How Prediction Markets Like Polymarket Went Mainstream This Election Season | Techmeme Ride Home
Robinhood says US users that meet a certain criteria can trade a Kamala Harris or Donald Trump contract via its Robinhood Derivatives unit and ForecastEx. Quoting CNBC:
Robinhood jumps into a suddenly crowded politics prediction markets field that grew this month after platform Kalshi won a key ruling against the Commodity Futures Trading Commission, which was seeking to stop the election outcome trading. The CFTC is appealing the ruling. Shortly after, Interactive Brokers launched various political contracts, including on the election.
The election markets have generated some controversary this year with some concerned about light volume allowing the markets to be skewed. International platform Polymarket said last week that a single French user was responsible for four accounts spending millions to buy the Trump contract. But Polymarket said an investigation found the trading was not manipulating the market. ENDQUOTE
Yes, on Polymarket, quoting the Washington Post:
Around $2 billion in cryptocurrency has been wagered on predicting the next president on Polymarket as of Friday two weeks ago. The New York-based company says it receives tens of millions of visits per month.
Tarek Mansour, CEO of Kalshi, said in an interview this week that the site’s user base has been “doubling day over day” since the U.S. District Court for the District of Columbia early this month ruled against a Commodity Futures Trading Commission order banning bets on politics. The agency is appealing the decision.
Advocates and fans of prediction markets argue that the financial incentives they create and the “wisdom of crowds” allow pricing on the exchanges to provide accurate forecasts.
Instead of stocks or bonds, traders on prediction markets buy stakes in potential outcomes that return $1 if they come to pass — or nothing if they don’t. In the run-up to an event, the market price fluctuates as traders weigh how likely they consider the different outcomes are and what stakes to buy and sell at different prices.
Wagering on elections and other events is gaining popularity as Americans double down on sports betting in the wake of dozens of states legalizing the pastime. In 2023, the sports betting industry had nearly $120 billion in revenue, a 44.5 percent increase from 2022, according to the American Gaming Association.
But U.S. regulators are still hammering out what’s allowed on prediction markets. The Commodity Futures Trading Commission has cracked down on election betting through a mix of proposed rules and court cases. The agency declined to comment on additional rulemaking while the Kalshi litigation is pending.
Polymarket, founded in 2020, is the largest prediction market but open only to non-U.S. investors, although tips on circumventing that rule circulate online. Polymarket said it certifies that its biggest traders are not American. The company has received more than $100 million in funding from investors including billionaire tech titan Peter Thiel, a mentor to Republican vice-presidential candidate JD Vance; and Vitalik Buterin, co-founder of the ethereum crypto network.
The majority of Polymarket’s 210,000 users have lost modest amounts of money on the platform, according to the analytics site LayerHub, and as of Friday only 12 percent of users have made a profit. ENDQUOTE