns elections from a place where you exercise your principles to where you exercise your pocketbook. It corrupts our American elections.”

Beyond the moral challenge, Merkley said the law prohibits it. He says it is against regulation 40.11 from the Commodity Futures Trading Commission, which prohibits trading in “terrorism, assassination, war, gambling or any activity illegal under any state or federal law.” The CFTC is fighting Kalshi in court.

“Gaming is betting on the outcome of a contest,” Merkley said. “An election is a competition. These are not commodities. This is not oil. This is not silver.”

Kalshis Mansour said he knows election betting comes with a stigma of corruption, but argued that the criticism does not hold water.

“We fought for these markets not because we think they threaten the integrity of the election,” Mansour said. “On the contrary, we think they promote it.”