Two months before Venezuela’s presidential election in 2024, a professional gambler known as Domer decided to take a punt on the incumbent, Nicolás Maduro. There was no guarantee Maduro would win: Venezuela’s economy had been wrecked by years of mismanagement, and the opposition had united behind a credible opponent, Edmundo González. But Domer knew Venezuela had a history of sham elections and suspected that Maduro wouldn’t relinquish power. Domer logged on to Polymarket, a prediction market, and started to place a series of bets on Maduro winning the election.

Polymarket and its main rival Kalshi—from the Arabic for “everything”—allow users to wager on the outcomes of real-world events. Will Binyamin Netanyahu leave office this year? When will Taylor Swift announce she is pregnant? Will America confirm that aliens exist? 

Whereas casinos and bookmakers operate as “the house”, setting the odds and taking the opposite side of every bet, prediction markets let punters trade against one another. The platforms are appealingly simple to use. Traders log in, pick an event market (for example, whether Maduro will win the election), and choose between “yes” or “no” outcomes. What they’re really doing is buying a contract that pays a dollar if their prediction is correct and nothing if it’s wrong. Because of that, prices always stay between $0 and $1, which neatly reflects the probability the market puts on an event occurring. For example, if a “yes” contract on Maduro winning is priced at 62.5 cents it implies traders collectively believe there’s a 62.5% chance that will happen.

As the election drew closer, Domer noticed footage of large opposition rallies spreading across social media and thought González sounded increasingly confident. Yet Polymarket traders continued to give Maduro around an 80% chance of victory.