The rise of prediction markets like Polymarket over the past decade has given them large-scale legitimacy,
especially after their correct prediction of the 2024 election. A new analysis reveals, however, that
markets may have a harder time predicting Trump's actions compared to other political events.
Proponents of these markets argue that since money is on
the line, they can often lead to more powerful
predictions. Users will buy or sell shares of a certain outcome, like whether Trump will end the war in
Ukraine within 90 days of his presidency. Each possible outcome's price rises and falls in real time as
users trade using real money.
Utilizing the Polymarket to analyze each political event since 2024, the analysis found that large political
betting markets not mentioning Trump correctly predicted outcomes almost 80% of the time. For markets
dealing with Trump, that accuracy fell to 68%.
With money on the line, predictions about Trump are less accurate
Proportion of Polymarket events where market correctly predicted outcome from January 2024 to March 2025
There may be several reasons for this discrepancy.
First, markets may be influenced by decisions by external factors like political preference.
Mattew Flynn, a professor at Texas State University, said these markets differ from the stock market in how
they price information, and possibly their accuracy. He found that Polymarket can react more quickly than
traditional markets to changes. Even still, investing in an individual's decisions rather than a corporation
leads to differing incentives.
“In some sense, it does ignore if you have some strong behavioral bias that might influence you to act a
certain way,” Flynn said. “If you love the Mets, even though the Mets might not be good, you'd still bet on
the Mets all the time.”
Evidence of
“whales” who dumped large amounts of money into markets predicting the presidential election
caused controversy in 2024 by those alleging market manipulation.
Markets may have differing levels of trading volume. A less popular market predicting a specific action of
Trump may be less accurate than a larger market predicting the actions of the Federal Reserve. The data
shows that accuracy is largely unaffected by the amount of money in a market.
Many of these markets involve President Trump, especially since his inauguration.
In January 2025, Trump dominated political betting and prediction markets
Percentage of political Polymarket events mentioning Trump by month of market creation
This presents an increasing risk to investors in these markets and casts doubt on the predictive power of
these markets as a whole. Polymarket users have already invested more than $18 million on whether Trump
will end the war in Ukraine by the end of his first 90 days (currently, a 30% chance of occurring,
according to the bettors).
