Last month, when a Washington, D.C., appeals court opened the door to legal election betting in the U.S. for the first time in a century, the judges’ decision came with a caveat that, like the Sword of Damocles, could just as quickly kill the niche industry. Government regulators have to date failed to prove that betting markets are a threat to the election. Concerns about manipulation are theoretical, based on examples that have just as quickly been shown to be inconsequential. Laws of supply and demand have, time and again, erased any apparent attempts in betting markets to sway an election. If anything, academic studies have shown that the markets have historically been just about as accurate as polls. But the courts also acknowledged that some form of market-based election interference certainly wasn’t impossible, and that “a substantiated risk of distorting the electoral process would amount to irreparable harm.”
For the last two weeks, what is arguably a distortion has been popping up in the betting markets. While polling-based models show that the election is essentially a dead heat, Donald Trump’s odds of winning next month’s election have risen higher than 60 percent in some betting markets. Even as data on early voting — which has been mixed to positive for Kamala Harris across different states — Trump’s odds only appear to be rising. If the shaky Election Night needle was among the most indelible, anxiety-inducing images of the 2016 race, the 2024 election has its own in the diverging red and blue lines on bookmakers’ websites to send blood pressure spiking.
So what is happening? Are the odds on the betting markets organically arrived at by those placing bets on the outcome, or is there some form of manipulation involved? Nobody is quite sure, but many signs point to a mix of benign biases, market oddities, and potentially nefarious manipulation, particularly on Polymarket, which tends to be the most-cited and most closely followed betting site. Here are the theories for what is going on.
People who bet on elections naturally favor Trump
Polymarket, an offshore betting site, is easily the most popular online market where anyone can place a bet on the election. It is also partly owned by Peter Thiel and runs on blockchain technology. In order to make a bet, a user has to purchase cryptocurrencies, which are then used to buy contracts — which has turned off some more tech-averse gamblers. This small hurdle could, in theory, make it a more self-selecting group than the betting markets at large. In fact, the Polymarket odds started to diverge before other markets, like PredictIt and Kalshi, did. This could account for some of the divergence, since Trump has backtracked from his earlier distaste for digital currencies and embraced the crypto industry, which has by and large supported his candidacy.
But it doesn’t explain everything. Some bettors may favor Trump no matter what, but most of them are looking to make money. There are also highly sophisticated investors, like Susquehanna Investment Group, who are using an array of technical strategies that have nothing to do with the outcome of the election — and would neutralize some of that inherent bias. (Susquehanna trades on Kalshi, another online market.) One of the quirks of Polymarket is that it pays out about $3,000 in crypto incentives every day to bettors who provide liquidity to the markets — that is, to people who accept trades to keep the markets from becoming too volatile. One trader, who goes by FozzyDiablo, explained that he has programmed a bot to make money off those short-term strategies, and it doesn’t matter who wins or loses. “I never take risks, and I just get paid,” he said.
There is a mystery “whale” skewing the markets
On October 16, a professional political bettor who goes by the name Domer posted on X about a mysterious, seemingly French trader he called “Monsieur Whale.” What followed was a fairly thorough examination of trading data on Polymarket that pointed to a single trader distorting the market.
In this theory, this trader has used multiple accounts to place at least $30 million in bets across different scenarios — all of them favoring Trump winning the election, or winning states like Michigan. Domer also pointed out that at least four other accounts have a similar pattern of taking money out of the same crypto exchange, Kraken, in similar amounts at similar times, which is evidence that it could be the same person. (The Wall Street Journal quoted crypto-analytics firm Arkham Intelligence as corroborating that the accounts appear to be linked.)
All this trading in such a short time has the potential to skew the odds. Between $22 million to $98 million in bets have been placed on the platform each day this month, according to data-analytics firm Dune, with most of that going toward election contracts. (Those numbers themselves are also somewhat misleading. They’re the notional amount of the bets places, not money put down.) Although traders say that the market is easy to trade on, the $30 million in bets from Monsieur Whale was enough to start moving Trump’s odds ever higher.
Still, there is no evidence that Monsieur Whale is manipulating the market — at least, as far as how market regulators would define the term. (Perhaps the multiple accounts violates the site’s terms and conditions, though.) Traders who have pored over the trades don’t see any strange or illegal patterns that would hint that the trades were anything but outsize bets.
Maybe they’re right?
Trump’s biggest strength in electoral politics is how much he’s been underestimated by the polls. Obviously, his win in 2016 was a shock to most. In 2020, his loss was narrower than what many polls predicted. In the final weeks of the election, Harris has been losing some momentum in swing states. If you’re a gambler, it’s not crazy to think that come November 5, the electorate would break Trump’s way.
This may be why you’re seeing decidedly old-school bookmakers, like The Lines and those in Las Vegas, favoring Trump — just by a smaller margin. To gamblers, the differences in odds might not be a big deal. “There’s no rhyme or reason to a lot of this. You’re using polls and it’s unclear if the price should be 50 or 65, or 40. There’s almost no difference,” one trader said. “It’s close. We don’t know who’s going to win.”
The “Loop” effect
At 10:42 a.m. on October 7, Elon Musk’s political-action committee posted on X some data that appeared to be positive for Trump’s odds in winning Pennsylvania, one of the key swing states for either candidate. Two minutes later, Trump’s advantage had gone from a little more than 2 percentage points to about 10. Since then, Musk has boosted some of Polymarket’s more Trump-favorable odds, even as polls showed much tighter races.
It’s not clear why Monsieur Whale is making the trades he’s making. He could be a giant Trump fan who’s about to put everything on the line. Perhaps, as FozzyDiablo floated to me, he could have some other correlated investment that gets more valuable as Trump’s odds rise (though in general a smart investor would hedge that position with the election market — betting on a Harris win to blunt their downside if they don’t get their preferred outcome). Whatever it may be, in the context of a broader election, it almost doesn’t matter. The art of electioneering makes use of perceptions — and by creating an image of a candidate who’s already winning could add to that momentum, and make more people enthusiastic to be part of the electorate.
What this means for the election is less clear. In an amicus brief, the pro-regulatory group Better Markets had warned that one of the risks betting markets pose to an electorate is that “much of this data could be selectively compiled, skewed, and deployed by almost anyone.” Still, the fact that polls are staying deadlocked, seemingly free from the influence of the betting markets’ exuberance, is evidence that they are not influencing the general electorate. But whether that continues to be the case remains to be seen.
“It’s a confirmation bias loop,” one Polymarket trader told me. “They’re edging Trump up a little bit, and then everyone’s talking about the momentum, like Elon Musk. Then they’re convincing themselves this is real. Then they’re going in and bidding him up more. And then there’s a new round of stories, and then they’re bidding him up more. It’s a cycle where they’re seeing the information that’s confirming what they previously thought, and it’s increasing their confidence, even though absolutely nothing is changing in the real world.”
