👁️ Election Market Manipulation

Polymarket is mostly fake. Also: more FTX Malfeasance; a Bitcoin play; DWF Labs' date rapist-in-residence; and more.

Election markets have emerged in the past two months as surprise stars of the 2024 election. Polymarket and now Kalshi (what?) have become practically household names, despite mixed and dubious legality in the U.S. itself. The markets themselves are super interesting, but the discourse around them has been enthralling.

Most notable has been the incredible simplemindedness with which even many media figures parroted the idea that the shifting betting odds on these platforms reflected some underlying political reality. You call something a “market” in this country, and suddenly it has more credibility than any college professor.

This quasi-religious treatment of markets as Delphic Oracles holds even when the reality of any given ‘market’ is more like ten fat guys mud-wrestling in a basement. That’s a fair description of the reality of Polymarket - it was revealed to be dominated by a small clutch of multimillionaire “whales” who had overwhelmingly placed bets on Donald Trump, driving up his odds (and driving down Trump betters potential payday). This is the core problem with taking anything on a political betting market as indicative of a deeper truth - because richer people can and will bet more, their biases will be over-represented.

That’s not even to say that rich people are here betting on Trump because they want him to win the actual election - though we’ll get to that. Far more fundamentally, in a prediction market rich people’s perspectives and biases on absolutely everything will be over-represented, from now until the end of time. Politics doesn’t even enter into it. This doesn’t mean prediction markets aren’t fun or even useful, but they’re not some miraculous technology that turns market forces into a revelation of The Truth, any more than Do Kwon can turn abstract market forces into Free Dollars.

In this case, it turns out, Polymarket has some more specific, less theoretical problems.

First, it’s quite small. As of November 1, $2.7 billion had been wagered on the election. That’s not nothing! But think of it this way: that’s the total you’d get if every American bet eight bucks. Not exactly an amount that would motivate a lot of rigorous information discovery. For another comparison, $30 billion was bet on fantasy sports on FanDuel in 2022.

Oh, and Polymarket is illegal in the U.S. anyway, which whatever you might say about VPNs, would still on balance suggest some deficit in representation of what, again all things being equal, is likely the population with the best actual insight into election conditions.

Oh, and like four guys, who are maybe one guy, make up most of the Trump bets on Polymarket. Turns out he’s maybe French? Don’t we still hate those guys?

Oh, and also, Polymarket is mostly fake, at least according to a new study of publicly accessible on-chain data. On top of the whales, one-third of all the activity on the platform is reputedly wash trading - that is, in this case, paired bets that cancel each other out, so the bettor isn’t actually risking anything.

The likely motive is that Polymarket is planning an “airdrop” to its users, a briefly cool but now incredibly stupid crypto thing where platforms bribe people to use them. This inevitably leads to “airdrop farming,” aka fake use and falsely inflated metrics. Then the token shits the bed and the fake users move on. Everybody wins!

The failure of Polymarketcels to comprehend basic reality isn’t just a neutral whoopsie. Convincing people that a prediction market can actually predict would be incredibly useful to the orbit of market maximalists around Peter Thiel and similar right-libertarians. In fact, Thiel is an investor in Polymarket. Information and prediction markets are in the bundle of strange radical anti-government technocratic dreams alongside Seasteading and Balaji Srinivasan’s “Network State.” They’re part of the conceptual infrastructure of how a sort of decentralized, privatized utopia would work. Instead of a newspaper with reporters, you get a Polymarket in everything, and the information discovers itself.

One funny possible outcome here is that, with real money on the line, a lot of these market technocrats might wind up hoisted by their own petard. Wall Street investors have reportedly been using the odds on these market to guide investments ahead of the election. Regardless of the actual outcome, that means they’re likely misallocated.

You have to be a special kind of mentally impaired to work on Wall Street and act on market indicators without understanding their inputs. But this is the all-too-human reality we live in, and it’s hard to think of a clearer example of why turning our critical faculties over to supposedly neutral, all-knowing markets is and always has been a royal road to fucking things up, badly.

My point is that markets aren’t God, and the tendency to think of them that way is a hilarious conceptual blind spot for right-wingers. This instance may wind up being painfully educational.

Capsule Review: “Happenstance: A Play about Bitcoin, Love, and Freedom.”

David Cagen as Ralph Schwagg, Nicole Carson as Sallie Neumann, and standout Olivia Hardin as Barbara Schwagg in Ben Schiller and Roman Albear’s Happenstance.

I was very happy last week to catch the limited run of performances of Happenstance, a play written by my former CoinDesk editor and good friend Ben Schiller. The plot is a mashup of several real-life stories, including elements of early Bitcoiner Charlie Shrem’s brief prison stint and Sam Bankman-Fried’s bizarre parents. I’m also just now noticing that the main character’s romantic interest is named “Neumann,” a possible reference to WeWork founder Adam Neumann’s grift-perfect conjunction of spirituality and technology.

The play is solid in this first iteration, and has a clear standout in Olivia Hardin’s portrayal of “Barbara Schwagg,” a clear stand-in for Sam Bankman-Fried’s mother Barbara Fried. Though in this iteration Barbara is frantically trying to get her son on a flight to a non-extradition country before he begins a prison sentence, Hardin brings the precise aura of fragile, manic aggression exuded by the real Barbara.

I’m told there are discussions underway to have the play produced in conjunction with future crypto events, so fingers crossed there will be more chances to see this.

DWF Labs Partner accused of Serial Date Rape

A very brave woman going by @hananotsorry on X (the everything app) went public last week with clear evidence that a crypto venture capitalist named Eugene Ng spiked her drink during a meeting in an apparent rape attempt. Subsequent accusations emerged suggesting this was a pattern, and Ng was fired. DWF Labs appeared on the scene quite recently, so this is likely to permanently shape perception of them as an organization.

FTX Prioritized VIP Withdrawals in Collapse

A new study found that “VIP” customers, including other exchanges, were given priority for withdrawals from FTX on November 7th and 8th of 2022, as the exchange was running out of money to fulfill withdrawals.

U.S. Seeks Clawback of $13m in FTX Political Donations

The U.S. Government is apparently still in “negotiations” with a group of Political Action Committees for the return of a total of $13 million in political donations from FTX executives, funded using customer money. The PACs apparently clinging to these stolen funds include Senate Majority PAC, Emily’s List/Women Vote, and the Future Forward PAC.

At Facebook, AI Slop Isn’t a Problem - It’s the Strategy

As reported by the always-excellent 404 Media, a recent Meta earnings call made clear that Zuck and company are very excited by the added engagement they’re getting from brain-breaking slop like Shrimp Jesus, and they’re doubling down.