U.S. Election Betting: Kalshi’s Polymarket Rival Quickly Gets Traction

The current U.S. election period is due to conclude within fortnight’s time. While some may breathe a sense of relief, prediction market platforms seem to be experiencing a burst of excitement.

Kalshi, a platform that started offering election prediction market contracts in October following a court verdict favorable to them against the Commodity Futures Trading Commission, has now surpassed $30 million in total trading volume for its main election contract. Although it lags behind Polymarket, which garnered approximately $40 million from early January to early February during its inaugural month of presidential betting and has recently exceeded $2 billion, Kalshi had to wait on the sidelines until their court case was resolved due to regulations.

In simpler terms, among U.S. citizens and permanent residents, Donald Trump, the Republican nominee, is 14 points ahead of Kamala Harris in the latest polling data. This advantage can only be attributed to domestic voters because, according to Kalshi’s rules, foreign nationals are not allowed to trade on their platform.

In contrast, while Polymarket restricts U.S users from its platform, it bypasses the traditional know-your-customer verification process. Unlike Kalshi, which settles bets in regular dollars, Polymarket uses cryptocurrency for its transactions.

At first glance, it could seem that Kalshi is entering the market at a disadvantage due to its regulation. However, this regulation has shielded the platform from accusations of market manipulation by mysterious, potentially foreign, illicit funds that have plagued Polymarket.

Instead, Kalshi created a rebuttal to such accusations for its much larger competitor.

On the discussion board for X (previously known as Twitter), Tarek Mansour, one of the founders of Kalshi, explained that attempts at market manipulation are unsuccessful on their platform. This is similar to how Polymarket operates, where Trump consistently maintains a significant lead.

As a researcher, I observed an intriguing pattern in my data analysis: The average wager placed on Harris is significantly higher compared to the average wager on Trump. Contrary to popular belief, it’s not a handful of individuals artificially inflating Trump’s odds; instead, it’s the opposite.

By examining Dune, a cryptocurrency analysis site (since Kalshi doesn’t operate on Dune due to not being a crypto platform), the wager amounts on Polymarket appear to be relatively consistent.

Data shows that overall on the site the median betting size is between $10 and $50.

Currently, the median data for Polymarket’s presidential election contract isn’t readily accessible on Dune. Instead, we can look at the average wager size as an alternative, with Trump’s averaging $210 and Harris’s averaging $113. Keep in mind that average and median are not the same; average refers to the total amount divided by the number of bettors, while median represents the middle value when all values are sorted from smallest to largest.

Regarding the total user base of the Polymarket platform, it’s important to note that just 27 users have ever made bets exceeding $100,000, despite the fact that the platform has over 220,000 registered users.

Among the 27 users, some are making bets worth over $20 million each, which could potentially influence market dynamics. However, the consistency between Polymarket’s and Kalshi’s data regarding Trump indicates that these large investors, often referred to as “whales,” may not be exerting the impact on predictions markets that their critics suggest they do.

‘Polypoll’ and swing states

Sometime between launching a crypto token that’s off to a rocky start and working a shift at McDonald’s (the employer of last resort for failed crypto bros) Trump name-dropped Polymarket at a rally, calling it “Polypoll.”

On previous occasions, the Republican candidate has made it known that he is familiar with Polymarket. His team, in fact, had displayed supportive bets on his Truth Social platform when there was a rise in his popularity earlier this summer.

As a crypto investor, I find myself questioning the figures presented by Polymarket’s election contract. Although Trump is leading his Democratic opponent by a significant margin of 62-37, I can’t help but wonder if these numbers truly reflect the current state of the race.

At the individual state level, it appears that Donald Trump is victorious in each swing state, including Nevada, with a comfortable lead in all cases.

But a contract asking if he’ll win every swing state is coming in at just 32% on the ”yes“ side.

The individual with the biggest stake opposing the “yes” side, known as “AntiMaga,” holds approximately $5 million worth of investments, predominantly betting against contracts related to Trump or the Republican party.

On the opposite end of the wager, Yeueu possesses fewer overall positions, but has seen an impressive 88% increase in value for the swing state contract.

All of this is a reminder that markets aren’t perfect, and inefficiencies exist – or arbitrage opportunities, depending on your perspective.

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