This week in prediction markets:
Trump-Harris makes for a volatile market
RFK is seen dropping out by November, but probably won’t endorse Trump
China’s “bitcoin ban” is more complicated than Justin Sun thinks
This past weekend was an active one for Polymarket traders betting on the 2024 U.S. presidential election. They pushed down shares representing Kamala Harris’ chances of winning the election by nearly 8 percentage points, leading to a brief tie between herself and Donald Trump, before she regained a 4-point lead (as of Monday morning U.S. time).
One theory on Trump’s buoyancy despite polls shifting toward Harris is some traders are sticking with outdated assumptions from when President Joe Biden was still the expected Democratic nominee instead of Harris.
On a recent episode of the political betting podcast Star Spangled Gamblers, one of the guests, a political gambler known as Gaeten Dugas, argued that the market wasn’t correctly pricing in Trump’s chances after Biden quit and needed to adjust.
“A Trump win was pretty well priced in with Biden being the candidate,” he said. “Once I had convinced myself it was going to be [candidate] Kamala, then I thought that I was basically buying the no’s at the highest price that they would be for Trump.”
It’s important to note that Polymarket, which officially bans U.S. residents from using the platform, began the election with a significant premium for Trump, and it’s tempting to dismiss its accuracy because of the embargo on Americans – the actual voters – as market participants.
Another prediction market, PredictIt, which has U.S. regulators’ blessing to operate, currently gives Harris a more significant edge against Trump.
And, to be sure, prediction markets aren’t perfect. PredictIt gave Hillary Clinton an 82% chance of beating Trump (she didn’t) in 2016 – in line with New York Times models – and priced in only a 16% chance that Brexit would happen (it did) as polls closed in the U.K.
For now, Harris seems to have the lead in the race. RealClearPolling gives her a 1.4-percentage-point lead over Trump, while Nate Silver’s Silver Bulletin model gives Harris a 2.5-percentage-point advantage. Whether that means PredictIt or Polymarket are more fairly priced is an open question.
With the Democratic National Convention taking place this week in Chicago – the event where Harris will officially become the party’s candidate – this could be a busy week for punters on prediction markets. And with leverage also coming soon to these markets, even more volatility may loom.
Robert F. Kennedy Jr.’s presidential campaign has struggled to regain its momentum after getting close to 12% in the polls in February, with numbers now languishing around 8% to 9%.
Prediction market bettors are more sour on RFK Jr. than pollsters: one Polymarket contract that asks bettors to predict his share of the popular vote is giving a 50% chance that he takes less than 1% of the overall vote, and only a 7% chance that he’ll be able to match what the polls currently give him.
Bettors are also putting their money on him dropping out before November, with a 56% chance of that happening.
Conservative commentator and former Fox News host Bill O’Reilly put it frankly on a recent show, calling the RFK Jr. campaign “done”.
“I told you from the very beginning that this was going nowhere,” O’Reilly recently said on his No Spin News podcast. “I told you, this was never going to work.”
This drop-out will likely not mean an endorsement of Donald Trump, despite a friendly call (which was later leaked by Kennedy’s camp) in July after the assassination attempt on Trump. Recently, reports emerged that Kennedy attempted to meet with Kamala Harris to discuss a potential role in her administration, but he later stated he has “no plans to endorse” her and intends, he says, to “defeat” her instead.
Bettors are putting the chances of a Trump endorsement at 35%, which shows a fair amount of doubt that relations between the two candidates will improve.
Tron’s Justin Sun recently posted on X: “China unbans crypto. What’s the best meme for this?” which, in turn, fueled headlines like “Justin Sun’s Cryptic Post Sparks Crypto Community Speculation of China Lifting Bitcoin Ban” and “Justin Sun Sparks Rumours of China Lifting its Ban on Crypto.”
Bettors on Polymarket are writing the prospect off almost entirely, giving it a 10% chance of happening before the end of the year.
The question of whether bitcoin is banned in China is a complicated one, and there’s no absolute answer.
As CoinDesk reported earlier this year, while China has imposed significant restrictions on crypto activities, a court in Fujian province and a Chinese law firm have noted that certain actions, like holding and peer-to-peer trading, are not explicitly banned, highlighting legal gray areas that allow for continued crypto use.
Beijing just doesn’t want to normalize crypto trading in-country because it poses a threat to its strict capital controls, which are designed to regulate the flow of money in and out of the country to prevent currency flight and maintain the stability of the yuan.
This is also why mainland China traders aren’t allowed to touch Hong Kong’s crypto ETFs, which have unique in-kind redemption models.
Until there are significant monetary policy changes in China, crypto can’t have a foothold.
