Prediction market whales

Why they increase market efficiency and accuracy

There has been something of a surge in the odds of a Trump victory in November’s Presidential election implied by the main betting markets. A Trump Presidency is now seen at 54% on PredictIt. Kalshi has Trump at 52%. Both these exchanges allow participation by US residents. The odds of a Republican clean sweep of the Presidency, House and Senate on Polymarket have increased to 37% from a low of 25% as recently as early August. The share price of Trump Media has also recently rallied from its recent record lows.

The price action has inevitably led to speculation of a politically-motivated, Trump-aligned ‘whale’ trader trying to influence the betting odds. These claims will be all too familiar to those of us who were around for the glory days of prediction markets in mid-2000s, when Intrade’s election markets were often the subject of allegations of market manipulation. George Soros was said to have been behind an attempt to crash George W Bush’s election betting odds in October 2004. There was a surge in John McCain’s betting odds in October 2008 that also raised eyebrows. This year, Elon Musk or someone close to him is said to be the whale. The fact that these claims of market manipulation invariably emerge in the month before the election when we would otherwise expect increased interest in these markets is a good hint that these claims of manipulation are probably false. But would it matter if they were true?