Crypto Betting Markets: Trump Got a Bump From Covid

Prediction markets like Augur have democratic presidential nominee Joe Biden in the lead in the US presidential election, but some are indicating that President Trump’s COVID-19 diagnosis may help his reelection chances in November.

Odds that Biden would win the US presidential election fell more than 5% following Trump’s COVID announcement, according to data from election prediction contracts on the FTX crypto exchange. The slide comes after Biden’s odds jumped to all-time highs in recent days in the aftermath of 2020’ first presidential debate, rising above 65% before falling to about 62% on October 3.

The market activity is a sign that prediction markets on the blockchain are gaining traction, and could one day overtake their centralized counterparts.

What are crypto prediction markets?

Prediction markets, also known as betting markets, allow participants to place bets on the outcome of a particular event, like a national election or a sports game. Prediction markets are legal throughout most of Europe and much of the rest of the world. But some countries, notably the US, don’t allow citizens to participate, causing large centralized services like Betfair to ban users from those countries.

Prediction markets have thus turned to the blockchain, where services can’t be censored or shut down once they’re up and running. Augur is one such project, where US election odds have seen Trump slip 10% in the aftermath of the first debate, but haven’t indicated a reversal based on the COVID diagnosis so far. Trump’s odds of winning the election sit at around 44% on Augur’s protocol.

Prediction markets have also appeared in less formal designs. In the case of FTX, odds are measured using a futures contract that pays out based on the results of the upcoming election. The closer the price is to $1 (the payout price for each contract held), the greater the anticipated odds Biden will be the winner.

Odds for Biden on the FTX contract had risen and remained above 50% in mid-June, but failed to climb above 60% until US voters had the chance to see the candidates square off in person during the September 29 presidential debate.

Prediction markets are seen as an alternative to polling surveys when trying to understand binary outcomes like an election, where confidence enough to place a bet takes the place of trying to statistically estimate the political leanings of a large population. 

Prediction markets are also more responsive to sudden events like Trump’s COVID announcement, and so far seem to view the development as bad news for Biden. We won’t be left waiting much longer to see if bettors are on the right side of history, or if Trump will upset the bunch with another come-from-behind victory.