Polymarket Resolves Presidential Election Contract

As an analyst with a background in both finance and political science, I’ve followed the evolution of prediction markets with great interest. The resolution of Polymarket’s Presidential election contract, which saw over $3.6 billion in volume, is a testament to the growing mainstream acceptance of this unique form of forecasting.

The 2024 U.S. presidential reelection of Republican Donald Trump marked the termination of a prediction contract on Polymarket, a platform that facilitated bets from users worth over $3.6 billion.

11 a.m. Eastern Time marked the resolution of the contract, with the Associated Press and NBC declaring Trump the election winner. Fox News announced Trump’s victory as the main contender, slightly past 1:45 a.m. ET, following his wins in crucial states such as North Carolina, Wisconsin, Pennsylvania, and Georgia.

The delay in resolving the contract was due to the need for a proposal to be made on UMA, the current oracle and resolution source for Polymarket. UMA’s dispute resolution process allows anyone to contest a proposed market result by placing a bond within a 2-hour challenge window. If contested, UMA token holders cast votes to decide the final resolution.

According to blockchain data, an individual identified as “Theo” who works in the financial services sector from France, emerged as the night’s biggest earner, accumulating more than 47.5 million dollars in profits. This profit was generated across several contracts related to the Presidential election, the popular vote, and various swing states.

The practice of this particular French user creating numerous accounts on the platform, each advocating for pro-Trump viewpoints, sparked a brief debate due to suspicions that this tactic might be an underhanded method of political influence using undisclosed funds (often referred to as dark money), according to critics who oppose prediction markets.

During an interview with the Wall Street Journal in early November, Theo attempted to disprove such assertions by stating that they were involved in “strongly-believed” trades, meaning they risked a significant portion of their accessible funds on these transactions. They chose not to go public, as they wanted to maintain confidentiality from friends and family about this matter.

Besides Theo having numerous accounts, the user ‘zxgngl’ who recently signed up on Polymarket, managed to secure the second highest earnings among all users, amassing a profit of approximately $11.4 million.

Although Polymarket’s presidential election contract is often praised for boosting mainstream understanding of prediction markets, and some view it as a more precise predictive tool compared to conventional polling, Rajiv Sethi, Economics Professor at Barnard College of Columbia University and author of the blog Imperfect Information, advises caution.

In a message sent to CoinDesk, he pointed out that the debate over whether prediction markets offer more accurate predictions on average than statistical models can’t be settled through reasoning alone; it requires empirical evidence. He recommended examining various types of outcomes like individual state election results, popular votes, congressional races, and other events where both models and markets provided forecasts simultaneously. Furthermore, he suggested comparing different market designs to determine which ones perform optimally.

Sethi proposes that elements such as transparency in transactions, Know Your Customer regulations, limitations on participation, and maximum positions significantly influence prediction markets. He further emphasizes that understanding the impact of these factors demands meticulous, continuous research on data.

According to on-chain data from Dune, approximately 73.8% of all trading volume on Polymarket, up until early November, was related to wagers on elections.