Yes, you can place bets on the election (for now)

Who will win the election? What will the vote margin be? Will Donald Trump post on X before November? People can place bets on all these real-world questions — and more — on prediction markets.

And these online platforms like PredictIt and Polymarket are increasingly being looked to as crystal balls in this chaotic election, promising real-time political insights and the chance to make a few bucks.

Marketplace’s Meghan McCarty Carino spoke to Chris Cohen, the deputy site editor of GQ, who recently wrote about his experience getting in on the action of what appears to be a prediction market “gold rush.”

The following is an edited transcript of their conversation.

Chris Cohen: It’s interesting the way it works. I’ve dabbled in sports gambling, where you’re placing bets on who’s going to win or what the final score is going to be. And in a prediction market, what I found super interesting is you can sell at any time, so you’re also making a bet on what’s going to happen a week from now. It’s something you can check constantly and play more like the stock market. It’s fascinating.

Meghan McCarty Carino: Right, because unlike a sports game, this is an ongoing reality that is being bet upon.

Cohen: Right, yeah, you’re gambling on the linear passage of time, which feels a little odd.

McCarty Carino: So, what bets did you place?

Cohen: So, I placed a bet on Kamala Harris to win the presidency. I thought she was way undervalued right after Joe Biden dropped out. You can also place bets on things you don’t think are going to happen. I thought Michelle Obama becoming the Democratic nominee was way overvalued. It wasn’t a huge number, but she was the number one alternate option to Kamala Harris. And so, I placed some no bets on that.

McCarty Carino: And obviously you were correct on that bet. How much did you win?

Cohen: Oh, gosh, I would have to look. I think I bet $10 and won 80 cents. You know, it’s all for fun. I’m not working on my kid’s college fund with this stuff.

McCarty Carino: The headline of your piece, however, was “how I got in on the election betting gold rush.” Does this feel like a gold rush to you?

Cohen: Yeah, that’s a good question. I think when you hear about a guy like [venture capitalist] Peter Thiel investing in this platform, you know, he’s someone who thinks a technology is going to be a money maker when he makes an investment like that. So, in that sense, it’s a gold rush. In the platform Polymarket, you can see these contracts have millions and millions of dollars. The most popular bets are having a lot of money wagered on them. I’m not sure that there are any sort of financial services firms putting in money on the scale of the stock market, or even something like cryptocurrency or sports betting, which this has a lot in common with, but I could see it reaching that scale, assuming they’re able to iron out the legal issues.

McCarty Carino: Prediction markets have been around for a long time. Why are they surging now?

Cohen: I think it’s the changing relationship that our culture has to gambling. You know, you saw during the pandemic that meme stocks became a big thing. Obviously, the culture of sports betting has completely changed in the last five or 10 years, and so I think that’s a big part of it. You know, as I found, it’s just like a fun thing to talk about on social media with your friends, and so it’s sort of right for this age of gambling that we find ourselves in.

McCarty Carino: Yeah, as you noted, sports betting has sort of exploded since a Supreme Court decision in 2018 opened the doors. But betting on elections like this is actually quite restricted, right?

Cohen: Right. I wouldn’t claim to understand the specific legal principles being litigated, but [betting on elections] is controversial and not totally accepted by our government’s security regulation bodies, so it’s something that they’re still figuring out.

McCarty Carino: And to that point, PredictIt, the platform that you used, is the only prediction market source available in the U.S. to bet on the outcome of the election?  

Cohen: If I’m understanding correctly, they’re also engaged in litigation. They just are at a different phase and are operating, rather than not operating, in the U.S.

McCarty Carino: You noted that statistician Nate Silver recently joined Polymarket, which is one of the platforms not currently available in the U.S., as some sort of advisor. This seems to give the industry some weight in terms of their predictive value. Like, maybe they can be analyzed in a similar way to polling data, which is what Silver is known for. How seriously do you think we should take these prediction markets when it comes to high stakes things like predicting an election?  

Cohen: That’s a great question. Nate Silver wrote about this in his newsletter. You know, when are prediction markets more useful than polls? In his reading, he prefers having polls, but there are lots of questions and lots of things that you can’t poll. For example, who is Kamala Harris going to pick as her vice president? If you call up a thousand people, a representative sample, and ask them, that answer isn’t going to be particularly useful. But the idea behind these prediction markets is if you give people the opportunity to put their money where their mouth is, you will come a little closer to understanding what the most likely answer might be. So, I think they’re valuable in these limited circumstances where things are up in the air. So, I think if there are enough people in these prediction markets, it could be considered, for some questions, a pretty good guide to what’s going to happen in the future.

McCarty Carino: That being said, you made kind of an easy 80 cents by correctly predicting that Michelle Obama would not be the nominee despite her being a favorite in the prediction markets. What does that tell you about how these markets operate?

Chris Cohen: Well, the convention hasn’t happened yet, so we might be surprised. I don’t have my money yet. I think prediction market platforms have problems with, I would say, fees and liquidity. There aren’t a lot of people looking to wager enough money to get a not great return out of it. These markets are still in a pretty embryonic phase, and so I think having that number hanging around in the single digits, it’s just not worth it to people to pump in a bunch of money that they’re going to have to pay fees on to get the number exactly right.

McCarty Carino: Do you think being able to place bets on real world events changes how people look at the news?

Cohen: I think it’s really possible. I mean, in the stock market, insider trading is obviously illegal. In a prediction market, it’s a little unclear what the insider trading might mean. On the one hand, it would seem to be obviously wrong and unethical for someone with insider knowledge about something like the vice presidential selection to be trying to make money on that. That’s not maybe socially useful. On the other hand, if all you want from these markets is to predict the right answer, then having people doing insider trading on them is extremely useful. The legal principles here are way over my head, but I can imagine that that is what the securities regulators are interested in ironing out.  

McCarty Carino: Are you going to place more bets?

Cohen: I think I’m done. I think I understand it from a journalistic perspective. I’ve never personally been drawn to gambling recreationally, so now that I understand how they work, I think I’ll stick to following the news from my own edification.

More on this

As we noted, it’s not just politics you can bet on as Chris Cohen did, but also questions like will Taylor Swift get married, what will happen next in Ukraine or when will we get artificial general intelligence that can act just like a human?

And while it may seem frivolous or just plain unhealthy to turn everything in life into a gambling opportunity, there is a community of true believers who think the bigger and more comprehensive these prediction markets become, the more useful they will be and potentially transformative for the world, aggregating all of human knowledge and intuition to gain a more rational picture the future. Or so the logic goes.

Kevin Roose at the New York Times wrote about a conference for such believers last year, a gathering for participants on Manifold Markets, a prediction platform that uses fake money. Because again, these markets are highly restricted in the U.S., especially when it comes to betting on elections.

In May the federal Commodity Futures Trading Commission proposed a rule to permanently ban betting on elections in commercial prediction markets and restrict a number of other topics like the Oscars in order to protect “election integrity” and the public interest.

Meanwhile Dartmouth economist Eric Zitzewitz argued to the New York Times that prediction markets for elections and other big news events have “much greater social utility than essentially every other form of gambling that is currently legal.”