Polymarket and Kalshi Face Scrutiny After Lula Wins at 20% Odds
Brazil.- 27 October 2026 | www.zonadeazar.com The unexpected victory of Luiz Inácio Lula da Silva in Brazil’s presidential election has sparked debate over the reliability of prediction markets after Polymarket and Kalshi assigned Flávio Bolsonaro an implied probability of approximately 80% just hours before the results became clear.
According to an analysis by Unchained, published on 26 October 2026 and distributed through Yahoo Finance, both platforms experienced dramatic shifts in their contract prices during the vote count.
The outcome has renewed a central question for the industry: how accurately do prediction market prices reflect the probabilities of political events?
Lula Wins Despite Having Just a 20% Implied Probability
On 25 October, Lula secured re-election with 51.8% of valid votes, compared with 48.2% for Flávio Bolsonaro.
The final margin was approximately 4.4 million votes, according to the election results.
However, on Sunday morning, prediction markets indicated a very different outlook:
- Flávio Bolsonaro: approximately 80% implied probability of victory.
- Luiz Inácio Lula da Silva: around 20%.
- Final result: Lula won by 3.6 percentage points.
The outcome surprised many market participants who had taken positions favouring Bolsonaro.
Kalshi Experiences a Dramatic Two-Hour Reversal
One of the most notable developments occurred on Kalshi, where market probabilities changed rapidly as election results emerged.
According to figures shared by Michael McDonough, Bolsonaro contracts had traded above 80% for two consecutive days.
However, during the vote count:
- Lula’s implied probability increased from approximately 20% to 70%.
- Bolsonaro’s probability fell to 31%.
- The reversal occurred over approximately two hours.
- Trading activity reached exceptional levels for the market.
The movements reflected a rapid reassessment of expectations as new electoral information became available.
Polymarket Records More Than US$249 Million in Trading Volume
Polymarket’s Brazilian presidential election market generated more than US$249 million in trading volume.
Following confirmation of the official result, the contract settled in Lula’s favour.
The significant activity demonstrates the international interest generated by Brazil’s election among prediction market participants.
However, the episode also illustrates that high trading volumes do not necessarily guarantee accurate expectations.
It is important to note that prediction markets are prohibited within Brazil, meaning the trading activity examined involved platforms and participants operating under other jurisdictions.
Differences Between Polling and Market Prices
The analysis also highlighted a considerable divergence between prediction market prices and opinion polls.
According to polling data cited by Unchained, some runoff surveys gave Bolsonaro an advantage of approximately 51%, substantially below the 80% implied by prediction markets.
The article also identified potential liquidity concerns.
At certain points, Polymarket’s order book was sufficiently thin that a sale of approximately US$30,000 could have reduced Bolsonaro’s implied probability by five percentage points.
This raises questions about the influence larger traders can exert in markets with limited liquidity.
An Incorrect Forecast or an Unlikely Outcome?
Lula’s victory prompted different interpretations among financial commentators and prediction market participants.
Joe Weisenthal, a financial journalist, questioned whether the result represented one of the most significant prediction market forecasting errors.
Meanwhile, Harry Crane pointed out that an event assigned a 20% probability is not statistically impossible.
Investor Nic Carter also questioned whether the result should instead be viewed as normal variation within a four-to-one probability scenario.
The debate highlights an essential distinction: assigning a low probability to an outcome does not mean that outcome cannot occur.
Impact on Financial Markets
The election result also triggered a negative reaction in certain Brazilian financial assets.
According to the reporting, the US-listed EWZ exchange-traded fund, which tracks Brazilian equities, declined by nearly 20% in overnight trading.
The reaction was linked to investors’ expectations concerning the incoming Government’s economic policies.
The episode illustrates how political developments can simultaneously influence traditional financial markets and prediction market platforms.
Industry Impact and Next Steps
Brazil’s presidential election has become an important case study for the operation of Kalshi, Polymarket and other prediction market platforms.
The result raises questions about liquidity, concentrated trading positions and the interpretation of market-implied probabilities.
For the iGaming and prediction markets industries, the episode also demonstrates the importance of clearly distinguishing between implied probabilities, electoral polling and confirmed election results.
Lula’s victory does not, by itself, invalidate prediction markets, but it provides another opportunity to examine their limitations and how they respond to unexpected events.
Editó: @fonta
