Why Prediction Markets Got the Brazilian Election So Wrong
Summary
Polymarket gave Lula da Silva roughly a 20% chance of winning Brazil’s presidential runoff, but he defeated Flávio Bolsonaro. Experts attributed the mispricing partly to Brazil’s ban on prediction markets, which kept local knowledge out, and to thin trading volume—just 4.5% of the 2024 U.S. election market’s volume. Some traders blamed retail investors for favoring Bolsonaro, while researchers cautioned that broader participation is not inherently harmful and that an 80% forecast can still fail. Analysts also said traders over-weighted Bolsonaro’s first-round result and misjudged turnout and voter transfers. They argued the result is a notable upset, not by itself proof that prediction markets are unreliable.
