{"id":231192,"date":"2026-03-22T12:26:11","date_gmt":"2026-03-22T12:26:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ca\/231192\/"},"modified":"2026-03-22T12:26:11","modified_gmt":"2026-03-22T12:26:11","slug":"prediction-markets-are-seeing-a-political-boom-heres-what-they-might-mean-for-californias-governor-race-the-mercury-news","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ca\/231192\/","title":{"rendered":"Prediction markets are seeing a political boom. Here\u2019s what they might mean for California\u2019s governor race \u2013 The Mercury News"},"content":{"rendered":"

As it ticks closer to Election Day, the prediction markets have gotten more confident in East Bay Rep. Eric Swalwell\u2019s chances to be the next governor of California. It\u2019s a stark contrast compared to recent polling that shows the race to succeed Gov. Gavin Newsom is still wide open<\/a> as many voters remain undecided or disengaged.<\/p>\n

The Castro Valley Democrat has held the highest probability to win the governorship since his entrance into the race last November<\/a> and has cleared 60% on Kalshi and Polymarket. Swalwell has frequently touted his performance in prediction markets on social media as a metric of his campaign\u2019s success.<\/p>\n

\u201cI\u2019m betting on Californians. And they\u2019re predicting on @Kalshi that we win BIG,\u201d he wrote in a Jan. 29 post on X.<\/p>\n

Prediction markets work by allowing users to buy or sell shares based on the outcome of an event. The odds are a balancing point of all trades on each candidate as users buy and sell \u201cyes\u201d or \u201cno\u201d on a candidate with another trader who has the opposing view.<\/p>\n

In the last six months, traders have put more than $7 million combined into Kalshi and Polymarket bets for who the next governor of California will be. It\u2019s part of a prediction market boom that\u2019s sweeping the nation as users wager billions of dollars a week on everything from who will win March Madness to who the next Democratic nominee for president will be.<\/p>\n

The markets\u2019 growing popularity, though, has raised concerns for some California lawmakers and other critics who argue that prediction markets blur the lines between trading and gambling and worry that they could wield influence over election outcomes or be susceptible to manipulation if insiders try to cash in.<\/p>\n

Assemblymember Maggy Krell, D-Sacramento, sent a letter earlier this month to the Fair Political Practices Commission expressing her concerns about \u201cpredictive market trading on the democratic process.\u201d<\/p>\n

\u201cPolitical donors look to support a \u2018winner,’\u201d she said. \u201cIncreasing favorable odds through sites like Kalshi have the potential to generate more support for a candidate and simultaneously damage the candidacy of one or more opponents. Candidates often circulate polls showing their path to victory in order to persuade potential supporters to invest in the campaign. But such expenditures must be disclosed.\u201d<\/p>\n

\"Explainer<\/p>\n

Swalwell\u2019s campaign did not respond to multiple requests for comment, but candidates like former Los Angeles Mayor Antonio Villaraigosa and former State Controller Betty Yee have denounced prediction markets and vowed to crack down on them if elected.<\/p>\n

Placing wagers on election outcomes precedes modern-day statistical polling \u2014 the first of which was done by Elmer Gallup in the 1936 presidential election \u2014 according to Koleman Strumpf, an economics professor at Wake Forest University who studies prediction markets.<\/p>\n

While the medium may have changed from the late 19th century or early 20th century markets that were held in poolrooms or on the curb exchange, the contracts mirror today\u2019s markets and were extremely accurate, Strumpf said. His research found that between 1868 and 1940, there was only one race where a presidential candidate who was favored in the prediction markets the month before Election Day lost.<\/p>\n

Strumpf maintains that today\u2019s markets also tend to be largely accurate as \u201cthe people in the market are pretty clever because they are putting their money down.\u201d<\/p>\n

But political data expert Paul Mitchell said they can also have their biases.<\/p>\n

San Jose Mayor Matt Mahan, who stems from tech and is being backed by the likes of Google co-founder Sergey Brin, Roblox CEO David Baszucki and Y Combinator CEO Gary Tan<\/a>, has been performing considerably better in prediction markets than in independent polls. The mayor, one of eight prominent Democrats in the race, has often been the candidate with the second-highest probability after Swalwell. Mitchell attributes the discrepancy to a potential \u201coverrepresentation\u201d of Silicon Valley-types who might gravitate toward the mayor and be more inclined to make bets in prediction markets.<\/p>\n

But the political data expert, who has included Polymarket information in a simulator he created to game out the chances of who will make it into the November runoff, said the prediction markets can capture things the polls can\u2019t, such as Swalwell receiving an endorsement from SEIU \u2014 one of the most powerful unions in the state that represents 750,000 workers.<\/p>\n

\u201cBased on how the spending is done in elections about the influence of that endorsement, that should increase Eric Swalwell\u2019s chances of getting elected governor at this point,\u201d Mitchell said of prediction markets. \u201cIt will take weeks for a poll to recognize that because polls that are in the field right now aren\u2019t going to capture any surge in viability because of the SEIU endorsement.\u201d<\/p>\n

While political and economic experts debate the accuracy of prediction markets, the platforms have come under fire from states and gambling interests as they face an onslaught of lawsuits.<\/p>\n

Arizona last week was the latest state to take aim at Kalshi, filing criminal charges that allege it\u2019s taking election bets and operating an illegal gambling business in the state without a license.<\/p>\n

\u201cKalshi may brand itself as a \u2018prediction market,\u2019 but what it\u2019s actually doing is running an illegal gambling operation and taking bets on Arizona elections, both of which violate Arizona law,\u201d Attorney General Kris Mayes said in a news release. \u201cNo company gets to decide for itself which laws to follow.\u201d<\/p>\n

Prediction markets are regulated by the Commodity Futures Trading Commission, and up until late last year, Polymarket \u2014 one of the two largest markets \u2014 was barred from doing business in the United States. The company was previously forced to shut down its local operations in 2022 after it reached a $1.4 million settlement agreement with the Biden administration for operating as an unlicensed exchange.<\/p>\n

I. Nelson Rose, a professor emeritus at Whittier College and an expert on gaming law<\/a>, said that the prediction markets are \u201cbasically unregulated\u201d as the CFTC \u201cdoesn\u2019t have any expertise in sports betting or frankly doing anything outside of the financial monitoring of trades.\u201d<\/p>\n

\u201cOne of the reasons that my personal belief is that these are illegal is that they don\u2019t meet sometimes strict standards\u00a0for what is and what isn\u2019t a commodity,\u201d he said. \u201cAlmost every state makes it illegal to bet on elections for very good reasons, particularly in smaller elections where you could affect the outcome and you could bribe people.\u201d<\/p>\n

State legislators in California, where online gambling and sports betting are illegal, are quickly scrambling to put what checks they can on the industry.\u00a0Recent legislation has been introduced to ban elected officials, candidates and lobbyists who might have insider information from making bets in prediction markets and bar the markets from advertising to or allowing minors on their platforms.<\/p>\n

\u201cI\u2019ve definitely seen a keener interest by stakeholders, parents and lawmakers about this and want to ensure that we are ultimately monitoring and protecting minors and what the future of this looks like as with any other regulatory environment,\u201d Assemblymember Patrick Ahrens, D-Sunnyvale, who co-chairs the California Technology and Innovation Caucus, said in an interview.<\/p>\n

Attorney General Rob Bonta, whose office did not respond to a request for comment, has yet to wade into the debate, though he signed onto an amicus brief in a lawsuit against Kalshi last year that said that \u201cmany of the \u2018contracts\u2019 Kalshi lists are indistinguishable from sports betting.\u201d<\/p>\n

Platforms like Kalshi and Polymarket have continued to maintain that they are prediction markets and not gambling.<\/p>\n

\u201cIf we are gambling, then I think you\u2019re basically calling the entire financial market gambling,\u201d Kalshi CEO Tarek Mansour told Axios in an interview last year<\/a>.<\/p>\n

CFTC Chairman Michael Selig, who was appointed by President Trump, has also come to the defense of prediction markets, arguing that state gambling laws don\u2019t apply to CFTC-regulated events.<\/p>\n

Kalshi and Polymarket have instituted rules that prohibit anyone under the age of 18 from placing a bet and Kalshi\u2019s website says it blocks politicians from joining the platform and prohibits candidates and government employees from betting in markets where they might have nonpublic information. Stephen Cloobeck, a businessman and former candidate for California governor, recently said he was blocked from trading on Kalshi.<\/p>\n

Strumpf, the Wake Forest University professor, dismissed concerns about market manipulation and influencing voter behavior, saying that there historically hasn\u2019t been issues and that the concerns \u201caren\u2019t grounded very deeply in fact.\u201d Instead, he sees them as an \u201cincredible resource for people interested in current events.<\/p>\n

\u201cI would say as part of a news diet, opening up Polymarket or opening up Kalshi at the beginning of the day and seeing what are the markets that are getting all of the activity, it tells you what are the big stories of the day,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"As it ticks closer to Election Day, the prediction markets have gotten more confident in East Bay Rep.…\n","protected":false},"author":2,"featured_media":231193,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[37945,389,85621,2647,72333,184,764,54722,7,47501,9,8,400,2954,390,391,392,186,8816,6836,332,393,383,204,14171,15841,394,187,2955,41759,181,23,190,2648,2649,12610,191,194,100,143,195,395,13,24403,385,976,101,396,88,1530,2651,397,197,198,200,2653,203,398,1689,399,7620],"class_list":["post-231192","post","type-post","status-publish","format-standard","has-post-thumbnail","category-california","tag-2026-election","tag-alameda-county","tag-alamo","tag-antioch","tag-atherton","tag-bay-area","tag-berkeley","tag-brisbane","tag-california","tag-california-governor-election","tag-california-headlines","tag-california-news","tag-california-politics","tag-castro-valley","tag-central-contra-costa","tag-concord","tag-contra-costa-county","tag-cupertino","tag-daly-city","tag-danville","tag-east-bay","tag-east-contra-costa","tag-economy","tag-election","tag-financial-markets","tag-foster-city","tag-fremont","tag-gilroy","tag-hayward","tag-hillsborough","tag-latest-headlines","tag-local-news","tag-los-gatos","tag-martinez","tag-menlo-park","tag-millbrae","tag-milpitas","tag-mountain-view","tag-news","tag-oakland","tag-palo-alto","tag-peninsula","tag-politics","tag-portola-valley","tag-regional","tag-richmond","tag-san-francisco","tag-san-francisco-county","tag-san-jose","tag-san-leandro","tag-san-mateo","tag-san-mateo-county","tag-santa-clara","tag-santa-clara-county","tag-south-bay","tag-south-san-francisco","tag-sunnyvale","tag-tri-valley","tag-walnut-creek","tag-west-contra-costa","tag-woodside"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/231192","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=231192"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/231192\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/231193"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=231192"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=231192"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=231192"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}