Big Money, Big Influence: How Prediction Markets Might Be Skewing Elections

Prediction markets were supposed to be the future of election forecasting, offering real-time data and financial incentives. But now, there are worries that these markets might be easily swayed by wealthy individuals, potentially shaping public opinion in unexpected ways. One big concern is that a few rich players could be pulling the strings. Dr. Don Moore, a professor at UC Berkeley, pointed out that these markets can be easily manipulated by a small group with deep pockets. This raises questions about how much we can trust the numbers they produce. Take the recent New York mayoral race, for example. Despite polls showing a tight race, betting platforms like Polymarket and Kalshi consistently showed one candidate, Mamdani, leading with over 90% of the vote. This didn't change, even when other candidates dropped out or polls showed different results. On Polymarket, one user, dubdubdub2, joined last month and has spent over a million dollars betting on Mamdani's victory. This user's activity is public because the platform uses blockchain technology, which makes all trading activity visible. This raises questions about whether one person can have such a big impact on the perceived outcome of an election. Moore also noted that betting markets can influence perception. If one candidate seems way ahead, it might discourage people from voting or change how they vote. This is a big deal, especially when you consider how many people see these odds every day in places like Times Square and Penn Station. Unlike traditional polls, betting markets don't have the same ethical guidelines. Pollsters usually wait until after the polls close to release their data to avoid influencing voters. But betting markets operate in real-time, and their data is often amplified through ads and media coverage. Kalshi, one of the platforms, has market makers who try to prevent manipulation. For example, during the 2024 presidential election, one bettor spent $85 million on Trump shares, pushing his odds up to 70% on Polymarket. But Kalshi's market makers kept the odds below 65% by taking the other side of the trade. This isn't the first time betting markets have raised concerns. In 2012, the prediction market InTrade showed Mitt Romney's odds surging on election night, which caused some worry within the Obama campaign. Now, with betting markets becoming more visible and influential, it's important to scrutinize their role in shaping public opinion.