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The Washington Post
"Make Me Smart” Newsletter

The big election bet

Ellen Rolfes Nov 1, 2024
The Washington Post

In this week’s “Make Me Smart” newsletter, Americans are betting on who they think will win the election. Plus, we do the numbers on budget airlines.


The News Fix

The rise of prediction markets. Wonks and traders are looking beyond polls and pundits to get a sense of who’ll win the presidential election. With people spending more money betting on political outcomes, prediction markets are getting more attention. As of this week, buyers and sellers worldwide have traded more than $3 billion in wagers, according to cryptocurrency data firm Dune.

Americans are in on the action, with at least $100 million in legal wagers so far on whether Vice President Kamala Harris or former President Donald Trump will win. The online brokerage firm Robinhood said this week it would also allow people to buy derivatives tied to the 2024 elections.

Buy the rumor, sell the news. Prediction markets act a bit like brokerage firms and a bit like sports-betting platforms. They allow individuals to cast bets on future events like who’ll win the Academy Award for best actor, when Taylor Swift and Travis Kelce will get engaged or whether Trump or Harris will win the popular vote. Unlike sports bets, which lock in wagers until an event comes and goes, prediction markets allow people to repeatedly buy and sell odds in the lead-up to a specific action or outcome.

Advocates of election betting argue that these markets get closer to the “truth” because people tend to be more honest about what they really believe when money is on the line.

Election betting has a long history in the U.S., but fell out of favor after World War II due to widespread disapproval of gambling. A court ruling in October opened the legal door, at least temporarily, for commercial platforms operating in the U.S. to take election bets.

Can we trust them? Pro athletes can’t bet on their own leagues, and traders aren’t allowed to buy or sell stock based on nonpublic knowledge. But there’s little agreement over what counts as “insider trading” when betting on an election. Opponents argue that even the perception that traders are voting based on which candidate will make them more money could compromise the integrity of elections. 

Are they accurate? Prediction markets are not free from bias or manipulation. Polymarket, the dominant platform for election bets, gives Trump up to 64% chance of victory as of Thursday afternoon. But crypto analysts found evidence of wash trading, in which traders buy and sell shares repeatedly to create a false impression of volume and activity. A single French trader moved the needle after plunking down over $28 million on Trump winning. 

Despite these red flags, Wall Street is taking notes. Big-name financial players like JPMorgan Chase are using odds on predictive markets to identify potential stock winners and losers post-election.

“Something has to anchor sentiment and thus views,” one analyst told Bloomberg. “Polymarket is that proxy or benchmark.”

(Our next deep dive episode, on Election Day, is all about what election bets can and can’t tell us about outcomes. See you then!)

Smart in a shot

Kai and Kimberly hosted a live episode in front of a sold-out crowd at WBUR CitySpace in Boston last week. They were joined by Heather Cox Richardson, a professor at Boston College and author of the Substack newsletter “Letters from an American.” They discussed how the economy is woven into our political narratives and what we can do to protect the health of our democracy.

The Numbers

The budget carrier Spirit Airlines has been losing money despite strong travel demand. And it’s not alone. Many of the cheaper carriers are struggling, and rethinking their business models to survive. Let’s do the numbers.

80%

Spirit Airlines has been operating at a loss since 2020, and now it has about $1 billion in debt up for repayment. The airline announced $80 million in cost-cutting measures this week, including layoffs and selling some of its fleet. Its stock is down more than 80% so far this year. 

30.1%

That’s the market share for low-cost carriers in North America. One study found budget airlines’ customers are satisfied with the fares, but less satisfied with their overall experience.

$78,000

That’s average household income for the budget airline traveler, compared to over $100,000 for those who fly Delta, American or United. Budget airlines’ customer base was more likely to cut back on travel when inflation squeezed their discretionary income.

$147

Budget flights don’t always lead to a cheaper trip. Even when listed fares are very low, budget airlines try to make up the costs with hidden fees that can dramatically raise the total price of a flight. The average additional one-way fees for a flight on Frontier was $147, according to a NerdWallet analysis. 

53 years

That’s how long Southwest Airlines maintained its egalitarian open seating policy. The company said in July it was ending the unconventional practice, charging more for  “premium” seats starting in late 2025. 

None of us is as smart as all of us

Tell us what’s making you smarter at smarter@marketplace.org. We’d love to include your recommendation in a future newsletter.

Are others doing better than you?

When Americans think about how well off they are, they think about more than their job and how much money they earn. Their sense of success often depends on comparing themselves to others (gift link). Writer Ellen Rolfes is reading a New York Times story about how changes in workers’ relative status shape their political views.

Poorly chosen words

Florida politicians want more financial firms to do business in the state, but lawmakers accidentally banned banks from selling securities for weeks. Editor Virginia K. Smith is reading a Wall Street Journal story about how overly broad consumer protections ended up stymieing investment.

Want to round up your purchase for charity?    

Retail stores that ask customers to donate to charities when checking out don’t benefit from these donations. Producer Alice Wilder is reading an Associated Press story explaining the facts around checkout charity campaigns. (Marketplace’s Janet Nyugen also wrote about this for our “I’ve Always Wondered” series.“)

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