Polymarket Predicts GOP House Control, Trump Trifecta Ahead

Polymarket, a cryptocurrency-based prediction market that gained prominence this year due to its accurate forecasts, is now indicating that the Republican Party is highly likely to maintain control of the House of Representatives.

As of Wednesday afternoon in New York, shares labeled Democratic on Polymarket's contract regarding House control after the 2024 election were trading at just 1 cent. This suggests that traders perceive only a 1% chance of the Democrats reclaiming the chamber. Each share is valued at $1 (payable in USDC, a stablecoin typically pegged to the dollar) if the prediction holds true; otherwise, it yields nothing.

The probability of the GOP winning the House stands at an impressive 99%.

While many news outlets anticipated that the Democrats would retain the House shortly after the election on November 5, by Wednesday afternoon, they began to align with Polymarket's predictions, acknowledging that those chances were diminishing.

Just a day prior, the market had given Democrats a slightly better than even chance of winning the lower house of Congress.

According to the Associated Press, the control of the House was still uncertain as of 2 p.m. ET. However, Republicans have secured at least 52 Senate seats, guaranteeing them a majority in the upper chamber.

If the current predictions hold, the Republicans, under the leadership of president-elect Donald Trump, will achieve a trifecta by controlling the White House as well as both houses of Congress.

This scenario would pave the way for comprehensive cryptocurrency legislation in the upcoming Congress, a move that the industry has been advocating for due to the existing laws lacking clarity on the regulation of digital assets.

In contrast, Gary Gensler, the outgoing chairman of the Securities and Exchange Commission under President Joseph Biden, has maintained that the current regulations are adequate for overseeing the industry.

It is worth noting that Polymarket's House contract has a relatively small trading volume of $2 million, especially when compared to the now-resolved presidential market, which saw billions in transactions.

In prediction markets, participants wager on the outcomes of real-world events within specified time frames. In recent weeks, the higher odds Polymarket assigned to Trump winning the presidency, compared to traditional polls, led to speculation in mainstream media about potential market manipulation.

Advocates argue that these markets can offer superior forecasting capabilities compared to polls or expert opinions, as participants have a financial stake and are thus incentivized to conduct thorough research and bet based on what they believe will happen, rather than what they hope to see.

Trump's decisive victory, despite polls indicating a close race, supports this argument.

Markets are better than models. Almost axiomatically, because any model that has a useful signal is already incorporated into market prices, stated Flip Pidot, CEO and co-founder of American Civics Exchange, which deals in political contracts.

Markets aren't perfect, but they're the best mechanism we've got for discounting both future cash flows and uncertainties, Pidot added. While markets benefit from models to the extent they can incorporate them in their pricing, if you're looking for the best fair odds, focus on market prices rather than traditional forecasters.