How scandals shift election odds overnight

The dynamic nature of presidential election odds is one of the most fascinating aspects of modern politics. Gone are the days when we had to wait weeks for a poll to tell us how a major event landed with the public. Today, election odds can change in the blink of an eye, reacting to a single tweet, a leaked video, or a breaking news alert.

Understanding these shifts is no longer just for professional analysts; it is essential for anyone interested in the real-time health of an election. Elections shape not only public policy but also the broader cultural conversation. They influence everything from economic decisions to the topics people debate at cocktail parties, making their trajectory relevant to everyone. In an environment where information moves faster than editorial verification, prediction markets increasingly surface shifts in belief before narratives catch up. By observing prediction markets like Kalshi, observers gain a unique vantage point: a window into the collective expectation of participants who have a financial incentive to separate truth from noise, narratives, and nonsense.

The 24-hour news cycle ensures that presidential campaigns are under constant, microscopic scrutiny and subject to countless forces, many of which cannot even be anticipated. However, the true catalyst for an "overnight" shift is typically the arrival of new information that prediction market traders process more quickly than the general public.

Presidential odds are essentially a moving average of a candidate's perceived electability. When unexpected events occur, such as a sudden health scare, a legal ruling, a campaign gaffe, or a geopolitical crisis, the probability of winning an election is instantly repriced. Unlike polls, which require days to aggregate responses, prediction market odds reflect the immediate digestion of these shocks. If the public perceives that a candidate can no longer effectively campaign or will be severely hindered if they continue, their odds will collapse before the candidates have time to react or implement damage control.

Millions of small campaign decisions (e.g., where a candidate chooses to campaign the week before an election) or exogenous forces (e.g., the weather on Election Day in a battleground state) can impact election odds. The following are several non-exhaustive core drivers that act as the primary engines for volatility in political forecasting.

Political scandals are the ultimate "black swan" events for an election. They introduce uncertainty that traditional models, like those run by Nate Silver, struggle to quantify without other data, but which prediction markets price with ruthless efficiency and immediately.

How do scandals impact the odds of an election?

When a scandal breaks, a specific chain reaction occurs that moves the needle on election odds instantly.

Traditional news outlets and pollsters, and even data aggregators like Nate Silver, operate at discrete intervals. Prediction markets, however, offer continuous updates by the second. Every trade provides a new data point, allowing the presidential probability to fluctuate 24/7.

Prediction markets allow for quick corrections. If a scandal turns out to be "fake news," the price will bounce back within minutes. News organizations are much slower to issue retractions, whereas the candidate's price on a prediction market reflects the most accurate, current information. 

Yes, prediction markets can be subject to the same biases that journalists, pollsters, and election forecasters have. But they also offer a financial incentive to be right that tends to quickly correct egregious inaccuracies.

In prediction markets, participants risk actual capital. This creates a discipline of accuracy. While a journalist may face reputational damage, a person who chooses to trade on politics faces an immediate financial loss. This makes prediction markets a more honest reflection of reality than punditry.

One of the most confusing aspects of a presidential election is when different signals tell different stories. Let me explain with a few different examples.

Polls are backward-looking. Prediction markets are forward-looking. This often creates a gap where a candidate like Kamala Harris or Donald Trump might look strong in a poll, but their odds are already shifting due to a fresh development that the poll cannot have priced in based on when it was fielded.

Prediction markets are not perfect; they can be "twitchy." Traders sometimes overreact to sensationalist headlines, leading to volatility in presidential odds. Still, the markets will correct in record time, and most markets are efficient enough now that they are less susceptible to moving just based on misleading sensationalist headlines or fake news.

Sometimes, both polls and prediction markets get it wrong. Late-deciding voters in a swing state can cause real-world election outcomes to diverge from all projections. In these cases, even the models from Nate Silver may fail to capture this silent or shy voter phenomenon.

The 2024 Presidential Election before Joe Biden dropped out is a perfect example of where polls showed general stability in the race, but the prediction market odds were different. Polls generally showed a neck-and-neck race throughout the spring and the summer of 2024, even though two major events, the June 2024 Presidential debate and the failed assassination attempt on Trump, pushed the odds in his direction significantly. Polls ultimately did shift in Trump’s favor slightly, but it was not super drastic. Prediction markets unearthed this signal way before polls did.

In very competitive races, in many cases polls, markets, and anecdotal voter behavior might diverge, and we’ve seen this development many times in recent memory. There have been many cases recently where polls have been inaccurate, as they have low response rates and have failed to price in shy Trump voters. 

Moreover, because there is social stigma against voting for Trump, sometimes, reading into media narratives or indexing too much on your political bubble can give you a wrong signal. Markets are not always correct, but they do price in polls, voter behavior, and other data points. In competitive races, especially close to Election Day, it is common to see volatility with wider odds ranges and rapid repricing as new information emerges. This is the market doing its job.

What sudden odds shifts reveal about the race

Sudden shifts in presidential election odds are a feature, not a bug in prediction markets. For those who track the election, these shifts identify the true pivot points of the race. If a major scandal doesn't move the odds for the Republicans or Democrats to win, it reveals that their support is already "baked in." Sudden shifts in the odds caused by major events reveal how resilient or fragile a candidate is to exogenous shocks.

Presidential election odds are a vital pulse-check for democracy. By understanding why and how these probabilities shift, from last-minute swing state surprises to campaign-ending scandals, we can look past the noise. Prediction markets provide a clearer view of the presidential landscape than traditional polls or election forecasts. In the end, the election is decided by voters, but the prediction markets tell us exactly what those voters are likely to do long before the first ballot is cast.