Prediction markets like to present themselves as a clear barometer of public opinion. A report by Wired, republished by Ars Technica, shows a case where the numbers look odd.
The numbers
Two global election markets on Polymarket's offshore platform generated over $600 million in trading volume, far more than most political markets attract. Most of it went to contracts on long-shot candidates who in the end did not win.
The Ethiopian election is the clearest example. Prime Minister Abiy Ahmed's Prosperity Party won 438 parliamentary seats this summer, while the closest rival got 13. Yet only $173,000 was wagered on Abiy winning, compared with more than $41 million on his chief of staff, Shimelis Abdisa, becoming the next leader. That one market added up to over $285 million in volume, nearly all of it on losing candidates.
Why it looks strange
Normally the volume on a contract follows its odds, so the favorite attracts the most money. Here the pattern is turned upside down. The excerpt we have does not explain why, so the reasons remain open.
Takeaway
High trading volume does not prove a market is wise. Before quoting a prediction market as a signal, look at who is actually trading and what the contract really pays out on.