WHEN THE TRUMP WHALE SWALLOWED THE POLLSTERS
THE 2024 ELECTION was a resounding victory not only for Donald J. Trump but also for prediction markets like the crypto-based Polymarket, which allow users to trade contracts that pay out based on the outcome of future events.
By the morning of the election, Polymarket showed $1.8 billion in trading volume on who would win the presidency (Trump at 62%) and an additional half billion on who would win the popular vote (Harris at 73%). The biggest bet on a Trump victory was placed by an enigmatic “whale” known only as Théo.
Trump’s victory was even more decisive than the prediction markets foresaw. Even on Polymarket, few shared Théo’s conviction that Trump would win the popular vote. But the prediction markets were still a lot closer than most opinion polls and political pundits, nearly all of which clustered around a neckand- neck result.
The Wall Street Journal reported on Election Day that “Prediction Markets Point to Likely Trump Victory,” giving the former president a chance of success between 57% and 62%. But most polls showed the election as headed for a tie. Renowned election forecaster Nate Silver wrote on election morning: “We ran 80,000 simulations tonight. Harris won in 40,012,” thereby giving the sitting vice president a 50.015% chance of winning the election.
Nope.
Prediction markets, like all markets, mobilize knowledge that otherwise “never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess,” as Friedrich Hayek argued in 1945. The 2024 election may go down in history as the last election when we paid more attention to selfanointed election experts than to prediction markets.
The news that the FBI raided the home of Polymarket CEO Shayne Coplan early Wednesday and seized his phone and other electronic devices has added another dramatic turn to the story. The basis of the investigation remains unclear. Calling an election result certainly isn’t an offense.
A “crypto-powered gambling website”
Incumbent pollsters and pundits spent the months before Nov. 5 heaping scorn on prediction markets. The better Trump’s odds became
Niall Ferguson is a senior fellow at the Hoover Institution at Stanford University and founder of the advisory firm Greenmantle. Manny Rincon-Cruz is the founder of Buttonwood, a decentralized finance project, and co-founder with Ferguson of FourWinds Research.
Pundits heaped scorn on the prediction markets—until Nov. 5.
