Crypto Quill

As the U.S. presidential election approaches, speculative trading on blockchain-based prediction platforms like Polymarket and Kalshi is surging, with billions of crypto dollars flowing into bets on candidates Donald Trump and Kamala Harris. These platforms, which bridge the world of cryptocurrency and political prediction markets, present a volatile yet potentially insightful take on election outcomes, standing in stark contrast to traditional polls.

A Billion-Dollar Betting Boom

Key Platforms and Their Reach

On Polymarket, the largest and busiest among crypto-based prediction platforms, over $3.1 billion has been traded on contracts predicting the winner of the presidential election. As of Monday, Polymarket users were giving Trump a 57%-43% lead over Harris, while Kalshi—a U.S. Commodity Futures Trading Commission (CFTC)-regulated platform—shows a tighter 51%-49% split. Both platforms’ odds differ significantly from many conventional opinion polls, which are projecting a much closer race.

Kalshi, though smaller in volume compared to Polymarket, has seen impressive interest in its election markets. The platform’s election outcome contract alone has drawn nearly $197 million in trading, while another contract on the Electoral College margin has pulled in around $33.8 million.

Prediction Markets vs. Traditional Polls

These prediction markets offer a real-time assessment of election probabilities, determined by user wagers. Elon Musk has commented that betting markets might hold more accuracy than polls since they require actual financial commitment from participants, suggesting that “real money on the line” could lead to a more truthful reflection of public sentiment.

Still, not everyone is convinced. Michael Cahill, CEO of Web3 development firm Douro Labs, argues that prediction markets are skewed toward crypto-native participants, who might disproportionately support Trump. “Your average voter isn’t spending time or money on prediction markets—those platforms are dominated by crypto-native users, and those users are voting for Trump,” Cahill notes.

Market Dynamics: Odds, Pricing, and Participants

How Prediction Markets Price Their Odds

Platforms like Polymarket and Kalshi use a straightforward pricing structure based on perceived probability. For instance, on Polymarket, a contract betting on a Trump victory currently costs $0.58, while one for Harris is priced at $0.42. The buyer of the winning contract receives $1 per contract, allowing a direct interpretation of the price as the market’s perceived probability of victory.

Kalshi has introduced measures to vet its traders, capping trading volumes at $7 million for individual traders and $100 million for eligible contract participants. Meanwhile, the decentralized crypto exchange dYdX offers leveraged options on both candidates, linking its contracts to Polymarket’s odds to allow for more complex trading strategies.

The Influence of High-Stakes Players

Polymarket’s trading volume has been bolstered by a select group of high-stakes bettors, including an anonymous French national who has reportedly placed large bets on Trump. Notably, due to regulatory restrictions, U.S. nationals are not permitted to trade on Polymarket, which limits its domestic market but does little to curb its global reach.

In total, bets on Trump and Harris amount to around $1.97 billion of the $3.1 billion in cumulative volume on Polymarket’s election market. However, as Adam McCarthy, a research analyst at digital data provider Kaiko, points out, this headline figure includes bets on former candidates like Nikki Haley and Robert F. Kennedy Jr. and doesn’t fully reflect the active stakes currently at play.

A Test of Longevity Beyond the Election

Record-Breaking Volume on Polymarket

Polymarket’s trading volume reached an unprecedented $1.1 billion in October, largely driven by election-related bets, making it the platform’s most active month. This momentum highlights the intense interest in political prediction markets but raises questions about how platforms will retain engagement after Election Day.

“There’s a big test on how they manage to stay relevant after the election,” Kaiko’s McCarthy observes, pointing out that the challenge for prediction markets lies in maintaining user interest once the high-stakes political event concludes.

Broadening the Scope of Prediction Markets

These platforms aren’t limited to political bets; they host markets on a wide array of topics, from predicting the Federal Reserve’s next move to guessing whether Taylor Swift will release a new album or who will be the next James Bond. The diversity of offerings is intended to keep users engaged year-round, even as major political events come and go.

With election-related contracts setting new records, prediction markets are now in the spotlight. Their potential to rival traditional polling methods is hotly debated, but for now, they remain a niche—albeit influential—corner of the cryptocurrency and speculation landscape.