Crypto leans into US presidential-election bets as prediction markets go all in
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Hittin’ Vegas on November 5… As the US presidential election nears, investors are placing more bets that fall outside traditional market plays. On Polymarket, a crypto-based prediction market, traders are staking money on “events contracts,” which let traders bet on the likelihood of certain outcomes. $326M+ has been wagered on Polymarket on election-related bets like who’ll be the Democratic nominee and which party will win the popular vote.
Crystal balls: Prediction markets let users bet on nearly anything. Picture: how many times Elon Musk will tweet this week, or whether this year will be the hottest on record.
Y/N: Events contracts are typically “yes” or “no” bets that pay out $1/contract if the bettor is correct. Prices fluctuate based on shifting odds. On Polymarket, users buy contracts with stablecoins.
Outlook hazy: Polymarket stopped serving “US persons” after a 2022 settlement with regulators. But US regulators gave the OK to Kalshi (another prediction market).
Taking the bet… The prediction-market industry is bigger than just crypto. PredictIt and Kalshi both let users bet $$ on events like whether the Fed will cut rates by September. Now traditional finance wants a piece: Interactive Brokers is planning to launch a market dubbed ForecastEx this summer, and trading firm Susquehanna set up a Kalshi market-making team.
All bets are on: Online prediction markets have ridden the same wave that’s lifted booming sports-betting apps like DraftKings and FanDuel. US sports-betting revenue hit a record last year of nearly $11B.
Everyone wants in on the action… but they can’t all be winners. Crypto-savvy bettors, investment firms, and brokers are all supercharging the prediction-markets industry. Regulators have taken note. In May, the CFTC, which regulates the US derivatives markets, proposed rules that would ban contracts on some real-world events like elections. Both Kalshi and PredictIt are fighting the CFTC in court.