QUICK TAKE

• Trump’s pro-crypto stance increases his lead over Biden in prediction markets.
• Doug Burgum remains behind Tim Scott for the Republican VP nomination.
• Longshot bets on SEC’s Ethereum ETF approval yield substantial returns.

Donald Trump’s recent overtures to the cryptocurrency community appear to have significantly strengthened his position against President Joe Biden, at least according to prediction markets. Over the past week, Trump has made several promises aimed at winning over crypto enthusiasts, including a pledge to commute the sentence of Silk Road founder Ross Ulbricht and a vow to establish the U.S. as a leader in the digital assets sector. This pro-crypto stance contrasts sharply with the more cautious approach taken by the Biden administration.

On PredictIt, a popular platform for election betting that settles trades in dollars, Biden’s “yes” shares have decreased from 46 cents to 44 cents. Each share pays out $1 if Biden is reelected, and nothing if he loses, so a 44 cent price implies a 44% chance of reelection. Similarly, on Polymarket, a crypto-based prediction platform that prohibits U.S. residents from participating, Trump’s odds have increased by two percentage points to 56%, while Biden’s have decreased by the same amount to 37%.

Interestingly, traditional polls have not mirrored these dramatic shifts. According to FiveThirtyEight averages, Trump’s polling lead over Biden has only increased by 80 basis points to 1.7%. Advocates of prediction markets argue that these platforms offer a more accurate gauge of public sentiment and forecasting because participants have financial stakes in the outcomes.

In addition to the presidential race, prediction markets have also been tracking potential vice-presidential picks for Trump. North Dakota Governor Doug Burgum, who has recently been active at Trump rallies and profiled by the Wall Street Journal as a wealthy candidate with influential connections, has seen a slight increase in his shares on Polymarket, now at 18%, though they have dipped slightly on PredictIt to 15%. Despite this, Burgum still trails behind South Carolina Senator Tim Scott, who leads the VP candidate predictions with 23% on PredictIt and 27% on Polymarket. Other prominent Republicans like Marco Rubio and Nikki Haley lag further behind.

Beyond the political sphere, prediction markets have also been active in the cryptocurrency sector, particularly around the approval of Ethereum ETFs by the U.S. Securities and Exchange Commission (SEC). Bettors recently enjoyed significant returns from a longshot contract concerning whether the SEC would approve Ethereum ETFs. A debate has arisen on Polymarket over the specific interpretation of “approval,” with some arguing it should include both the 19b-4 forms and the S-1 filings.

Last week, the SEC unexpectedly requested updated 19b-4 filings from potential issuers of Ethereum ETFs. This move stunned many analysts who had anticipated delays due to the SEC’s ambiguous stance on Ethereum’s status as a security. The rapid green-lighting of these filings marked a significant turn of events and led to substantial profits for those who had placed bets on this outcome.

Trump’s strategic courting of the crypto community, coupled with his promises to protect the industry and assert U.S. leadership in digital assets, has clearly resonated with bettors on prediction markets. As the political landscape continues to evolve, these markets provide a unique lens through which to assess the potential impact of candidates’ positions on niche but increasingly influential voter blocs.

Moreover, the developments around Ethereum ETFs highlight the dynamic nature of the cryptocurrency market and its regulatory environment. The SEC’s actions have profound implications for investors and companies alike, and prediction markets have become a valuable tool for gauging and capitalizing on these regulatory shifts.

As the 2024 presidential race heats up, and with ongoing debates about the future of cryptocurrency regulation, both political and financial prediction markets will undoubtedly play a critical role in shaping and reflecting public sentiment and expectations. For now, Trump’s proactive engagement with the crypto community has provided him with a notable edge, demonstrating the growing political influence of digital asset proponents.