Polymarket and Nate Silver Want to Reshape Political Forecasting
Reading Time: 5 minutesHave a Bunch of Degenerate Gamblers Figured Out How to Predict Elections?, Welcome to the new, degenerate age of prediction markets., How Polymarket and Nate Silver Want to Reshape Political Forecasting
Whether you recognize it as a ‘betting app,’ a ‘predictions market,’ or a ‘bunch of degenerate gamblers trying to make a buck off anything and everything,’ political betting has become an intractable feature of every race. Throughout the 2020s, the digital landscape of electoral forecasting became saturated with pictures of politicians’ headshots accompanied by probability figures and dollarized values—monetary signposts as to how bullish the global bettor class feels about a specific candidate or political outcome.
Every day, platforms with names like Polymarket, PredictIt, Kalshi, Smarkets, and Manifold keep track of what the money is saying: Which party will control the House of Representatives? Are the courts going to convict Donald Trump on felony charges? Will Kamala Harris pick Tim Walz or Josh Shapiro as her running mate? Can she even win in November?? (The markets currently seem to think so.)
It’s hardly surprising that the era of meme stocks, cryptocurrency speculation, and legalized sports betting has fueled enthusiasm over the prospect of making a buck on the future of our democracy. What is more remarkable is how legitimized the practice has become in the rarefied world of election-casting—and how powerful an indicator it has become in modern-day politics.
Take, for example, the 4-year-old Polymarket. The app and its users have notched impressive wins lately, having predicted Biden’s withdrawal from the 2024 race long before media outlets considered the possibility, and nailing its guess on the Walz-vs.-Shapiro veepstakes the night before the official announcement. (All without being able to legally serve U.S. customers, at the time of reporting.)
The idea is that retail traders will be incentivized to match their money to their true beliefs, based on their perceptions of the likelihood around a particular event. (As the app itself puts it: ‘Traders combine all available information: news, polls, and expert opinions, and make informed trades based on that combined knowledge.’) So essentially, the profit motive indicates their belief in one outcome or the other. The percentage chances are then calculated based on the worth of an individual share in an option, priced at anywhere from a cent to $1.
Founder and CEO Shayne Coplan promises to make Polymarket an ‘unbiased’ and ‘alternative news source’ that can counter our ‘misinformation pandemic’ by offering ‘financial incentives for truth.’ To this end, the app recently teamed up with the artificial intelligence bot Perplexity to offer up-to-date news summaries of events offered up for bets. Coplan also got some big co-signs recently: The Wall Street Journal embedded Polymarket’s presidential-forecast chart on its website, and polling savant and media giant Nate Silver has purchased some equity and formally joined the platform in an advisory role.
It’s no small move for Silver, who used to frequently deride such betting markets for being ‘delusional‘ and ‘irrational‘ when it came to political forecasting (with the caveat that they were useful in gauging risk-averse popular sentiments on high-stakes election nights). But the veteran pollster has appeared to warm to this betting market over the other ones. In joining, he noted that ‘Polymarket’s scale and structure provides for considerably better pricing than we’ve seen in the past’ and pointed out how similar its findings have consistently been to those of his own Silver Bulletin election model.
There may be something of a parallel here to Silver’s own storied career, which arose as a result of his ability to provide a measure of statistical diligence to the field of electoral polling, a sector that had long been lacking in that department. While Silver’s career has experienced many ups and downs since then—a reputation-bruising series of Trump-era elections, the crushing layoffs at FiveThirtyEight—he remains a well-credentialed, well-informed commentator with a unique perspective on how risk-takers and gamblers have come to dominate the culture. Perhaps Silver’s blessing of Polymarket is, then, a sign that this betting market can get right what others haven’t.
What also helps here is that people really like using Polymarket, especially for making guesses on the U.S. presidential election. To date, the site has registered hundreds of millions of dollars in bets on the 2024 result alone. (Even though American users aren’t allowed to bet on Polymarket, it gets plenty of site traffic stateside, often via VPNs.) The platform doesn’t take out fees on trades, giving users more incentive to put in however much they’d like. (Yes, that also means Polymarket just doesn’t earn much actual revenue.) Until recently, it only allowed transactions via the USDC cryptocurrency token, a ‘stablecoin’ whose value is pegged to the U.S. dollar.
The bets are all-or-nothing: If you get it right, congrats, but if you don’t, you lost all that money, tough luck. What’s more, the sheer volume of trades makes for a better measure of both public interest in a given public event and a wider, more representative range of players offering their opinions through their dollars. And that just makes it an even more alluring space for more gamblers to join.
Polymarket also comes into a new age of prediction markets. Thanks to the United States’ restrictions on organized gambling (especially on elections), political prediction markets were often based outside the U.S. and offered limited access to its consumers. The most famous of these, PredictIt, was established by a New Zealand public university in 2014. It earned approval from American regulators to operate stateside, thanks to its utility for academic research, but had to abide as a nonprofit with exacting restrictions. Still, PredictIt took off in the U.S. during the madcap 2016 election and encouraged wider interest in trading financial futures representing real-life politics—even though the platform, like so many other polls, got its presidential victor quite wrong.
PredictIt’s limits and biases (e.g., a right-wing commentary bias, a consistent overvaluation of long-shot bets) made it more of a novelty item than a legitimately useful resource, especially for the misinformation-drenched 2020 election cycle. But the popular appetite for its basic concept left room for other enterprising gamblers to give something like it a better shot, especially after the Supreme Court legalized sports betting nationwide in 2018.
Cryptocurrency enthusiasts took advantage of their encrypted, blockchain-based trading systems to launch unregulated platforms for this purpose. (This is, incidentally, how Polymarket emerged back in 2020.) Those sites gained more users throughout 2020 thanks to eager moneymakers stuck in pandemic lockdown and intrigued by the stakes of the U.S. presidential election.
But that greater utilization came with greater scrutiny: In 2022, the Biden administration fined Polymarket $1.4 million for its failure to seek regulatory approval, and also revoked PredictIt’s U.S. privileges after accusing it of exceeding the terms of its agreement with domestic regulators. (The latter continues to operate thanks to a 2023 injunction from the U.S. Court of Appeals for the 5th Circuit, which is still deciding the overall case.)
Polymarket, meanwhile, persisted thanks to a broad range of options—users can bet on who the next James Bond actor will be, or when Japan will lower interest rates—as well as high-powered connections. In 2020, Polymarket’s choice to use the Ethereum blockchain for its trades gained it favor with crypto true believers like Naval Ravikant and Balaji Srinivasan, and they helped to raise millions for the app’s launch. The platform gained wider notice last year when gamblers placed bets on attention-grabbing incidents like the search for the ill-fated OceanGate submersible—making Polymarket even more attractive to investors. First came a $25 million fundraising round from the venture capital firm General Catalyst; then, a $45 million funding round led by Peter Thiel’s Founders Fund alongside Ethereum founder Vitalik Buterin. All the while, it garnered both popular and political influence by promoting itself to meme-stock Reddit users and employing former government officials as advisers.
That’s no guarantee that Polymarket, or the betting market at large, is bound for glory (and not necessarily because its social media manager doesn’t seem to understand the distinction between a percent difference and a percentage-point difference). The platform saw a heavy drop in user interest earlier this month, likely thanks to broader market travails as well as the end of the Olympics—which meant that a lot of major sports bets were now done for good this year. The Commodity Futures Trading Commission voted in May to ban all election bets on derivatives markets, and a group of Democratic lawmakers recently sent the agency a letter of support urging it to finalize its guidelines as soon as possible. Maybe there’s a platform out there where we can bet on how that ends up.
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