Results from a dozen years of election futures markets research

Abstract

Real-money futures markets utilize continuous double-auction mechanisms to aggregate information and predict election outcomes with high degrees of accuracy. Analysis of 49 markets across 41 elections in 13 countries demonstrates that these market-based forecasts frequently outperform traditional opinion polls. While polls rely on representative sampling and questions of current voter intent, futures markets incentivize participants to predict actual election-day results through financial rewards. Although individual traders often exhibit behavioral biases and partisan optimism, market prices remain efficient because a subset of marginal traders—those actively setting bid and ask prices—corrects mispricing and eliminates arbitrage opportunities. These markets exhibit greater predictive stability throughout campaign cycles than polls, with prices typically following a random walk consistent with efficient market theory. Beyond vote-share and seat-share predictions, winner-take-all contracts provide probabilistic assessments of candidate viability and the impact of specific news events. By bridging the gap between controlled laboratory settings and large-scale natural markets, election futures markets function as robust forecasting tools and decision support systems driven by the aggregate information of incentivized participants rather than the average beliefs of a representative sample. – AI-generated abstract.