Prediction Markets Are A Hit for Papal Wagers

Much to the public's and prediction markets' surprise, Chicago Cardinal Robert Prevost was elected Pope Leo XIV, the first American pope, last week. His election surprised gamblers, who had wagered heavily on other candidates in online prediction markets.

Two major prediction markets, Kalshi and Polymarket, collectively processed over $40 million of bets on the outcome of the conclave. Polymarket alone processed over $30 million of that total, reported via data on its website. Kalshi, a regulated event-based futures market, confirmed it processed over $10.6 million worth of trading related to the election of the Pope.

Despite the monumental volume of activity, the market participants regarded the Prevost as a long shot. Kalshi data indicated that Prevost's implied probability was under 1% in the build-up to the conclave. Of over 33,000 conclave-related trades placed on Kalshi, just 416 bets amounting to $450,000 were wagered on Prevost's nomination.

A Kalshi spokesman called the conclave a "big draw" at the moment of attendance, likening the race of trading to that of a major sporting event. The $10.6 million wagered on the pope's fate pales in comparison to the $132 million that Kalshi reported was wagered on the U.S. presidential election of 2024.

Prediction Markets Remain Heavily Contested Issue

Concerns regarding prediction markets were especially prominent in such an election. Cantrell Dumas, derivatives policy director for the interest group Better Markets, raised the topic in October 2024 of how large market players would be capable of manipulating such sites to influence citizens' voting or spread misinformation.

Dumas emphasized that regulation was necessary to protect the integrity of the sites and the electoral process.

Kalshi allows betting on a broad spectrum of events, covering everything from political events to entertainment releases. Speculation on the release of the video game Grand Theft Auto VI and what White House Press Secretary Karoline Leavitt will announce during her next press briefing are some examples of open markets.

Polymarket, operating outside the bounds of U.S. regulations, likewise allows users to place bets on exactly the same speculative topics. However, citizens of the U.S. are currently being prevented from accessing the site following regulatory enforcement carried out by the Commodity Futures Trading Commission (CFTC). 

In 2022, the regulator imposed a fine and compelled the company to close some non-compliant markets.

The surprise nomination of Pope Leo XIV is used to stress not only the uncertain nature of papal elections but also the limitations of prediction instruments, even with high cash stakes. Whatever high cash stakes are wagered on such markets, their value for prediction is dubious, particularly if punters strongly prefer favorites and pay no attention to outsiders.