The 2026 California governor's race was already one of the strangest in recent memory. No Kamala Harris. No Alex Padilla. Just a fragmented field of lesser-known Democrats, two Republicans who briefly led every poll, and a billionaire who'd been quietly blanketing the airwaves for months. Then, on Friday, it got a lot stranger.
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For weeks, Eric Swalwell had been sitting near the top of the field, consolidating support from powerful labor unions and business groups. On Kalshi, his odds, consistently above 50%, reflected that standing. He was a clear frontrunner in a muddled race. Then, early this week, something shifted. Rumblings on social media about alleged misconduct began circulating, but without a named accuser or a published story, the market took note but didn't panic. Swalwell's odds dipped from 58% to 41%, but he still held the top spot.
Then came Friday afternoon, and everything changed.
The San Francisco Chronicle published a bombshell account from a former Swalwell staffer alleging he sexually assaulted her twice while she was too intoxicated to consent, once in 2019 and again in 2024. Later that evening, CNN aired an interview with the same woman and reported that three additional women had made sexual misconduct allegations against the congressman, including allegations that he sent unsolicited nude photos and explicit text messages. His odds on Kalshi collapsed to 4% at the time of this article.
Late Friday night, Eric Swalwell released a video on X denying the allegations, calling them false, and said he would spend the weekend with his family.
What’s interesting is that this is not the first time that the California governor frontrunner has fallen from the number one spot due to a scandal.
Last October, Katie Porter's odds plummeted from 40% to 18% in a single day after a clip of her CBS Sacramento interview went viral, in which she threatened to end the interview mid-segment, calling it an "unhappy experience." The subsequent UC Berkeley IGS poll showed Porter had fallen from 17% to 11% support among voters. Kalshi had priced in the scandal before it was caught in the polls, and it looks like the same phenomenon is occurring here.
The more pressing question right now isn't who wins the governorship. It's whether Swalwell will even be in the race next week.
The top three House Democrats, Leader Hakeem Jeffries, Whip Katherine Clark, and Caucus Chair Pete Aguilar, issued a joint statement calling on Swalwell to "immediately" end his campaign. Former Speaker Nancy Pelosi followed, stating it was "clear that a full investigation is best done outside of a gubernatorial campaign." Senator Adam Schiff withdrew his endorsement outright, writing that he found the allegations "deeply distressing" and that Swalwell should withdraw from the race.
The institutional collapse has been just as swift. The California Teachers Association, which had been one of his marquee endorsements, voted unanimously to rescind its support. His campaign chair, Rep. Jimmy Gomez, resigned on Friday and called on Swalwell to drop out immediately. Several senior campaign staffers had already walked out the door before the Chronicle story was even published.
At the time of this article, Kalshi markets currently price approximately a 75% chance that Swalwell exits the race by the end of April. The likelihood that Eric Swalwell would drop out immediately declined after Swalwell released a video late Friday night denying the allegations, saying he would fight them. Still, his endorsements and donors' pages are down on the website. The big question will be whether he can weather the storm. Right now, the pressure for him to drop out across the political aisle is very high.
To understand what happens next, you need to understand how California's primary works. On June 2, every candidate, Democrat, Republican, independent, appears on the same ballot. The top two vote-getters, regardless of party, advance to the November general election. That's it. No party runoffs. No conventions. Just the top two.
For months, that system had Democrats genuinely nervous. A recent UC Berkeley poll showed Republican candidates Steve Hilton at 17% and Chad Bianco at 16%, while Democratic candidates Swalwell and Porter sat at 13% each. With eight serious Democrats splitting the vote and two Republicans consolidating it, a scenario where no Democrat made the general election was not just a talking point; it was a real possibility.
Then Trump intervened. On April 6, he endorsed former Fox News host Steve Hilton on Truth Social, upending the Republican side of the race. The move was meant to boost the GOP, but the irony is that it may have done the opposite. By consolidating Republican votes around Hilton, analysts believe Trump has likely dropped Bianco into the mid-teens, creating more headroom for a Democrat to secure the second spot in the general election. One GOP strategist put it bluntly: Trump probably saved the Democrats from their own circular firing squad.
Now, Hilton is trading at 75% to advance through the primary on Kalshi, while his odds were 60% before the Trump endorsement. Bianco's odds have slipped from 35% to 5%. The real drama is on the Democratic side, where Swalwell's sudden implosion has scrambled everything.
Who Benefits?
The markets show that Swalwell’s scandal has improved the chances of basically every other candidate in the race. Steyer’s odds went up the most from 15% a week ago to 57% now, but Katie Porter and Matt Mahan’s odds also doubled. They respectively have the second- and third-best chances of winning, behind Steyer. Steyer has a structural advantage that money can buy: while rivals spend considerable time on fundraising calls, his self-funded campaign has been blanketing the airwaves, building name recognition in a field where most voters still can't identify the players. Porter, meanwhile, may benefit most from Swalwell's labor endorsements coming loose. If Swalwell collapses, veteran labor strategists have signaled that Porter is the next natural home for union support.
Matt Mahan, the San Jose mayor who has been a vocal critic of Swalwell this week, has also seen his odds move. He was among the first candidates to call publicly for Swalwell to exit the race, and the market has noticed.
The question now is whether Democrats can coalesce quickly enough around one or two candidates to ensure they both advance. A scenario where Porter, Steyer, and Mahan all hover around 15% while Hilton cruises at 25% and maybe Bianco gets 15% is exactly the kind of math that keeps California Democratic strategists awake at night.
Why This Race Matters
California is not a normal state. It has the largest population and the largest economy in the country, larger than that of most nations. The governor sits at the intersection of AI regulation and Silicon Valley, immigration policy, wildfire response, and housing. And Gavin Newsom, who is term-limited out of the office he currently holds, is widely considered a leading candidate for the 2028 presidential race (our markets have him at a 27% chance to be the 2028 Democratic nominee), meaning whoever inherits this job is inheriting the national spotlight, too.
The June 2 primary is less than two months away, and the first debate is less than a month away. As always, look to the Kalshi markets to tell you where this lands before anyone else does.
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