Are Betting Markets Better than Polling in Predicting Political Elections?

TL;DR

This study compares traditional polling and online betting markets in predicting US presidential elections, finding that betting markets like Polymarket outperform polls, especially in swing states, aligning with Wisdom of Crowds theory.

Contribution

The paper demonstrates that online betting markets can provide more accurate election predictions than traditional polls, highlighting their potential as a valuable forecasting tool.

Findings

Polymarket outperformed polls in predicting 2024 election outcomes.

Betting markets were especially accurate in swing states.

Results support the Wisdom of Crowds theory.

Abstract

Political elections are one of the most significant aspects of what constitutes the fabric of the United States. In recent history, typical polling estimates have largely lacked precision in predicting election outcomes, which has not only caused uncertainty for American voters, but has also impacted campaign strategies, spending, and fundraising efforts. One intriguing aspect of traditional polling is the types of questions that are asked -- the questions largely focus on asking individuals who they intend to vote for. However, they don't always probe who voters think will win -- regardless of who they want to win. In contrast, online betting markets allow individuals to wager money on who they expect to win, which may capture who individuals think will win in an especially salient manner. The current study used both descriptive and predictive analytics to determine whether data from Polymarket, the world's largest online betting market, provided insights that differed from traditional presidential polling. Overall, findings suggest that Polymarket was superior to polling in predicting the outcome of the 2024 presidential election, particularly in swing states. Results are in alignment with research on ''Wisdom of Crowds'' theory, which suggests a large group of people are often accurate in predicting outcomes, even if they are not necessarily experts or closely aligned with the issue at hand. Overall, our results suggest that betting markets, such as Polymarket, could be employed to predict presidential elections and/or other real-world events. However, future investigations are needed to fully unpack and understand the current study's intriguing results, including alignment with Wisdom of Crowds theory and portability to other events.