Key facts
- Trading on prediction markets tied to election outcomes is increasing significantly.
- Election administrators worry that financial incentives on these markets could damage public confidence in democracy.
- Platforms like Polymarket and Kalshi allow trading on election results, with prices reflecting probable outcomes.
- States are pursuing legal action to regulate or ban prediction markets, citing gambling laws.
- Concerns include the potential for wealthy individuals to manipulate odds and influence voter turnout or perception.
Trading on prediction markets, which allow participants to buy and sell contracts based on the probable outcome of events like elections, has surged. This trend is causing concern among election administrators who fear it could further damage public confidence in democratic processes. Platforms such as Polymarket and Kalshi are at the center of this activity, with contracts typically priced between 1 and 99 cents.
Election officials nationwide are grappling with how to address these markets, with some states attempting to outlaw them as unlicensed casinos or betting on elections. The core worry is that pervasive financial incentives could lead people to believe they can influence election results, thereby undermining faith in the integrity of the vote. Jared DeMarinis, administrator for the Maryland State Board of Elections, described it as a "troubling trend."
Officials from Kalshi and Polymarket, however, argue that their platforms are akin to stock or commodity trading, serving as a means for individuals to hedge against potential policy impacts of election outcomes. They also assert that insider trading protections are in place, with Kalshi citing an instance where it suspended a North Carolina congressional candidate for trading on her own race. The platforms also claim their markets correlate strongly with actual outcomes, with traders incentivized to bet on the correct results.
Despite these assurances, prediction markets have faced scrutiny. In one instance, they heavily favored a losing candidate in a Wisconsin gubernatorial primary, mirroring poll inaccuracies. In Los Angeles, online influencers pointed to market odds favoring a Republican mayoral candidate as evidence of alleged election manipulation. Courts are currently handling litigation over whether states have the authority to regulate or ban these markets under existing gambling laws.
With courts unlikely to rule before the upcoming elections, trading on these platforms is expected to reach unprecedented levels across most states. Billions of dollars could be traded on questions concerning control of the House and Senate, as well as gubernatorial races. Election officials are discussing strategies to educate the public about the difference between prediction market odds, polls, and vote counts, and to implement policies that protect election integrity. Some, like Jim Allen in Delaware County, Pennsylvania, are considering adding prediction market trading to election worker oaths. Concerns also persist that wealthy partisans could use large bets to sway public opinion or discourage voters, potentially influencing election outcomes.