Election betting is everywhere. Are you right?

The director of the longest-running election betting market in modern US politics used to work in a relatively sleepy environment, running what he called a “connoisseur's market” where bets were capped at $500 (£388) and no one made much Money.

But the world in which Thomas Gruca, a marketing professor at the University of Iowa Tippie College of Business, now operates has changed dramatically.

In recent weeks, as the U.S. heads toward a presidential election that most experts and polls say is too close to call, a new group of companies has emerged.

They are attracting hundreds of millions of dollars in bets on the outcome of the race – and the attention of both campaigns and media, as predictions on many of the largest websites are heavily in favor of Republican nominee Donald Trump.

The furor was sparked in part in September when a federal judge rejected arguments from U.S. market regulators that offering elective trading to Americans conflicted with state gambling laws and was not in the public interest.

The decision is being appealed. But since the ruling, more than $100 million (£77.5 million) has already been bet on Kalshi, the company that has taken regulators to court, according to its website.

Other companies, including Interactive Brokers and popular stock trading platform Robinhood, have also joined the fray, joining sites that have long served non-U.S. customers in countries like Britain, where betting on American politics is fair game.

At rallies, Trump drew attention to the sudden increase in election betting – and the increasing chances of his victory.

His most prominent supporter, tech billionaire Elon Musk, has also drawn attention to the phenomenon. alerts his social media followers to calls on election betting markets earlier this month, arguing they are “more accurate than polls because real money is involved.”

Prof. Gruca's Iowa Electronic Markets have very little in common with their new competitors.

The exchange is not fighting US regulators in court over its legality.

Under rules agreed with the government, it can accept bets for research purposes, but bets are limited and the exchange is not allowed to advertise or make money from the activity.

It also monitors a small portion of trading, mostly by Americans: a pool totaling less than $30,000, Prof. Gruca said.

There is another big difference.

Unlike larger platforms like Kalshi, Polymarket, Betfair and PredictIt, where the odds favor Trump by around 60% or more, traders in the Iowa market are currently betting on Kamala Harris.

Prof. Gruca is proud of his exchange's track record: On average over nine elections, Iowa Electronic Markets has predicted the popular vote outcome with an accuracy of almost one percentage point, proving to be a more accurate benchmark than the polls.

So he was surprised by the numbers on some of the larger sites.

“The numbers are extreme – it’s a 50-50 race,” he told the BBC. “We've done this for 60 to 40 races, we've seen this before. This is as close or closer than anything we’ve ever seen.”

Betting markets with a long history outside the U.S. have been wrong before: for example, they heavily discounted the odds of a Trump victory in 2016 and assumed Republicans would do better than them in the 2022 midterm elections.

However, scientists say markets are generally useful forecasting tools.

Still, Prof. Gruca said the public should be skeptical of some platforms, pointing out that they lack a track record and could be subject to manipulation, given the huge sums of money at stake and the risk that the pool of participants will not is big enough to fulfill all bets.

“If there are no limits, then it is the deep pockets that move prices,” he said. “Your opinion is weighted by the size of your checkbook.”

At Polymarket, for example, large bets from four accounts controlled by a French trader helped boost Trump's odds in early fall.

Researchers have also told reporters that they have seen signs of wash trading on Polymarket – the same people buying and selling repeatedly, giving the impression that there is more activity than there actually is.

Polymarket – which allows users to bet against each other on a specific future outcome and unusually operates in crypto – did not respond to a request for comment from the BBC.

Its chief executive Shayne Coplan has previously called the platform a “reality check” and a “much-needed alternative data source,” noting that it correctly predicted that President Joe Biden would drop out of the race.

Others see it more bleakly.

After the September court ruling, the watchdog group Better Markets warned that allowing such bets would “damage the integrity of our elections, trigger market manipulation and victimize countless investors.”

Prof Gruca said he believed election betting was a “sideshow” when it came to threats to democracy.

But debate on the issue is likely to continue.

In the US, states regulate betting and some have banned election betting entirely.

Prediction markets – which differ from gambling in that they are based on trading rather than a centralized company that monitors the odds – fall under the jurisdiction of federal market regulators, which have long viewed such activities negatively.

But in the US, betting standards have been relaxed, particularly after the 2018 Supreme Court ruling that paved the way for sports gambling.

In May, in response to a growing number of applications from companies seeking to offer trading at events, the Commodities Futures Trading Commission (CFTC) proposed a rule that would explicitly ban trading in political contests.

“Contracts tied to political events ultimately commercialize and compromise the integrity of the uniquely American experience of participating in the democratic electoral process,” CFTC Chairman Rostin Behnam said at the time.

He warned that allowing such trading would force the CFTC beyond its mandate and expertise and cast it in the role of an “election policeman.”

In the end, the solution to the question could well be another election bet.