- [Narrator] Americans can now legally gamble on elections, something once banned by federal regulators. While polls show former President Trump in a narrow lead over Vice President Harris in the final stretch of the election, multiple betting markets have Trump dominating Harris. - Supporters of prediction markets say that they provide another useful data point besides opinion polls, which have been proven to be flawed in some past election cycles. - [Narrator] Here's what this new world of political betting can tell us about the upcoming presidential election and why some critics are sounding the alarm on the implications of trading on the future of the country. Election betting is now available to Americans thanks to a recent court ruling in a battle between betting platform Kalshi and the Commodity Futures Trading Commission. In early October, a federal appeals court legalized election betting. - The rulings have allowed a certain limited kind of election betting, which is election contracts

on regulated exchanges. - [Narrator] Americans can now place what are known as yes or no contracts on Kalshi and Forecast X, a platform run by Interactive Brokers. - Let's say that you want to bet on Kamala Harris winning the election. You can buy contracts that will pay out if Kamala Harris wins the election. Let's say that those are priced for 40 cents. What that means is that traders assess right now that there's a 40% chance of Kamala winning. You could go and buy a hundred of those contracts for $40. After the election is resolved, if Kamala Harris is inaugurated president, you'll get a hundred dollars. If she's not an inaugurated president, you'll get zero. - [Narrator] On the crypto-based prediction market, Poly Market, which prohibits Americans from trading, betters give Trump a more than 60% chance of winning.

- The gamblers are the ones that are the only ones that want to say it. - [Narrator] Although prediction markets have a mixed record of forecasting election results, some users on Poly Market recently made successful bets on President Biden dropping out of the race while the White House was still insisting he would stay in. - I'm in this to complete the job I started. - [Narrator] Just who is betting on the election isn't entirely clear. - We don't have a great visibility right now into who is trading on call sheet or the offshore sites like Poly Market. There's definitely a lot of retail interest. There do seem to be a few very high volume, fairly profitable individual traders who've been using these platforms for a while now. - [Narrator] But what is clear is that gamblers are betting big; gambling on elections is Poly Market's most popular offering.

with more than $2.2 billion in trading volume on its main market for this year's presidential race. Supporters of prediction markets say they provide a useful data point besides opinion polls. - Betting markets also have the advantage of reacting in real time to events. So if something happens in the news, say a candidate does poorly in a debate... - We have a thousand trillionaires in America. I mean billionaires in America. - You'll immediately see a reaction to that. - [Narrator] In a post on x, Elon Musk argued that betting markets are more accurate than polls because people are putting real money on the line. - American's faith in opinion polls took a big hit after 2016 when opinion polls generally forecast that Hillary Clinton would win the election. - And we begin a new chapter tonight. - Instead, Donald Trump pulled a surprise. They didn't do that good a job in 2020, either.

when the opinion polls predicted a giant blowout for Joe Biden, and in fact, the race was a lot tighter than many people had expected. And so, I think that that has fueled a lot of interest in prediction markets now. - [Narrator] But betting markets have a mixed track record when it comes to predicting election results. - In 2016, for example, betting markets saw Hillary as likely to win. They were taking cues from the polls, and they turned out to be wrong. The betting markets were more favorable to Trump than the polls were in the 2020 election. - [Narrator] Critics of betting markets say that they have their biases. - For instance, you can have a few large whale accounts that do very big trades and push a market in a particular direction. Another criticism that some people have raised of markets like Poly Market is that their users tend to be kind of pro-Trump Crypto Bros or libertarians.

- [Narrator] Poly Market declined to comment. In a statement, Kalshi said that the idea that markets are being manipulated on Kalshi is ill-founded. It added that it was openly releasing internal data showing large traders actually slightly favor Harris, and Interactive Brokers said that it doesn't have any evidence to refute or support claims of market manipulation. The company also said that in a liquid market, big trades should balance each other out. - There is this idea that it's sort of inappropriate for a democracy. It skews the incentives of voters. - I'm taken the Florida night to ring the alarm bells for our democracy with grave concerns about the opening up of a casino for betting on our elections. - There's a related concern that it could actually be involved in some sort of election manipulation schemes. Somebody who has knowledge of how an election is gonna play out or revelations that will come out about a candidate.

could seek to profit from that. - [Narrator] Despite the rise in popularity in 2024, it's unclear what will happen to these prediction markets after the election. - There have been prediction market startups before that have launched different marketplaces, and they have gotten attention. In general, they've done very well during US presidential election years, but there tends to be a big drop-off in interest afterwards. So for all these guys, Kalshi, Forecast X, Poly Market, I think a big test will be to see whether they can continue to maintain trading volume and interest even after we know who won the 2024 election. (peaceful music)

Inside the Newly Legalized World of Election Betting | WSJ

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