No, Polymarket Whales Aren't Evidence of Prediction Market Manipulation

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Aubrey Strobel is the host of The Aubservation podcast, and an advisor to Lolli and Trust Machines.

It seems likely that a small group of traders have pushed up former President Donald Trump’s odds on Polymarket, the crypto-based prediction market, by heavily betting on the Republican nominee.

First, the obvious point: it’s not just Polymarket where Trump is rallying. Trump"yes" shares are trading at around 59.9 cents on Polymarket right now, indicating the market sees a 59.9% probability he will win. Predictit – a U.S. platform with strict betting limits – has Trump at 56%. Kalshi, a U.S.-based, regulated platform, has Trump at 58%.

The mere existence of a large buyer does not imply manipulation. The entire premise of markets is that prices compress available information by rewarding those who take risk to express their views. The identity of the traders or the distribution of trades is irrelevant; in theory, everyone has a motive to extract information from markets by betting when their belief about the fair value of an asset diverges from the market’s value. Markets don’t need to be democratic in order to be reliable.

First, it’s not even clear this would benefit Trump. It might cause complacency among his voters, reducing their turnout on Election Day . Second, you could simply spend that $30 million on ads in battleground states and meaningfully influence the race. Polymarket remains as of yet a fairly obscure platform so any PR dividend from moving the odds slightly would be extremely hard to quantify.

 

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