This presidential bet offers 'free money'

By Brett Arends

Quick arbitrage opportunity shows prediction markets are still inefficient

Presidential betting on Kentucky Gov. Andy Beshear shows there is free money to be made in prediction markets

Polymarket currently gives Kentucky Gov. Andy Beshear a 19% chance of winning the 2028 U.S. presidential election.

But it gives him only an 8% chance of winning his party's presidential nomination that year.

These were the prices on Polymarket as of Thursday lunchtime. They had been this way since at least Wednesday evening. How long they will last is anyone's guess.

Confused? You should be. One of those two numbers must be wrong. And this sets up a simple opportunity to make some free money through arbitrage. Bet in favor of Democrat Beshear winning his party's nomination and against him winning the presidential election, and you will make a guaranteed profit - unless you think Beshear will somehow win the White House as a third-party candidate, which isn't going to happen.

A politician needs to win their party's nomination before they can win the November election as that party's nominee. Therefore, their chances of winning the actual election must be less than their chances of winning the nomination. Given how divided America has become, the chances of becoming president should probably be about half the chance of getting nominated.

If Andy Beshear has an 8% chance of getting nominated, he probably has around a 4% chance of getting elected president.

But if he has a 19% chance of getting elected, he probably has somewhere around a 38% chance of getting nominated.

The 19% and 8% figures cannot both be right.

A Polymarket spokesman confirmed the numbers but explained that they were the result of separate trades by gamblers in the two distinct markets.

(Polymarket has a data partnership with Dow Jones, the publisher of MarketWatch.)

The arbitrage opportunity may not last long. As soon as MarketWatch reports it, or traders see it, they can be expected to take advantage, place the relevant trades and close the gap. Eagle-eyed traders may make hundreds or even thousands of dollars on the bet, but they will not make life-changing sums - the markets are not big enough.

And if they want to wait for the bets to settle to take their profits, they will have to wait until the results in two years' time. (Happily, on Polymarket, you can sell out of your position, like on the stock market.)

As always, do your own due diligence and read all the fine print. Caveat emptor: Prediction-market bets are gambling.

Prediction markets such as Polymarket and rival Kalshi have exploded in popularity in recent years and have become increasingly influential in politics and finance. While they are controversial, their numbers are often quoted as predictors of the likelihood of future events.

But as the Beshear case shows, these markets are still in an early stage of development, and some of their numbers are clearly wrong. And that's an important warning for all investors - including the vast numbers who don't want to take on the risks and hassles of actually gambling.

-Brett Arends

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

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09-03-26 1354ET