Trump Conviction Barely Dents His Odds of Winning Election: Prediction Markets

This
week
in
prediction
markets:

Donald
J.
Trump
is
the
first
U.S.
president,
former
or
otherwise,
to
be
convicted
in
criminal
court.
But
this
dubious
distinction
did
little
to
sway
his
odds
of
retaking
the
White
House,
prediction
markets
indicate.

For
the
uninitiated,
on
prediction
markets,
when
the
trade
settles,
those
who
bet
on
the
correct
outcome
get
$1
per
contract
purchased,
and
those
who
bought
“shares”
in
the
incorrect
one
get
zero.
The
contract’s
value
can
be
read
like
a
poll;
a
contract
with
a
value
of
40
cents
could
be
read
as
a
40%
chance
of
the
prediction
coming
true.

On
crypto-based
Polymarket,
where
the

election
contract
is
nearing
$150
million
in
total
bets,
Trump’s
guilty
verdict
didn’t
do
much
to
move
prices,
knocking
just
a
penny
off
the
“yes”
contract’s
value.

Week-over-week,
the
probability
of
Trump
winning
is
down
around
two
percentage
points,
to
54%.
But
on
May
31,
the
day
a
jury
convicted
Trump
of
felony
crimes,
it
lost
only
one
percentage
point.

Trump’s
16-point
lead
over
President
Joe
Biden
on
Polymarket
is
still
much
more
pronounced
than
the
polling
averages.
By
that
traditional
measure,
the
presumptive
GOP
nominee
is
still
ahead
of
the
incumbent,
but
by
less
than
a
percentage
point

according
to
an
aggregate
produced
by
270
to
Win.

On
PredictIt,
a
more
mainstream
betting
site
where
trades
are
placed
in
dollars
rather
than
stablecoins,
the
Trump
contract
actually
gained
1
cent
following
the
guilty
verdict,
although
at
51-48
his
lead
over
Biden
is
narrower
and
closer
to
the
polls
than
on
Polymarket.
Unlike
Polymarket,
which
blocks
U.S.
users
under
a
regulatory
settlement
but
has
traders
around
the
world,
PredictIt
is
open
only
to
Americans.

Legal
experts
have
said
that

Trump
is
unlikely
to
face
a
prison
sentence
for
his
crime,
and
the
market
is
in
line
with
this
sentiment.

On
a
Polymarket
contract
asking
if
Trump
will
go
to
prison,
bettors
are
fairly
confident
he
won’t
see
the
inside
of
a
cell,
giving
a
76%
probability
he
will
serve
no
time;
a
18%
change
he
will
get
less
than
a
year;
and
a
2%
change
he
will
get
one
to
two
years.

Polymarket
bettors
were
fairly
accurate
when
predicting
the
sentence
for
former
Binance
CEO
Changpeng
“CZ”
Zhao.

CZ
was
sentenced
(and
is
now
serving)
a

four-month
prison
sentence.
Before
sentencing,
the
market
was
confident
that

he’d
get
less
than
a
year,
and
more
specifically,
less
than
six
months.
The
Department
of
Justice
had
asked
for
a
three-year
sentence,
while
CZ’s
attorneys
had
argued
for
18
months
in
his
plea
agreement.

Kalshi
and

Polymarket
traders
are
not
pricing
in
a
rate
cut,
creating
a
stark
contrast
with
the
CME
FedWatch
poll,
which
does
anticipate
a
cut
by
the
fall,
and
gives
some
certainty
of
another
by
the
winter.

On
Kalshi,
the
only
U.S.-regulated
platform
for
these
contracts,
bettors
are
giving
a
32%
chance
of
zero
cuts,
while
they
are
pricing
in
a
29%
chance
of
one
cut.
“Two
cuts”
is
coming
in
next
at
24%.

Over
at
Polymarket,
bettors
are
split
between
zero
and
two
cuts,
giving
a
30%
chance
of
each
happening.

Economists
are
split
on
whether
the
Federal
Reserve
will
lower
interest
rates
in
2024.

Factors
such
as
elevated
inflation,
a
resilient
economy,
and
a
labor
market
that
remains
strong,
though
slightly
softening,
suggest
that
easing
monetary
policy
may
not
be
necessary.
However,
the
persistence
of
these
conditions
throughout
the
year
adds
an
element
of
doubt.

Some,
like
Steve
Englander
from
Standard
Chartered
Bank,

argue
there’s
a
chance
for
a
July
cut,
citing
potential
slowdowns
in
core
inflation
and
seasonal
factors
affecting
current
inflation
readings.

The

CME’s
FedWatch,
a
poll
of
market
participants,
paints
a
different
picture.

It’s
targeting
a
54%
chance
of
the
first
rate
cut
occurring
by
the
Sept.
18
meeting
of
the
Federal
Open
Market
Committee,
and
growing
confidence
that
a
second
–
or
even
third
–
cut
will
occur
by
December.

This
divergence
will
be
something
to
watch,
to
see
if
the
market
participants
on
CME’s
FedWatch
know
more
than
the
market
observers
on
prediction
markets.