This is a cross-post from Polymarket Institutional Research. To receive future issues, sign up here.

The Polymarket Institutional Desk offers block trades on US and international exchanges, institutional market maker relationships, and enterprise data services. Contact Brooke Rizzetto at institutional@polymarket.com for onboarding.

On July 31 at a Camp David meeting, Scott Bessent had only one item written down on his to-do list: “Buy Japanese Yen (JPY) $5-10 bil.”

One day earlier, the yen had just hit its weakest level against the dollar since 1986, and Washington and Tokyo responded with the first coordinated currency intervention since the 1998 Asian Financial Crisis. This intervention saw USD/JPY pull back from 164 to 155. In the two weeks since, the $88 billion effort looks misspent, as the yen has slid back above 159.

Polymarket traders are now considering the risk that Bessent was trying desperately to avoid: could the largest funding trade in the world be starting to unwind?

Borrowed time

The yen carry trade is simple: borrow cheap yen, convert to dollars, buy higher yielding assets, pocket the difference. Japan’s policy rate is 1%; the Fed’s upper bound is 3.75%. Traders have gorged on levering up this trade as the yen continued to weaken.

But the setup is precarious: when the yen strengthens, borrowing gets more expensive and leveraged traders get margin called. Covering means selling dollar assets and buying yen back, which strengthens the yen further and forces more selling, creating a vicious cycle.

The yen has steadily weakened since 2011 under Japan’s ballooning debt load and the widest rate gap with the US in the developed world. The Iran war and higher oil prices have accelerated the Yen’s decline, since Japan imports nearly all of its energy.

Polymarket traders have priced the ongoing slide in the past month. When the USD/JPY rate hit its peak of 164, odds of it topping 165 by year-end ran to around 77%. The US and Japan intervention knocked those odds to 30% in two days. But just two weeks later, they are back to 43%. Traders essentially shrugged off the intervention as merely buying time to avoid confronting an inevitable further decline in the yen.

Trigger warning

This is not the first round of jitters about a carry trade unwind; there was a similar episode in the summer of 2024.

When the Bank of Japan hiked to 25bp on July 31st, and jobs data on Aug 2 pulled US yields lower, the yen surged ~6% in just a few days. Margin calls went out on August 5th, crashing the Nikkei 12.4%, its worst decline in nearly 40 years and dragging U.S. stocks down with it.

The trigger in 2024 was the BoJ hiking rates 25bp off a floor of zero. Today, a BoJ hike is the market's base case. While traders priced a September hike only at 8% a few weeks ago, the intervention spiked the odds and sped up the repricing, now trading at 68%.

A September BoJ hike would take Japan’s policy rate to 1.25%, the third hike since December, and a pace not seen since 1989. With the Fed also expected to hold rates in September (75% odds), the carry trade spread would further compress.

Wall Street shrugs?

The stock market has not yet been thrown off by yen carry risk.

As we saw in 2024, equities are the first casualty of a carry trade unwind. Today the S&P sits around 7,800, and traders give 34% odds it tops 8,200 by December. In late July, the equities forecasts held steady even as the yen intervention collided with the Situational Awareness margin call. As both stresses faded, the market resumed its climb, even as the yen resumed sliding.

So while yen stress and AI stress hit the same index as leveraged players sold off, there is still optimism in the short-term resilience of the S&P. The tail risk that the S&P touches 6,200 by December has a 17% chance. If a September hike sends the yen sharply higher, the first signal may be a repricing of the S&P forward strip.

Treasuries impact

But a carry trade unwind would also have second-order effects beyond stocks.

Japan is the largest foreign holder of US Treasuries. By selling Treasuries to buy yen, Japan pushes US yields higher. Odds of the 10-year yield hitting 4.8% before 2027 reached near 70% the week of the intervention. Notably, Bessent funded his part of the intervention by selling Euros, knowing that the US Treasury market couldn’t absorb any more selling.

The yen intervention was supposed to protect the Treasury market. But every round of yen defense means Japan is selling more Treasuries to prop up its currency.

As the 10-year Treasury forecast creeps higher, Polymarket traders are forecasting the slow exit of the most reliable buyer of US debt.

The risk for the equity market is that Japan’s exit pushes US interest rates higher, squeezing the equity risk premium that thinly supports the stock market’s valuation.

September showdown

Polymarket forecasts for BoJ rates and US debt see a carry trade squeeze coming. Stock traders not so much.

These narratives will collide at the September meeting. A BoJ hike, if it snaps the yen sharply higher, would hit equities first and trigger cascading margin calls in a replay of the summer of 2024. A hold buys the carry trade another quarter, but how much lower can the BoJ let the yen slide?

Anton Wagner is studying Applied Math and Philosophy at Harvard University and is an intern on the Growth and Partnerships team at Polymarket.

Related Polymarkets:

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. All odds are time-sensitive and subject to change. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

Werner K. Zagrebbi is a board-certified Superforecaster™ who writes about politics and economics at Right Rationalism.

If you take the trip from DC down into that intricate amphibious Northern Virginia region, there could often be seen sauntering across Fairfax a very interesting old man, like a wizened sage—portly—with a glint in his blue eyes and lightness on his feet testifying to a glorious twinkhood lost.

In the words of his colleague Bryan Caplan: “When the typical economist tells me about his latest research, my standard reaction is ‘Eh, maybe.’ Then I forget about it. When Robin Hanson tells me about his latest research, my standard reaction is ‘No way! Impossible!’ Then I think about it for years.”

It could be argued Hanson originated modern prediction markets: If he gets the Nobel Prize (Manifold put his odds at 20%), it’s expected to be for prediction markets.

I came across his work in his capacity as one of the first niche internet microcelebrity bloggers, and I saw in him an intellectual hero worth idolizing. Beginning in High School, I often took the pilgrimage to George Mason’s campus, and faced him over games of Dungeons and Dragons. This month, I went back with a recorder.

Here’s our conversation, condensed and edited for clarity.

Share

Thanks a lot for doing this, Professor Hanson.

Well, you know, prediction markets just boomed in the last few years, and all of a sudden lots of people want to talk to me. That’ll probably go away when it becomes less of a novelty. But at the moment, it’s a novelty.

Why don’t companies run these markets internally? They need the information, and they have the money.

Once you realize you want the people who value the information to pay for it, the obvious first place you’d go is companies. They need the information, they’ve got money, and their decisions are valuable. That’s what people tried to do. In the aughts there was a lot of effort to get companies to do these markets. And what we learned is this: most managers present themselves to the world as scientific decision makers. They’ve got a spreadsheet, they’re trying to fill in the numbers so they can make the best decision for the company. Under that model of who they are, they should want these markets. But that’s not who they are. They’re actually politicians. They have an alliance and they’re trying to support it. They’re trying to recruit allies to support decisions, and they don’t want some random neutral source weighing in that messes up their ability to control the narrative.

Is this what got you interested in the economics of status?

My longer-term history is: I learned the usual points of view in economics as a student, and then I noticed lots of puzzles, things that didn’t make much sense. This is one of them, but it’s only one of many puzzling things about the world. My book The Elephant in the Brain is the realization: what if people are just wrong about their motives? Then you can explain a lot of things. And I think that works here too. Managers’ motives aren’t actually to be the scientific decision maker filling in the spreadsheet.

I have this hypothetical of the autist in the C-suite. You put a really smart person there who understands the company really well, and every time a subject comes up they just spew out lots of relevant, important things about it. They would not be allowed to sit there, because other people can’t rely on them to support their agendas. They would be disruptive. But that’s what a prediction market is. Something that speaks the truth without any sense of who wants to hear it.

Isn’t that kind of the self-image of McKinsey?

The most common scenario with consulting is that somebody wants to make a decision but doesn’t have enough internal support, so they hire McKinsey to be the outside support for what they’ve already pre-decided to do. McKinsey isn’t actually doing that much original analysis. They’re offering their support. It’s credible in part because there’s only so far they’re willing to go. If you bet wrong that McKinsey will support what you want, you lose out. But that is the main thing they do.

Subscribe now

You built the Policy Analysis Market at DARPA, markets on geopolitical instability to inform policy. Two senators held a press conference calling it a federal terrorism casino, and it died. What was that day like?

There was this guy Poindexter, of Iran-Contra fame, very famous, who was in the hierarchy above us at DARPA. Some reporters said: how can we find dirt on him? So they looked at projects under him, and they found our project. To get him fired. He wasn’t fired for Iran-Contra or whatever. He didn’t have much influence over the project, but he was nominally in charge of it, so that was the basis.

They made sure to have their press conference when the DARPA PR person was unavailable. It was a Monday morning, and by the next morning the Secretary of Defense said our project was killed. They did not have much time in 24 hours to assess the situation. They killed it on the basis of: we don’t want to be associated with this bad publicity. And they did not check whether the accusations were even correct.

The other people on the project just wanted to hunker down and hide. I was the one person willing to talk to the press, so I went through several months of talking to the press, and I learned a lot about how these sorts of issues play out.

The power of bad publicity is really strong in our culture.

There’s also the power of accusing norm violations. If you’re associated with an accused norm violation and you say, let me get back to you on that, I need to look into it, that looks bad. You’re supposed to have an automatic response. A norm violation is supposed to be so obvious, and your position on it so obvious, that you don’t need time to react. This is of course not true. In reality almost all norm violations have details you might not understand, and we don’t always agree on what the norms are. But we have this norm that we DO agree on the norms and that their application is obvious. That’s why, when you’re accused, you don’t have time to look into things.

Should it be made again?

It did happen, ten years later. IARPA, a related but different government organization, funded prediction markets, and my team’s pitch was: we’ll do the combinatorics. That was SciCast, roughly a thousand markets, starting with geopolitical events in the East and moving to science and technology. We did it ten years later without much publicity, because Poindexter wasn’t in the hierarchy above us.

Was this useful for the government? Maybe they have a more secret version now.

For a while, maybe ten years, the CIA had internal prediction markets, and they were useful to them. But they were only allowed to exist because of one rule. The coin of the realm in the US intelligence community is white papers. White papers cite other white papers. What you aspire to do in that world is write white papers that get cited. So the rule was: the markets can’t be mentioned in white papers. They were allowed to exist as long as they didn’t get credit. Individuals could participate, look at the prices, let them influence their opinions. But in the white paper they presented themselves as having thought of all these things themselves.

And then that norm ended, and that killed it?

I don’t know what killed it. My guess is that eventually people higher up heard about it, and when they see a white paper they say: what does the market say? Now it’s getting credit. You can’t let that happen.

What should this lesson tell us about the prospects of prediction markets as an institution in broader society?

Institutional innovation is just more difficult, because you’re threatening people’s status and power. People are much more okay with innovation that happens in a lab: if the lab succeeds, they change the production process of a product, and the whole organization stays the same, except now they’ve got more money. Innovation of institutions, of who gets rewarded and what we believe, is much more threatening. So you should expect it to be harder to get experiments started, harder to get them to last, harder to produce innovation. And you can’t patent institutional structures. It’s a basic fact about the world: we are much more eager for innovations in computation and physical devices than in innovations of social practices. The biggest social innovation of the last few decades was social media, which was presented as a technology. People were okay with introducing it as a technology, and then it had social implications as a side effect.

You were very early to a lot of social phenomena. The web, AI, prediction markets. Is there anything you’d add to the list?

The world of people I was hanging out with in Silicon Valley in the late 80s. I left in ‘84 to go out to Silicon Valley, and I went away in ‘93 when I went to grad school. In that world there were lots of big ideas for the future that people were throwing around, and I was trying to contribute to that. In retrospect we could say I added prediction markets to that world, and that was successful. Other people were doing other things. Hal Finney, of Bitcoin fame, was one of my friends in that world. He’s my best guess for at least part of Satoshi. Eric Drexler, who many people thought was more likely to be the harbinger of the future, for nanotech. That turned out not to be such a thing yet. There were people trying to make social media at the time. There was cryonics, which I got into eventually.

Share The Oracle by Polymarket

Prediction markets as they exist now, what percentage of that vision do we have? They do reference Polymarket prices in WSJ now.

When I first came to the subject, I was imagining: let’s just have legal markets on the questions we all argue about in public policy and politics and the media, and that would be enough. That’s the initial vision, and I think it’s the vision most people start with when they come to the subject. Every few years more people come to the subject, and that’s where they start.

There are three things I think people should eventually come to realize. First, the world has far more topics that matter than the topics that show up in the news. Second, the markets we’ve had so far are mainly a side effect of traders who are there for risk hedging or entertainment reasons. What we want is to switch to a model where the people who want information pay for it. Then we could unleash a much bigger market. And third, decision markets: if we want to make things relevant for decisions, we make the markets right next to a decision.

But even on the first milestone, look at the number of news articles that show up in a year and the number of markets that show up in a year. We’re still less than one percent. We have a long way to go even to reach that milestone, and that milestone is still much smaller than the bigger long-term vision.

So is it, in a weak social science-y way, inevitable that we eventually get more futarchy, because the firms that do it outcompete the ones that don’t? Maybe the AI firms of 15 years from now?

That’s the key open question. Years ago I wrote a blog post listing 21 ways firms seem inefficient. You might think that for each of them competition will eventually force the more efficient thing. But it’s an open question. I still hope, and there’s a chance that’s worth pursuing even if it’s not obvious it’ll happen. If you know the literature on innovation, the world just has far less innovation than would be possible. We’re proud that we innovate much faster than people did three centuries ago, and that’s true. But compared to what seems possible, we’re still way below.

Now, before the web existed, you worked at Xanadu, Ted Nelson’s legendary hypertext project: the people who invented the link and spent decades trying to build a smarter internet before the internet. I’ve heard you say prediction markets are in some sense part of the same intellectual project. To cleanse the world of ideas.

That’s where I got my inspiration. Other people had this idea of the World Wide Web, and I thought that was cool. I went to Silicon Valley in part to work with them on that idea. They had a vision: they thought making criticism easier to find would help conversation. And I had doubts. I thought, is that really going to work? It probably has helped, but it’s not nirvana. That’s when I asked, well, what else could we do? And that’s when I started to think about prediction markets. In that context of big, grand things we could do with new technology to change the world.

Random thing I’m curious about: does LessWrong, the forum the rationalist movement grew up on, owe anything to Xanadu?

The LessWrong community has a lot in common with the Xanadu community. Similar sorts of people, a generation apart, trying to do similar sorts of things. The Xanadu people thought of themselves as thinking rationally about which technologies would be beneficial and how, and as better able than other people to see possibilities. That’s what the rationalists have seen themselves as, too. I don’t know that one caused the other, but whatever forces caused one probably caused the other.

The only org chart overlap was you.

There were other people associated with Xanadu who were also in that community. Still around, still having influence.

The FOOM debate, 2008. Famous, sort of. Eliezer said one AI project suddenly explodes past everyone. You said growth will be broader, slower, more like normal economic growth. Seventeen years and one revolution later, I think both of you could claim partial credit. Could you imagine four cells: what did you get right, what did Eliezer get right, what did you each get wrong? Ems, the whole-brain emulations your book The Age of Em predicted would come before AI, do seem wrong, right?

People inspired by Eliezer are still predicting FOOM [explosive acceleration in AI ability]. Soon, to happen in a few years. They say it hasn’t happened yet, but it’s about to happen. So to settle this bet, we just wait a few years and see if it happens. Ask me again in ten years. Then I’m going to look pretty right. They will not have seen the FOOM happen in the next ten years. Of course, they may say it’s still coming then.

On ems: if AGI shows up in the next five years, then it shows up before ems, most likely. There are people working on ems right now. But obviously a lot more attention has gone to the usual kind of AI. There are many orders of magnitude more money in AGI than in ems.

Okay. I won’t give you the L on that one yet.

I see Eliezer’s argument as: it’s possible for a very basic algorithmic change to have this huge impact, where it allows the machine in the basement to take over the world on the weekend. And if that’s true, we need to prepare by giving all the AIs good values through that transition. My critique was that the sudden explosion is not very plausible. It’ll happen slower, we’ll have more chances to react, and it will be less concentrated, spread across the whole world economy, not just one machine in the basement. He has been saying lately: see, Robin, you were wrong, because look how algorithms matter. And I say: we do have algorithms that matter, but they matter when paired with lots of data. The big ventures take pretty widely known algorithms and combine them with specialized implementations and data to be the leaders in these industries. The difference between the leaders is often data advantages, hardware advantages, market position advantages. Not just algorithm advantages. Algorithms matter, but not in the way that a machine takes over the world in a weekend matters.

If you re-ran the debate today with bets, are there sub-claims where you could find a price?

There have been forecasting efforts over the last decade where groups tried to get people to forecast different aspects of AI predictions, and then asked whether that helped resolve differences. It apparently did not. When people break the argument into pieces and argue over the pieces, that hasn’t reduced the difference between the groups. And in a way it did for other topics. There was one study with several topics, and on the other topics, breaking things down and engaging the details brought the groups together. Not on AI. They had subject matter experts and general smart superforecasters engage on the details, and on the other topics they came closer to each other. On AI, the superforecasters said: no, we don’t believe it. Sorry. So the AI debate is somewhat different from these other debates. The technical details just don’t make a big difference

Generally, who should have status as a good forecaster? The actual superforecaster people, Polymarket traders who do well, or literally you?

Our world is too much structured by status as the default organizing principle of institutions. If you don’t have a prediction market and there’s some topic we’re uncertain about, the usual thing is: who’s highest status here? What do they say? That’s how we handle hard questions. I would rather replace that. I want status to matter less as the way we run parts of our world.

In my world as an intellectual, I hear people getting status for doing impressive things. And I go: no, I want to give status to people who made an impact, who actually made a difference, not just did something impressive. A lot of academic work is impressive but not very useful. People tell me I’m smart, and I go: I wasn’t trying to be smart, I was trying to accomplish something. If you’re impressed with what I’ve accomplished, I’ll own that. I deserve the status when I did something that mattered. But I don’t want to hand out status for potential, or impressiveness, or way with words, or the way he holds himself and commands authority. I want actual accomplishment. I’ve met Elon Musk. He’s not that impressive as a person. For real. But damn it, he deserves status, for what he’s done in the world. I don’t know who deserves more. So hand out status for actually doing stuff, not for how someone holds their head when they’re standing next to you, or talks fast, or uses a big vocabulary. In a prediction market, people who trade and make money because they moved the price in the right direction: that’s a real accomplishment. Give them status.

If you’re reading this, go give a high five to the winning Polymarket trader near you.

The one who’s made money.

Leave a comment

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. All odds are time-sensitive and subject to change. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

This is a cross-post from Polymarket Institutional Research. To receive future issues, sign up here.

The Polymarket Institutional Desk offers block trades on U.S. and international exchanges, institutional market maker relationships, and enterprise data services. Contact Brooke Rizzetto at institutional@polymarket.com for onboarding.

On July 30, margin calls forced AI hedge fund Situational Awareness to sell its $16 billion public-equity book to Citadel after the fund cruised into July’s AI selloff at a reported 4X leverage.

This article examines how this episode played out on Polymarket, in particular the “AI bubble burst in 2026” contract, which is a near-perfect proxy for the market forces that no doubt made Leopold’s pre-wedding investment “colloquium” far more stimulating.

But were Polymarket traders simply responding to the news headlines? Or anticipating them?

Drawdown gauge

Polymarket’s AI bubble burst contract resolves YES if at least three of six conditions occur within a 90-day window before year-end.

The criteria are a mixture of equity drawdowns, compute pricing, and AI lab corporate events (eg bankruptcy) that would result from significant market pressures:

These are the exact moves that would also push a highly leveraged AI fund like Situational Awareness to its breaking point.

By comparing the movement of this AI stress index to the news flow around Leopold’s fund, we see that this Polymarket contract anticipated many of the key developments in the saga.

The above chart plots the Polymarket AI burst odds alongside the VanEck Semiconductor ETF, a widely cited proxy for the AI trade.

Notice that the Polymarket contract didn't move higher until the Situational Awareness stress emerged in late July, while the VanEck Semiconductor ETF had been falling all month.

In this instance, the Polymarket contract arguably reflected the acute stress around the fund unwind more directly than one of the most-watched AI proxy ETFs.

What moved first?

Prior to the Financial Times announcement on the evening of July 29 that Situational Awareness was seeking capital, Polymarket traders had already anticipated that the fund was in trouble.

For the two weeks leading up to the margin call, the market sat in a narrow 15-to-17% range, even as the semiconductor index was already rolling over. Then, on July 27, traders broke this range, bidding the odds to 20%. By the afternoon of July 29 the market had repriced to 22%; the FT’s report that evening only took it the rest of the way, to its 28% peak.

Right now, the AI bubble burst market is priced at 12%, aligning more with its pre-Situational odds.

Another market also seemed to anticipate this event. NVIDIA's odds on Polymarket of being the world's largest company at the end of August fell from 78% on July 24 to 36% on July 30. This anticipated the dip in the AI hardware equities that Leopold was so highly leveraged on.

Containment or contagion?

Within a week, Polymarket’s AI stress contracts had round-tripped the entire move and kept going. By August 6, the AI bubble market sat near 15%, below the range it held before the margin calls. The largest AI-fund blow-up of the cycle just happened, and the priced odds of an AI bubble burst are lower than before. Instead of treating this sale as a forewarning about the future of AI, Polymarket traders seem to be pricing this event as a risk isolated to a single overextended fund.

NVIDIA’s end-August dominance odds, which had cratered to 36% on the day of the sale, are back above 93%, higher than before the unwind. Even the broad US recession contract barely twitched, holding at 10–12% throughout. The polymarket on whether the fund itself winds down is priced at just 5% by year-end.

On August 5, Situational Awareness announced it was closing a $400 million private investment in a Sequoia-backed company, on top of $100 million it had put into the same company a month earlier.

Polymarket traders reacted early

Across a handful of Polymarket contracts, you could watch as systemic risks to the AI trade were repriced in real time. Equities markets repriced the AI complex in the days before the margin call, jolted when the sale broke, and have climbed steadily back since, capped by the fund’s own return to investing. But while equities gyrated wildly as traders hunted Leopold’s troubled trades, Polymarket moves were more modest, never pricing the AI bust scenario above 30%.

For both retail traders and institutional desks, this case study shows the value of looking at event contracts as a contra-indicator to index proxies to sort the signal from the noise during periods of market dislocation.

Related Polymarkets

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

is the chief political analyst for Israel’s top rated Channel 12 news outlet, and a columnist for Israel Hayom. In English, he writes It’s Noon in Israel on Substack. The Oracle caught up with Segal to discuss why he thinks the October 27 Israeli election is mispriced, the state of the Trump-Netanyahu relationship, dark horse coalition scenarios, and how the Iran war will end.

This interview has been edited for length. All answers are his own.

Subscribe now

Netanyahu has dissolved parliament ahead of the October 27 election. Polymarket has Netanyahu, the ultimate political survivor, at just one-in-three to be prime minister after the election. Does that surprise you?

First, an introduction crucial for Polymarket investors.

Unlike in the US or UK, an Israeli election might end in a draw. It can also end in a rotation government, one figure serving as prime minister for two years and another for the next two. Or in an outright majority.

Here’s the thing. Netanyahu, as the incumbent, can enjoy a hung parliament. If there is no clear winner, he stays in office in what we call a transition government. So any chance of a draw adds chances for Netanyahu, the only outcome that can come of it. And if a rotation government is possible, that also increases Netanyahu’s odds, as he’s the leader of the right wing.

I look at Polymarket every day, and I’m quite surprised by Netanyahu’s low chances, and by the very low chances given to Avigdor Lieberman.

In Israel, the decision on the next prime minister is in the hands of the parliament, not the people. It is neither a beauty contest nor a popularity contest. In 2021, Naftali Bennett became prime minister with 5% of the popular vote. The lesson is that in Israel, kingmakers can become the kings themselves.

Share

How could Lieberman become prime minister?

Eisenkot is the front-runner in the opposition, leading every poll since April or May. But Avigdor Lieberman can make his way to the prime minister’s office, because he is not a natural part of the opposition. He is a settler living in a settlement. He is not exposed to pressure from center-left news outlets. His political base is Russian immigrants. He is a maverick.

Second: he is 68, so he knows this is his last round. And third, he’s a kingmaker. He belongs to the right on diplomacy and the Palestinian question, but to the opposition on domestic issues, liberalism, the economy. So he can come to Eisenkot the day after the election and say, “I’m one of only three people in Israel ever to serve as defense minister, treasury minister, and minister of foreign affairs. Give me the chance to be prime minister first.” What can Eisenkot do? The only guy you have to convince after the election, if not the voters, is Lieberman himself.

So I think Lieberman is heavily underrated and written off. He is somewhere around 4%, 4.7% on Polymarket. I would give him something like 20%.

Also: we have two types of polls. In the mainstream media, Netanyahu is heading toward his worst defeat in 20 years, 51-52 seats for his bloc out of 120. But according to Channel 14 and Channel 24, more affiliated with the right wing, he is heading toward the best victory of his career. Statistics cannot explain that gap. Margins explain 3% or 4%, not 12% or 13%.

And I want to give you the magic number: 55. We have 10 Arab Knesset members who do not take part in coalitions: they do not sympathize with the Zionist state, and the Zionist parties do not want them. Post-October 7, there is almost no legitimacy, especially in the center, to base a coalition on non-Zionist, sometimes anti-Zionist, Arab parties. So if Netanyahu gets 55 seats, he does not lose to Eisenkot in terms of Zionist seats.

The average of the polls has Netanyahu around 52 and a half, and we know the shy voter phenomenon, the inability to really poll right-wing voters, from the US, UK, and Israel. So even trusting the mainstream polls, Netanyahu is two and a half seats short of ending this election without Eisenkot being able to form a stable coalition. That leaves two options: a new election, meaning Netanyahu stays prime minister, or a rotation government, in which Netanyahu most likely goes first.

Remember: 61 seats are enough for a victory speech, but 59 does not force you to concede. That’s what Americans fail to understand about Israeli politics. One can get away with 52, 53, 55, 57 seats. The sitting prime minister deserves a premium simply for sitting as prime minister.

So I would give Netanyahu 45%, Eisenkot 35%, and Lieberman 20%. Netanyahu is still under 50% because of some 100 consecutive very bad polls. Eisenkot is still the one with the best chances in the center-left. But Lieberman is there, and Netanyahu has a higher chance than on Polymarket now.

As we record this, the US headlines say ‘Netanyahu visits DC amid tensions with Trump’. Are they really tense? Or is this a media invention?

Tension did exist. But as a general rule, the relationship is always better than meets the eye in the press. It is based on four to seven people from the two sides of the pond: Netanyahu, Ron Dermer, Trump, Kushner, Witkoff, and maybe Susie Wiles. Seven out of seven belong to the right, while most of the media covers it from a center-left point of view. That means lack of information, and a natural bias towards saying the situation is worse.

The relationship has cooled a bit since March, for two reasons. The war was less successful than hoped, and this administration has become more closed, with decisions taken by fewer people, so it’s harder for the Israelis to penetrate. But I would not write off Netanyahu’s chances to talk Trump into something.

Big picture, what does Israel want out of Iran? Did they already achieve their goals with getting rid of Khamenei?

No, not at all. There is no shortage of lunatic fundamentalist leaders in Iran. There are two goals.

The deliberate one is the nuke. Specifically, the 440 kilograms of uranium enriched to 60%. Israel and the US destroyed the nuclear facilities, but as long as Iran holds this uranium in underground bunkers, it has the theoretical option to relaunch nuclear production in a way Israel is not aware of, or unable to respond to. So extracting the enriched uranium, one way or the other, is the spoken goal of the war.

And if the Iranian regime collapses, the next regime is necessarily way friendlier. That’s the unspoken goal, because it’s way more difficult to extract regimes than to extract enriched uranium.

Odds that Iran agrees to end enrichment or surrender their existing stockpiles are way down.

To be honest, I wouldn’t give it even 1%. Unlike North Korea, for the Iranian regime the nuclear program is not only a means to ensure survival. It’s almost a religious principle. Iran is not only a country, but an idea: to spread the Islamic revolution, first within Iran, then the Middle East, then the world. Giving it up in return for lifting sanctions would mean the formative idea behind the revolution is dead. They’ll word it in different ways, but they’ll never agree to stop. Unless there is a regime change, of course.

So how does it end?

For Trump, there are three options. One is extracting the uranium with boots on the ground. Second, an agreement. And third, regime change.

Israel does not believe in an agreement, because we know our customers. Once Iran has the first Muslim nuclear bomb, it is no longer vulnerable. It is on the world stage. So for Israel there are only two options. The failure of the Epic Fury operation came from Israel wanting to extract the enriched uranium, whereas Trump said, “Let’s wait, we can reach an agreement that will give us the uranium. Why bother?”

In my mind, a ground operation to seize the uranium is a 1%, crazy idea. How likely do you put it?

It was on the table at the start. There are no big secrets: we all know where the uranium is, and we know the abilities of the US and Israel. Former defense minister Yoav Gallant, himself a former commando commander, said that while it was possible three, four months ago, he is not sure it still is, because the Iranians have prepared many obstacles on the ground.

I still think it’s feasible. The main obstacle is psychological, for the Republican Party and this very Republican president. Sending American combatants to Iranian soil is boots on the ground, even if temporary, even if a few hundred people rather than hundreds of thousands like in Iraq. For a president whose raison d’être in 2015 was to be the first Republican ever to speak out loud against the Iraq War, it was too much. The obstacles are more political than military.

Does the war just continue in phases, fight, pause, fight, pause, until something happens with the uranium?

We keep talking about it in a binary way: war or no war. We should adjust to the idea that it’s going to be non-binary, something in between.

And there is something else: the Iranian economy. The assessment in Israel three months ago was that without an agreement, the regime collapses by the end of 2026. At the end of 2025, millions of protesters stormed the streets of Tehran, Qom, and Bushehr over a devastating economic situation. It has only worsened since. The damage from the Epic Fury operation alone is estimated around $400 billion.

One might say the barrier of fear went up after the massacre of some 7,000 to 32,000 protesters. But fear and having nothing to lose are competing in Iran as we speak. Say the one-month MOU postponed the collapse to January 31, 2027. Watch the streets of Tehran closely.

For Israel, no war, no deal is the perfect solution: no casualties, international flights, and the regime slowly fading away. But Israel is not an actor in world energy prices. President Trump is, and for him that means fights over the Strait of Hormuz.

So you’re more bullish than the market on regime change. What’s your number by the end of the year?

I would give it 30%. There are two options: top-down or bottom-up. We have the image of the velvet revolutions in Eastern Europe, but even the Islamic Revolution in 1979 began with mass protests and ended with a faction of fundamentalists taking the regime. We now know that Israel and the US work simultaneously top-down, with former President Ahmadinejad, and bottom-up through propaganda warfare. The main idea is that protests would lead parts of the regime to acknowledge the gloomy reality and come to terms with the United States.

Israel is not being targeted and not shooting in this round of fighting. What could pull Israel back in?

Three options. One, an Israeli-American decision to attack Iran’s energy facilities. Two, the same decision on the uranium. Three, the regime feeling its end is near and seeking legitimacy by attacking the Zionists. The first two are more probable than the third.

Polymarket recently listed markets on Qeshm, Hormuz, and Kharg islands. Will Iran keep control over Hormuz, regardless of what happens with the regime?

No matter which regime is in Iran, the Strait of Hormuz is going to be international. The world has seen the effects of taking over a relatively small strait, and no one is going to let it happen again. This is the conclusion of every US ally in the region, mainly the UAE, Saudi Arabia, and of course Qatar, whose economies took amazing damage.

Two processes are coming. One is alternative routes, be it Jordan-Israel-Mediterranean, Syria-Turkey-Mediterranean, or Syria-Turkey-Europe. And second, even a new regime in Iran will go through what Venezuela went through: you can keep your sovereignty, but your oil is controlled by us.

Could a naval operation unblock Hormuz?

I think it is considered. I’m not an expert here, but I keep hearing rumors about it. Such an operation would not include Israel, which has no interests in the Strait of Hormuz, unlike the uranium question. It could happen even without any Israeli knowledge.

Follow Amit Segal on X and on his Substack, It’s Noon in Israel.

Follow all Israel Polymarkets

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

By Andrew Asani*

Today, odds on Polymarket for the Houthis to close Bab el-Mandeb by 30 September 2026 stand at just 14%.

In my last piece for The Oracle, I argued that the Houthis were unlikely to close off this critical Red Sea chokepoint due to their increasing financial dependence on Saudi Arabia.

Things have changed.

Share

Based on my recent conversations with several Houthi insiders, I believe Polymarket is significantly underestimating the odds for a Bab el-Mandeb closure today.

Despite the potential risks, closing the waterway remains the cheapest and most effective way for the Houthis to achieve their primary aim of forcing the US and its allies to de-escalate against Iran, at a time when most other options have been exhausted.

The Houthis support de-escalation as US-Israeli strikes on Iran have severely weakened the logistics infrastructure of the country’s Islamic Revolutionary Guard Corps (IRGC), the hardline paramilitary that oversees Tehran’s proxy network and serves as the Houthi’s top arms and fuel supplier, financier and patron. Without IRGC support, the balance of power within Yemen would shift in favor of the Saudi-backed Yemeni government, as the Houthis are currently too weak to confront their domestic enemies by themselves.

The Houthis previously sat out prior rounds of US-Iranian warfare in June 2025 and February-April 2026 as the stakes then were not as high. Following a ceasefire on 02 April 2022 that ended the 7-year civil war between the Houthis and Saudi-backed Yemeni government, Riyadh quietly began providing the Houthis monthly payments of roughly $100m to ensure quiet on its border. The Houthis became dependent on these transfers and in June 2025 were reluctant to launch attacks against US and allied forces that could provide Saudi Arabia a pretext to cut off payments.

At the time, the Houthis were caught between two rival patrons: Saudi Arabia, which they relied on for financing, and Iran, their main weapons supplier.

However, the expansion of US airstrikes in Iran to include energy and civilian infrastructure along with steps taken by the Trump administration signaling intent to seize key Iranian islands and even carry out a ground invasion—which the White House has instructed the Pentagon to develop plans for—have shifted the Houthis’ calculus and made the group more responsive to Iranian demands for assistance.

A member of the Houthi Political Bureau told me that Iranian operatives have deployed across Yemen and are driving the current escalation in the Red Sea, adding that the Houthis are following IRGC requests because continued aid is contingent on meeting certain Iranian directives.

That said, should the United States continue to prosecute the war and remain undeterred by Iranian counter measures the Houthis will likely resume attacks on commercial shipping as a measure to help protect Iran and ensure continued access to IRGC patronage.

A relative of the Houthi’s Jihad Council—the group’s top decision making body—claimed that in the event of an expanded US-Israeli campaign in Iran, the Houthis would escalate their attacks to include shipping in Bab el-Mandeb as deterrence to prevent further US strikes and the collapse of IRGC logistics networks.

That the Houthis would do so appears plausible in light of reports that IRGC operatives in Yemen have begun preparations to develop a Red Sea “authority”—similar to Iran’s newly created Persian Gulf Strait Authority —to extract tolls from ships in the Red Sea.

Shuttering the Bab could trigger the opposite response: a vicious US counter campaign which the Houthis would not be able to withstand. However, opinion polls showing overwhelming opposition to the war within the United States and reports claiming that American interceptors and munitions stockpiles have been depleted below levels previously thought cast doubt on such a prospect.

That said, closing Bab el-Mandeb remains a low-cost method for the Houthis to force the United States to de-escalate against Iran and pressure Saudi Arabia to hold off support for anti-Houthi forces that have recently increased their attacks on the group. Beginning on 20 July 2026, the Houthis attempted to deter Saudi-backed anti-Houthi forces in Yemen by imposing a blockade on Saudi ports and conducting symbolic strikes on energy infrastructure.

However, these strikes failed to achieve the desired effect, instead triggering violent Saudi and Yemeni government reprisals, the first major act of hostilities between both sides since the 02 April 2022 ceasefire. The Houthis have responded by deploying large-scale reinforcements across the country, including to the southwest coastal province of Ta’iz, overlooking the strategic waterway.

Subscribe now

Cracking at the Seams

My senior Houthi contacts describe a group unable to afford renewed full-scale war with Saudi-backed Yemeni forces, following renewed pressure placed on the group by the second Trump administration. The 2025 US-UK Operation Rough Rider and subsequent Israeli strikes degraded Houthi leadership, weapons stockpiles, and port infrastructure, prompting the Houthis to reduce their Red Sea shipping attacks—especially after the October 2025 Israeli-Hamas ceasefire—and cutting the group’s revenue.

Expanded US sanctions further squeezed the group’s income from customs and limited their access to fuel needed for missile production. Financial strains in early 2026 triggered several waves of mass defections and three leadership purges from April-June 2026 over alleged Saudi espionage. Tribal unrest, including July 2026 clashes with Daham tribesmen in Jawf governorate over land disputes, further destabilized Houthi control and prompted defections.

These pressures have made the Houthis more receptive to Iranian escalation calls, hoping for greater support. On 17 June 2026, the US provided Iran a temporary sanctions waiver to sell petroleum products, enabling Tehran to net roughly $5bn-6bn before US-Iran hostilities resumed on July 11. During this period, Iranian funds flowed to Hezbollah and the Houthis, including at least two Iranian arms shipments intercepted by Yemeni government forces on 29 June and 14 July 2026—the first in 2026—that contained heavy drone/missile manufacturing equipment.

Leave a comment

What To Watch

After more than a year of electing to sit out fighting between US and Iran due to fears of antagonizing Riyadh, it now appears the Houthis are leaning closer towards Tehran. As the group becomes more desperate, it will continue to do so. However, the Houthis still seek to avoid the type of escalation in Iran and Yemen that can degrade the IRGC and Houthis themselves enough to embolden Saudi Arabia and invite a resumption of full-scale war.

That said, for the foreseeable future, Houthi attacks against Saudi Arabia will mirror US escalation in Iran itself. Should the United States follow through with plans to seize strategic Iranian islands, prepare a ground invasion or expand its target list to include a wider range of civilian and energy infrastructure, the Houthis will likely have little choice but to play their final card and close Bab al-Mandab.

The best sources to follow for updates include the daily “Iran Report” by the American Enterprise Institute’s Critical Threats project, which does a great job at cataloguing every kinetic strike in the region. For minute to minute updates, great X accounts to follow include @OSINTdefender, the Yemeni @SanaaCenter think tank, and Times of Israel correspondent @manniefabian.

* Andrew Asani is the pseudonym of an OSINT-HUMINT researcher who tracks extremist patronage networks across the Middle East, including Syria, Yemen, North Sinai, Libya and Sudan. He advises clients performing strategic advisory and litigation support, and his work has been featured in numerous academic journals and news outlets.

Browse all Yemen Polymarkets

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. All odds are time-sensitive and subject to change. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

This is a cross-post from Polymarket Institutional Research. To receive future issues, sign up here.

Polymarket’s Institutional Desk is facilitating block trades for JetBlue bankruptcy event contracts on both our U.S. and international exchanges. Contact Brooke Rizzetto at institutional@polymarket.com for onboarding.

By

Warren Buffett famously said that airlines have devoured capital since the Wright Brothers:

Since the 1970s, the US airline industry has produced almost 160 bankruptcies. The problem with airlines from an equity or credit perspective is that they are thin margin businesses with high fixed costs and volatile variable costs. The business model is very dependent on scale. Which is why, for these past few decades, the airline industry typically cannibalizes itself, as the acquirer aims for increased scale and the acquired is in financial trouble from not having it.

JetBlue, over the last couple of years, tried to execute this rollup strategy. Up until last year, they put in a good-faith effort to buy Spirit Airlines. That was struck down by antitrust regulators and Spirit went on to declare bankruptcy in 2026.

This failed move by JetBlue has left them in a very awkward place. The financial markets are saying this with 5y CDS on JetBlue bonds (chart below) trading near 1000bps, but the left tail on Polymarket is still quite cheap. Which is interesting in light of a very tricky backdrop for JetBlue.

Without the Spirit acquisition, JetBlue is stuck in between the big guys (Delta, United) and the budget airlines. They are too big to be a discounter but they are not big enough to compete with the network economics (pricing, routing etc.) of the big guys. And the big guys have been able to move up the pricing power curve with premium traffic.

This imbalance can be seen in the recent labor talks going on at JetBlue. United and Delta crews just landed deals that were 34% bigger than what JetBlue is currently offering its crews. That shows that JetBlue cannot match the market.

The financial picture right now is hairy for JetBlue. They have $9.3B in outstanding debt, with most of the fleet already pledged as collateral and a CCC credit rating. Their interest costs alone are running at $800m a year. They have very little room to maneuver, and it doesn’t seem like a sale is viable now.

Within this very tight operating window, the headwinds to the business more tactically have increased in recent months. Jet fuel prices have surged following the war in the Middle East. They have negative pressure from Pratt and Whitney engine issues disproportionately impacting JetBlue’s Airbus-heavy fleet. And, they are the most exposed large carrier to fall weather disruptions, as they have a heavy Florida/Caribbean fleet concentration.

This could bring forward some interesting tactics around managing their debt position. It is possible that declaring chapter 11 early, could make it less likely that they have to declare chapter 7 later on. This would keep the company operating instead of it being forced to liquidate like what happened to Spirit.

An interesting trade on Polymarket right now is that this left tail of JetBlue, that financial markets are pricing quite seriously with CDS near 1000bps (10% notional per year to insure against default), is only modestly priced in prediction markets. In “Which airlines will announce bankruptcy by December 31, 2026?” “Yes” for JetBlue is around 4%. That seems like an interesting opportunity in a relative value sense to traditional credit markets but also given the left tail dynamics in the business over the second half of the year.

Related Polymarkets

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. All odds are time-sensitive and subject to change. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

This is a cross-post from Polymarket Institutional Research. To receive future issues, sign up here.

Polymarket’s Institutional Desk is scaling up. For information on block trades, market making, and commercial data sales on either our U.S. or international exchanges, contact Brooke Rizzetto at institutional@polymarket.com.

By

An interesting trade to me in the macro space, that can’t really be expressed in financial markets at the moment, is that I think it is highly likely that Lagarde leaves her post as President of the ECB before the end of the year. To be more specific, I think she announces her intention to leave her post before the end of the calendar year.

Something that entered the ECB halls earlier this year was the idea that Lagarde could leave her post before her term ends in October of 2027. The reason behind this was twofold:

First, I think Lagarde probably wants to create optionality for Macron before the volatile French Presidential election in April of next year. Lagarde would likely be more comfortable with Merz and Macron being the influential voices in deciding the ECB’s next president vs. whoever in France will come after Macron in the spring of next year. Lagarde is a down the center defender of the European Union in a traditional sense, I think the chances of a less orthodox French President deciding her successor, gives her pause.

Second, there is also a chance that Lagarde actually wants to be part of the French Presidential election herself. Lagarde is a master politician, and has evolved from French finance minister to head of the IMF, to now president of the ECB. It is unlikely that she will directly run, but I think the bar to her wanting to be part of the conversation is very real. She is very much a Carney type figure who went from famous central bank governor to Prime Minister of Canada last year.

So where do things stand now?

Post the start of the Iran war, Lagarde, when asked about leaving early, said, “a captain doesn’t leave the ship mid-storm.” This saw the odds of her leaving before the end of 2026 on Polymarket drop from 30% to 17%.

However, in recent weeks, this trade has come back to life with Lagarde saying in an interview with Reuters that an early exit was “possible.” This saw the market move from 20% to close to 60%.

And then came the ECB press conference yesterday following their July meeting. Lagarde, when asked if she was going to leave, said “you will not see the back of me before 2027.” This saw the market price the odds of her leaving by 2026 plunge to 25%. Where I think it is now a very good trade. Lagarde said something interesting, she said she wouldn’t leave “if” there are clouds on the horizon (a reference to her captain comments in March), and she left it very open to leaving after 2027. This leaves plenty of room for her to announce she is leaving before 2027, even if she actually only vacates the seat in 2027.

I think the market post this comment, still is underestimating the likelihood that Lagarde announces her intent to leave her post before the end of 2026. I think the two reasons related to the French election in April have become more relevant, not less. The acute stage of the crisis in the Strait of Hormuz is less pronounced now, and while it does not mean the ECB is done raising rates, the level of urgency has come down quite considerably from her March “captain” comments. The market currently views this trade as a 25% chance, but I think conditional on economic volatility remaining in the range of the current status quo (2-3 more hikes priced for this year), the odds of Lagarde announcing her intention to leave her post early by the end of the year should be closer to 70-80%. And it is all centered around the French elections in April.

With Le Pen the current favorite on Polymarket to replace Macron, and the RN polling ~35% ahead of a fractured left and center heading into the 2027 presidential race, French political risk remains. This is something that Lagarde seems particularly mindful of.

I think a key part of this trade is the language in how the contract will resolve:

An announcement of Lagarde’s resignation/removal before this market’s end date will immediately resolve this market to “Yes”, regardless of when the announced resignation/removal goes into effect.

Lagarde will want optionality for the French elections while giving the ECB the proper time to make this adjustment. This sets up for her to announce she is leaving in Q4 and actually leave in Q1 of 2027. The announcement is enough for the market to resolve “yes.”

Overall: To me, based on how relevant the French elections are for her in April of next year, I think the odds that she decides to leave the ECB early are much closer to 80%. And only that low because I do believe that she will not announce her departure during a time of heightened volatility, which given the recent dynamics in energy markets, is still a very real risk.

Leave a comment

Related Polymarkets

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. All odds are time-sensitive and subject to change. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

🇺🇸 Midterms are LIVE on Polymarket USA.

New users get a $20 bonus with $10 deposit.

Download now with code “ORACLE” to claim your bonus.

Werner K. Zagrebbi is a board-certified Superforecaster™ who writes about politics and economics at Right Rationalism.

Graham Platner dropped out of the Maine Senate race on July 10th.

This probably isn’t news to you. You’ve surely tired of the panoply of takes that have been bandied about after his withdrawal: Was that symbol on his pectoral associated with Imperial Germany? Is it cringe to be on Kik after the age of 25?

But there is an important question left unanswered by all these takes: was this a good decision for his party?And after this kind of scandal hit their nominee, wouldn’t you expect the Democrats to be less likely to win in Maine? I certainly would. And yet, on the same news, the Democrats’ chance of winning that Senate seat went up, from 54% to 63% in a couple hours - days before Platner bowed out of the race.

THIS is the real Platner story!

Platner vs. Arrow

GMU’s Tyler Cowen went so far as to rank Kenneth Arrow as the fourth greatest modern economist, after Hayek, Keynes, and Milton Friedman. Arrow’s most important contribution was to “build up economics from a theory of ‘state prices,’” according to Cowen.

What does this mean? We can think of every possible world as a separate “state.” A state price is what you would pay today for a dollar that arrives in exactly one of those states and no other. Naturally, the more likely you consider that state, the more you will pay for a dollar that “lives there.” Thus each possible future carries its own price, and those prices behave like probabilities.

This kind of thinking may come naturally to Polymarketeers, but its implications are not necessarily intuitive.

Subscribe now

Consider Sergeant Platner. The price of “Democrats win the seat” is essentially a weighted average of two possible worlds: Democrats’ odds of winning the Maine Senate seat if Platner goes, and their odds of doing so if he stays, each weighted conditional on the likelihood of it occurring. The Platner accusations, in this reading, is an “exogenous shock” that moved the weights. Said Alex Tabarrok of Marginal Revolution:

The market is signaling that Platner reduces the Democrats’ chances of victory. We can be more precise. If an 87-point increase in the probability of dropping out gets you 9 points of winning, then a 100% chance of dropping out implies a gain of 9/0.87 ≈ 10.3 percentage points. Thus the market’s best estimate is that Platner is reducing the Democrats’ chance of winning by about 10 percentage points (compared to an unknown replacement). That’s a pretty big number!

It was a pretty big number! And thus Platner was probably right to drop out: That decision, at the time, made the universe where a Democrat is Maine’s senator 10% more likely. The scandal hurt Democrats, but Platner’s withdrawal helped them more.

Share The Oracle by Polymarket

Watch The Unlisted Market

The lesson for traders here is to keep an eye out for the unlisted market. A visible contract is often but one leg of a hidden state-price bundle, and when news changes a price, adjacent contracts don’t always update in the same order. Perhaps write out the synthetic before you trade:

In this case, that would be Democrats’ overall chance of winning = (Their chance of winning if Platner leaves) × (The chance that he leaves) + (Their chance of winning if Platner stays) × (The chance that he stays).

Endeavor to ask, “Have the displayed prices caught up with the implied conditional prices?”

Every Dem name in the race to succeed Platner as Maine Senate nominee has a live probability of being nominated on Polymarket. Their sum is a synthetic “Democratic nominee is X” bundle. If it prices at less than the “Dems win” market divided by a plausible general-election win rate, someone is mispriced.

You can use this trick elsewhere. JD Vance’s chance of being out as VP by December 31, 2026 is about 7%, for instance, and his chance of winning the Republican nomination in 2028 is 41%, so his implied nomination probability conditional on remaining VP is 0.41 / 0.93 ≈ 44%. Rubio is at 28% in the same market, and if the VP-exit market rises by 20 points on some news, but Rubio doesn’t rise 8 points, there is an arbitrage.

The total-cuts-in-2026 polymarket prices the odds of no interest rate cuts at 81%, 1 cut at 15%, and 2 or more at 4%, for expected cuts of about 0.25; the Jul–Oct decision-path market prices Pause-Pause-Pause at 47%, and the two describe the same underlying object, so summing the path probabilities should recover the total-cuts distribution.

Zohran Mamdani out as mayor before 2027 is 5.5%, and his rent-freeze market is 92%, so the rent-freeze conditional on him remaining in office is about 97%. Every one of his policy contracts (millionaire tax, $30 wage, city grocery store) is a compound bet of P(Mamdani still in office) times P(policy passes given he is), so a shock to the tenure market should reduce every policy market by the same factor.

Or consider Israel. The Likud party is priced at 63.5% to win the next Knesset election, while Netanyahu himself is at 34.5% to be the next Prime Minister. But if Likud wins, its leader is who forms a coalition, and the two markets describe the same underlying object. Divide one by the other and you get the market’s implied probability that Netanyahu is the one still leading Likud when the votes are counted: 0.345 / 0.635 ≈ 54%. No Polymarket contract asks that question directly, but the two that do trade can together get you to a price. On any news that resolves it (a corruption verdict, a coalition fight, a health scare), both markets will move together.

You should also take advantage of spanned information in other ways when you can. If you’re a Democrat who wants to know how to donate to races in which it will be maximally effective, Polymarket is what you should be watching.

It’s easy to underestimate the beauty and promise of this idea: Conditional markets offer rigorous evaluation before policies are even enacted. Robin Hanson might go as far as suggesting we use them to decide what the government does, but there are a whole host of other use cases short of that: Central bankers already closely watch market-implied expectations through things like CME FedWatch, and people have proposed going further with NGDP prediction markets or decision markets for monetary policy. And research funders could look to markets for scientific replicability, or to more exotic experiments like Scott Alexander’s impact markets.

Certainly once we know what we want, we should more often ask the Arrow question: What is the market price of the world where such a thing happens, compared to the world where it doesn’t?

Leave a comment

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. All odds are time-sensitive and subject to change. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

This is a cross-post from Polymarket Institutional Research. To receive future issues, sign up here.

Polymarket’s Institutional Desk is scaling up. For information on block trades, market making, and commercial data sales on either our U.S. or international exchanges, contact Brooke Rizzetto at institutional@polymarket.com.

Pre-war, around 20 million barrels of oil flowed through the Strait of Hormuz daily. Polymarket traders now price a 62% chance for Hormuz normalization by year-end, defined as greater than 60 vessel transits recorded by IMF Portwatch on a 7-day moving average basis.

The latest 7-day moving average was 32, just over half the normalization threshold.

Over the past 30 days, year-end reopening odds have trended down, as traders grow skeptical of peace headlines and major differences remain over transit fees (Iran? U.S.?), and continued strikes on commercial vessels transiting the Omani lane.

What’s not priced in?

The chart above shows the realized Brent-WTI spread while the points from September to December are the forward futures curve. The break is where the historical data ends and market implied futures pricing begins. (Note: calculated daily from Brent-WTI settlement prices; conflict averages calculated since 28th February. December spreads are calculated from CME quotes.)

The spread between WTI and Brent oil benchmarks is widely seen as a barometer of Hormuz stress, as Brent is more heavily impacted by Gulf crude prices, while WTI is mainly U.S.-based and has little exposure to Hormuz transit risk.

The Brent-WTI spread shot up from ~$4.39 pre-conflict to over $25 during the war’s peak in April.

On Polymarket, the Hormuz reopening curve gives a live read on where the Brent-WTI spread should be. If the Strait reopens, the spread should revert to its ~$4.39 pre-conflict level. If the conflict drags on, it can stay near the ~$8.59 average since the war began.

Polymarket’s odds can be used to estimate the fair spread. At Polymarket’s 62% reopen and 38% prolonged closure, the fair spread is calculated to be ~$5.99.

Fair spread = [0.62 x $4.39 (pre-conflict spread)] + [0.38 x $8.59 (prolonged conflict)] = ~$5.99

Today, the December Brent-WTI spread trades at ~$4.90, well below the calculated fair spread. Should the year-end reopening odds continue to drop, the logical trade is to long the Brent-WTI spread near $4.90, using ~$5.99 as the fair-value anchor, with more upside should the reopening odds fall further.

All Iran Polymarkets

Related Polymarkets

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. All odds are time-sensitive and subject to change. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

Werner K Zagrebbi is a board-certified Superforecaster™ who writes about politics and economics at Right Rationalism.

Nina Totenberg is NPR’s legal affairs correspondent. At 82, her resume includes breaking Anita Hill’s harassment allegations against Clarence Thomas, reporting on secret Court deliberations during Watergate, and exposing that Douglas Ginsburg had smoked marijuana, which ended his chances at nomination.

And so at 10:51 AM ET on Tuesday, June 30th, when National Public Radio published a story headlined “Justice Samuel Alito Retires”, the markets took her seriously. The polymarket on Alito announcing his retirement by December 31, 2026 was trading at 37.5%. Nine minutes later it had shot up to 88%.

Sixteen minutes after publication, however, NPR retracted the story. By evening, $552,265 of trading volume later, the contract had settled at 29%.

Subscribe now

Did the market behave well?

Domer (aka ImJustKen), one of Polymarket’s most followed sharps, certainly handled it well. His wallet sold 11,314 shares of YES at $0.902 at 11:04 AM, four minutes after the peak and three minutes before NPR pulled the story. He then bought 18,690 shares of NO at $0.579 twenty-five minutes later—for a profit of ~$10k.

Two things had to happen in the four minutes between NPR’s publication and Domer’s sell. First, someone had to look at the article and notice it was structurally broken. Second, someone had to check the actual resolution source, which is the Court itself.

Both were public in real time. On Bluesky, six minutes after publication, the legal commentator David Lat asked whether SCOTUSblog had received a release from the Court’s Public Information Office. Mark Walsh, physically in the Court press room, answered that it had not. That thread was live at 10:57 AM. Ken sold at 11:04 AM.

Leak Bait?

A careful reader of the Totenberg article contained more warning signs. Take a look—the caption to the leading photo says that Alito “retired Friday,” while the first paragraph claims his retirement was “announced Tuesday” (which—at the time of publication—was today).

It’s grammatically possible that NPR meant “Alito had already retired Friday, and the Court announced it Tuesday,” but given the context it’s implausible.1

The article also quotes a Yale Law professor as saying that Alito “will forever be remembered” as the justice who “took sown Roe v. Wade” instead of “took down”—which is not the kind of copyedit that usually makes it through NPR.2

Many have argued that this story was an “embargo breach” or that Alito planted the story to catch a leaker. I think it’s worth taking off the tinfoil hat on this: A real embargoed story would probably not have an egregious contradiction between the lede and leading photo’s caption. If NPR had been given advance notice by the Court or some political insider, the basic timeline would not read like it had been assembled from three incompatible drafts.3

Share

“Rookie Mistake”

But it’s hard to fault the rest of the market for missing these clues.

Nina Totenberg is a highly respected 82-year old journalist. And as has noted, The Media Very Rarely Lies. Crazy, I know, but it’s true! In fact, you have to go pretty far back in history to find a precedent for a mistake of this magnitude in a mainstream outlet4—a frequentist would certainly buy up.

And Supreme Court reporters, in particular, have traditionally commanded a lot of power and respect. America’s favorite economist Tom Sowell even made the case that they have a massively outsized impact on legal outcomes: It’s well documented, after all, that while “Supreme Court justices swim slowly, they tend to swim to the left” — ie, they tend to vote more with the left over their tenures. Desire for favorable press coverage from the likes of NYT’s Linda Greenhouse, Sowell argued, may well be what’s going on, under a model he called the “Greenhouse Effect.”5

Wake Up Call

Polymarket has a separate market, Supreme Court vacancy in 2026?, which applies to any justice creating an opening. It ran up alongside the Alito contract, peaked at 60.5% around 3 PM, then went back down, but only partway. As of this writing it trades at 41.5%, up 17.5 percentage points on the week.

If you back out the Alito-specific probability at 27.5% under a rough-independence assumption, the market is implicitly pricing ~18% chance of a 2026 vacancy created by someone other than Alito, which is notable—that premium was near zero seven days ago. So what’s going on?

Well, as Fisher Black taught us, noise traders are an effective subsidy to smarter traders; they give them a reason to correct the price.

The any-vacancy market has $18,576 in lifetime volume. In the entire week before the Totenberg story, it did $37 in trading and seven trades—essentially dormant. In the sixteen minutes the NPR story was live, it did $5,019 across seventeen trades. The false NPR signal traded a hundred times more volume, minute-for-minute, than the market had seen all week. The scare gave the market a jolt of noise that woke it up: In a flash, it became worth investing the effort to discover the right price.

In mid-term calendar years since 1980, at least one justice has retired or died six of eleven times, a 55% base rate. Pre-Totenberg, the any-vacancy market was already at 28.5%—below that. Certainly the post-Totenberg price is more consistent with these base rates, and with the brand-new Clarence Thomas retirement contract.

Share The Oracle by Polymarket

What to Watch

Supreme court Justice is a dangerous profession: Three died in office. Of the seven who retired, six announced between March and July, with the announcement clustering at the close of the term. The seventh, Breyer, was leaked by CNN in late January, and formalized on the following morning.

In any case, I’d watch any communication out of Thomas’s chambers, clerk-hire announcements for OT26 (Justices who plan to retire stop hiring), and retirement timing signals in July, when Justices are wont to drop these announcements at the close of a completed term. The info on hires disperses entirely informally, but if you were to make a bot David Lat of Original Jurisdiction is the place that’s known for reporting earliest. The indefatigable Scotus Blog also should have an inkling.

And—theoretically—such considerations would be priced into markets on live cases. Polymarket has an active market on whether the Court accepts the sports event contract case, currently pricing 50.5% for December 31 resolution. Retirement expectations flow into case-acceptance expectations. Watch the pair.

These contracts are functionally binary options. Their prices naturally decay toward zero as expiration approaches—but that decay isn’t smooth. Discrete calendar events like end-of-term rulings and clerk-hire announcements create predictable moments of potential repricing. A trader who models these markets as pure theta is leaving alpha on the table for someone who knows when the term ends, so keep it in mind.

The Greenhouse Effect, if it exists, took decades to move a Justice by a few ideological points. The Totenberg Effect, if we want to call it that, took sixteen minutes to move a Polymarket contract by fifty, and to effectively subsidize another to a much more correct new price.

Maybe Tom Sowell is right and the reporters are just that powerful. If nothing else: It’s worth checking if the first page has errors before you trade off events: Tell your bots!

Follow Supreme Court Polymarkets

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. All odds are time-sensitive and subject to change. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

Today we are launching Polymarket Institutional Research, a publication exploring the intersection of Polymarket with the global financial system.

The first issue is being cross-published here on The Oracle. To receive future issues, sign up here.

If you are a financial institution looking to engage with Polymarket, our Institutional Desk is scaling up. For information on block trades, market making, and commercial data sales on either our U.S. or international exchanges, contact Brooke Rizzetto at institutional@polymarket.com.

Anthropic Right Tail Underpriced?

By

It is rare for single companies in the $35T U.S. economy to become themselves a macro variable. Anthropic is one now. Their ARR growth, capex spend, and model impact on productivity all have multipliers on the U.S. economy.

An interesting trade to me is looking at the strip of the “Will Anthropic valuation hit _ by December 31st” Polymarket contract.

The interesting thing is where the market prices the convexity point and how the market prices the right tail in the context of the recent run that Anthropic’s valuation has been on.

Valuation has tripled just in the last six months and the revenue has backed it up. Not only have we gotten stories about ARR going from $9B to $45B, but Anthropic showed that they are already profitable this year despite massive capex intensity.

Fable Inflection?

Last week, the U.S. government reversed their ban of Fable 5, which has cross-cutting impacts on the forward valuation curve. On the one hand, this development could be bearish Anthropic’s valuation based on the fact that it will be harder to release new models going forward.

On the other hand, it is itself evidence that the model is a genuine capability leap rather than an incremental release, which is exactly what a step-function valuation jump needs. The other factor here is, as these models improve from a very high baseline, it also raises the chances of regulatory capture which would be very beneficial for Anthropic’s valuation in a world of increased model competition.

In this context, the strip has a strange shape. There’s a hard cliff exactly at the $1.5T mark, then the upper tail flattens, which in the context of the recent growth and where SpaceX went public, is surprising to me.

This reads as a mixture of two distributions: a tight cluster around the consensus round print, then a smoother “something else happens” regime above $1.5T. Given the trajectory of growth and what the current risk sentiment is in the AI trade, thinking that Anthropic doesn’t add another 50-75% of its valuation this year feels like a 50-50 at worst to me given the current non linear growth in ARR. Especially with an IPO kicker likely coming towards the end of the year.

In that context, Anthropic at a valuation of $1.75T or above by year end at 40% seems too low. And the convexity point where the market hands off from mode to tail seems too close to the spot valuation, even if that number is +50% from here.

Get Polymarket Institutional Research

Related Polymarkets

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. All odds are time-sensitive and subject to change. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

At this time last year, Polymarket traders thought FDA approval of a new kidney drug was almost a sure thing. YES shares traded as high as 89% before crashing to zero in days.

Subscribe now

The strangest part? The drug was completely fine.

The drug in question, Unicycive’s oxylanthanum carbonate, was safe and effective. The problem was a third-party plant failing a manufacturing inspection. The FDA issued a Complete Response Letter (CRL), the agency’s “not yet” ruling that sends a drug back without approval, and the polymarket settled at zero.

This summer, that same molecule is back after resubmission, along with seven other FDA drug approvals.

The headlines may look similar, but these contracts are pricing completely different risks. One rides on whether a foreign factory passes re-inspection. Another rides on a Phase 3 readout, the big trial that decides whether a drug works as advertised. The trick is knowing which risk you’re holding.

Timing

Let’s start with the part that can be a bit misleading. Each of these polymarkets reads “FDA approves [drug] by [date],” and people trade it like a yes-or-no on the drug. But it’s actually all about the date.

Think of it like handing in a flawless essay a week past the deadline: you still get a zero, because the essay wasn’t the problem, the deadline was. A drug with a contract ending in June can clear the FDA months later in September, and its contract will still pay zero.

A NO on Polymarket isn’t always an FDA rejection. Of the 13 markets that resolved NO in our data, four were pure timing: a drug that simply required more time to work through the approval process.

Share

Factory reset

And when a contract resolves NO on an actual rejection rather than a delay, the reason is usually dull. Of the nine CRLs in the resolved set, seven were manufacturing problems. Only two had anything to do with whether the drug worked.

A factory problem is also fixable. The company patches the deficiency, refiles, and takes another swing, which is why the same molecules come back for a second cycle.

Decoding FDA approvals

Before you even look at price, work through three things. First, the normal base rate: drugs that reach a decision get approved often, roughly 80% on the first cycle, and label expansions (where a drug is expanded to different diseases or demographics) are higher still.

Second, the designations: Priority Review (the FDA committing to decide in about six months instead of the usual ten) or a Breakthrough Therapy tag (an early flag for drugs showing unusually strong results) is the agency saying that it likes what it has seen. The base rate for these types of approvals is, again, higher than the usual.

Third, the prior cycle: if the drug received a CRL last time, find out why. A manufacturing fix is a far easier bar to clear than a fresh efficacy determination, and both lead to different expected approval rates.

Share The Oracle by Polymarket

Case Study: Oxylanthanum carbonate

Last June’s rejection came down to a single manufacturing deficiency at a third-party plant, with nothing said about the drug itself. Unicycive resubmitted in December to fix the issue.

So Oxylanthanum carbonate is back, and it’s a refile, meaning that they’re leaning on past data instead of re-running every trial to resubmit after their earlier CRL.

Thus, the Unicycive contract is really one question: does the refiled factory pass inspection before its July deadline?

At 64%, traders are pricing that risk solidly below the approval base rate for a normal drug. (Note: at time of publication this contract’s orderbook showed a very wide spread, indicating a lack of trader consensus on the odds.)

The rest of the board

Armed with this knowledge of the base rates, let’s look at the other contracts that are live.

Two are clean reviews or expansions, and traders are pricing them like it. Zoryve cream at 83% and Olezarsen at 91% are first-cycle expansions with no manufacturing history to worry about. About as close to a formality as this category gets.

The key risk with Arcalyst (54%) hinges on a routine switch of manufacturing to a new contract plant, Samsung Biologics, for rilonacept, a drug that has never received a CRL, yet the crowd treats it as the riskiest trade on the board.

Only one drug is a first time approval. Veligrotug, at 70%, has good Phase 3 numbers and both Breakthrough and Priority Review, but first approvals carry more unknowns than expansions. It’s marked modestly below the usual base rate of 80%, for this reason.

Reading resolved markets

A few recently resolved markets also contain clues.

Just a few days ago, we had Oclaiz at 82% and Welireg at 84%. Close enough to look like the same trade, but three days later they’d gone opposite directions.

Oclaiz went first. On June 10, the FDA sent it back with a second manufacturing rejection tied to a third-party plant. Same story as oxylanthanum a year earlier. The contract priced at 82% fell to zero overnight, and NO shares paid more than fivefold. Again, it was the factory, not the drug that was the issue.

Welireg did the opposite. On June 12, it got approved: Merck’s belzutifan was cleared to widen into earlier-stage kidney cancer. A drug the FDA already trusted, on a trial it had already seen. The price drifted up and settled at a dollar: a routine label expansion.

Finally, Tebipenem was the only drug that rode on the molecule itself. It received a CRL on the science, was fixed with a fresh Phase 3 and approved June 17, clearing the most challenging FDA bar.

What’s next?

FDA forecasting hinges on a number of key risks: timing, factory approvals, new molecule approvals, and new use approvals (expansions). Each of these has its own base rate, which tends to outweigh drug-specific risks.

But this article looked at just 36 markets, too small to establish reliable base rates at that level of detail. We’ll tackle that in a future piece, digging into the broader historical record to build out a base rate for each individual risk.

Leave a comment

How we built this

We pulled every FDA drug-approval market on Polymarket, open and resolved, and hand-checked the regulatory record behind each: application type, any prior CRL and its cause, designations, and the contract’s true resolve-by date, which carries a roughly two-week grace past the expected decision. Then we logged the price each market charged before its decision, anchored to the day the FDA acted rather than the later settlement. With 36 resolved markets the sample is small and skews toward contested, refile-heavy decisions, so read every number as directional.

Dataset and code: github.com/realakshayk1/fda-markets

About the Author

Akshay Kumar is a software engineer at Polymarket and a computational drug-discovery researcher at Penn, where he models tumor growth and drug response. He studies in the Life Sciences and Management program at the University of Pennsylvania, combining Wharton, biology, and data science.

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. All odds are time-sensitive and subject to change. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

Polymarket traders seem to be pricing a startling scenario: that the Russia-Ukraine war—Europe’s deadliest since World War II—could spiral into an even wider conflagration before year’s end.

Traders currently put the prospects for a “military clash” between NATO and Russian forces at about 17 percent. A die roll.

But what are traders actually pricing? And which events could be the most geopolitically consequential? I scanned the historical record and found some telling insights.

Subscribe now

Base Rate

In a rough screening of the record since 1950, I found some 21 likely qualifying incidents involving the U.S. and Russia/Soviet Union, for a base rate of roughly 17 percent–very close to where the market today is pricing for a wider NATO-Russia clash.

But the bulk of these incidents occurred during the early years of the Cold War before satellites reduced the demand for risky overflight recon missions. Strip those out and the post-1965 rate drops to single digits, roughly consistent with the adjacent U.S.-Russia market today.

The fact that the broader NATO-Russia market prices nearly three times higher likely reflects the alliance’s vast membership, its proximity to a major land war, as well as incidents like Turkey’s 2015 shoot down of a Russian jet near the Syrian border.

More recent U.S.-Russia encounters involving Reaper drones (2022 over Syria; 2023 over the Black Sea) may hold the biggest clues to how these markets might trigger in the months ahead. If the targeting of larger, unmanned surveillance drones lowers the threshold for a qualifying incident while lowering the stakes of one, the satellite-era base rate may be too optimistic, and the “early Cold War” pricing may not be as crazy as it looks.

Close Calls

Both markets define a “military encounter” narrowly: a fairly unambiguous use of force/weapons by the Russian or U.S/NATO militaries against the other.

This has not happened near the Ukraine war since it began. But the rules exclude several provocative incidents that have, highlighting how much escalation risk sits outside the market. For example:

• Intercepts of munitions targeting a third party*–During a massive Russian barrage against Ukraine last September, more than a dozen Russian Gerbera-type drones crossed into eastern Poland where several were destroyed by Dutch and Polish fighters. The episode was reportedly the first time that NATO aircraft destroyed hostile targets inside the alliance, and it prompted NATO Article 4 consultations (only the eighth in history).

• Dangerous interference short of weapons use–A Russian fighter jet collided with a U.S. MQ-9 Reaper drone over the Black Sea in 2023, damaging its propeller and forcing it down. The incident brought Russian and U.S. military assets into direct physical contact for the first time during the Ukraine war.

• Non mil-to-mil spillover–A Russian drone struck an apartment building in Romania in May, injuring two civilians. Again, an extraordinarily provocative event but clearly outside the markets’s rules.

• Gray-zone attacks–All of the above is just one band of conventional military escalation risk in a much wider spectrum that includes unconventional Russian military, paramilitary, and intelligence operations (e.g. cyberattacks, sabotage, assassinations). Western analysts have documented a steep uptick in these types of Russian operations–often called gray-zone activities since the 2022 invasion.

Share The Oracle by Polymarket

Big Risks Below the Threshold

The record is somewhat reassuring about the risk for a catastrophic escalation: when qualifying mil-to-mil incidents do happen, they tend to be managed diplomatically.

But the increase in Russia’s gray-zone operations against NATO hints at a more insidious problem. One of Russian President Vladimir Putin’s strategic goals is to drive a wedge into NATO–particularly between the United States and European members–in order to undermine confidence in the alliance’s collective security guarantees.

Why would Moscow want an open military clash with NATO when it can keep probing the alliance through gray-zone activities, which are relatively low-cost, low-risk, and potentially more strategically valuable?

The danger is that more frequent and transgressive gray-zone actions by Russia repeatedly test and strain NATO’s collective response. A particularly egregious Russian operation, which some defense experts say could culminate in a limited ground incursion, might compel a NATO member to seek an Article 5 declaration.

What to Watch

There are a few things traders might want to track that would shift the risk environment around these markets and move the odds of a mil-to-mil encounter:

• Rules of Engagement. NATO members have discussed altering the alliance’s classified rules for when and how allied forces engage Russian drones or aircraft, potentially allowing for a more forceful response. European states also have their own ROEs, and some, such as Lithuania, have already altered them. Any shift could matter for prediction markets.

• Force posture. Watch whether NATO reinforces or reorganizes–as with Eastern Sentry– its eastern flank. More military assets on the alliance’s frontier could improve deterrence but also put more allied systems into the airspace most likely to see a qualifying incident. Meanwhile, the Trump administration’s recent cancellation of some planned military deployments to Europe underscores how quickly the American posture can shift.

• Drone War. The scale and pace of the drone war in Ukraine, already extraordinary, continues to expand. The more drones both sides put into the air, especially near NATO borders, the greater the chance of military-to-military spillover. A qualifying clash in these markets may be most likely to begin with a UAV incident at the edge of alliance airspace.

* only applicable to the NATO-Russia market

Leave a comment

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

TheMaineWonk is a Democratic strategist based in northern Maine’s conservative second congressional district.

He’s watched Republican Susan Collins skate to victory over and over by bringing home the pork, but thinks this cycle is different.

The Oracle spoke with him the day before the primary about who’s behind the Graham Platner oppo dump, possible game-changers in the campaign, and what to watch on election night.

This interview has been edited for length. All answers are his own.

Subscribe now

🚨 Just In: Before hitting publish on this piece, we received this audio update from MaineWonk breaking down yesterday’s primary results. Listen here 👇

Maine is one of the key Senate seats Dems are hoping to flip. Give us the state of play.

Maine’s politics are incredibly unique, and Maine is infamously difficult to poll accurately. The one thing that makes Maine more unique is the tariff aspect of being a border state. We do a lot of business with our northern neighbors, and relations have been a little tense between the Canadians and the US over the last 18 months or so. And Mainers do not take well to having outside forces, whether it’s establishment politicians or establishment media, trying to influence them.

Susan Collins has been written off in every cycle and keeps winning. What is it about her?

The number one currency in Maine is personal relationships. It’s not campaign ads, it’s not literature, it’s not Twitter posts or Facebook posts. In Maine, it’s two degrees of separation: either you know your representative or senator directly, or somebody close to you knows them and knows their story, knows their family, knows their background. Collins is from a big family in Caribou, Maine, and these folks have networks.

The second point is that Susan Collins is one of the most powerful Republicans in the Senate. She’s chair of the Senate Appropriations Committee, the most powerful committee, because it deals with all of the money. In this presidency there’s been $460 million allocated to Maine through pork barrel projects. $400 million of it has come from Susan Collins. That is how she does it. She hasn’t had a town hall in 30 years. She campaigns through press releases, going to VFW halls, going to fairs, going to parades. She stays away from answering tough questions. Her avenue to win is: “I bring home the bacon.” If I stay in the Senate, I’m still going to be a chairperson or ranking member. Graham’s a new guy, he’s going to go to the back of the line.

The question is, is it going to be enough? And my answer to that is, I don’t think so. Not in this cycle. She has high net negatives. Last polling averages have her at a net negative of minus 13, minus 14. You’re in an anti-incumbent cycle. People are fed up with the status quo politician, and there’s nobody more status quo than somebody who’s been there for 30 years. And the president, who is the head of her party, has a negative 25 or 26 net approval rating in Maine.

Share

Let’s talk about the Democratic candidate, Graham Platner. Where did he come from and what is his story?

Graham grew up in Sullivan, Maine, about 35 to 40 minutes from where I’m sitting right now. He went to John Bapst, a semi-parochial private school in Bangor, went to the Marines, went to George Washington University, went back into the military after that, came back to Maine after his deployments and started his oyster company around 2018. As a disabled veteran, he lives off his benefits and the small money that comes in from his oyster farm.

Graham and I met about seven, eight, nine years ago through mutual friends. Everybody outside of Maine doesn’t understand how small Maine really is. There’s only 1.4 million people here. I was just in Bar Harbor the other night with Ro Khanna and Graham and his wife Amy and Troy Jackson, who’s running for governor, Matt Dunlap, who’s running for Congress, and some others, and we were all just marveling at how we’ve met and how we’re connected. That’s just how Maine is. Everybody somehow, some way, knows everybody.

As far as how they found him, this is not a secret in political circles, there are people out there in activist circles that go and recruit candidates. Some of the mainstream Democrats in Maine were not interested in jumping in this race, many were running for governor. When Graham got in and shot up like a rocket, his fundraising was through the roof. That’s when the establishment Democrats started to get nervous, your neoliberal corporatist Democrats, the Chuck Schumers of the world, and they had to dragoon Mills to get into this race. She didn’t want to run. The people behind Graham are the same people that ran Mamdani’s campaign, the Fight Agency. The same people that ran Fetterman’s campaign.

I actually like that he is not polished, he hasn’t been groomed to run for office his entire life. His story of going through the military, coming out of it with PTSD, going to seek therapy, still working through that, I think that is commendable.

A series of oppo stories has come out just a few days before the June 8 Primaries. How much has it moved the needle?

The movement in the polling has been nominal at best. Both sides have put out internal polls, and the one that really stuck out to me was the internal poll released by Collins from Fabrizio Ward, a Trump pollster, showing it a dead heat, even after all of this. And that was before the Bar Harbor event, when the amount of media on our tiny island…you would have thought the Pope was here.

This was Graham’s first big event in front of cameras since the oppo dump, and all the news reports after fascinated me. Even Fox News, you go back and watch the field reporters they had here, they were talking to voters up and down the coast, and they were all telling you what I’ve been saying: nobody cares. Mainers don’t care about the personal character stuff.

I saw this with Trump in 2016, you could throw every scandal you want at him, it may stay in the 24-hour news cycle for a couple of days, and then it fades.

The severity of the attacks is going down. First it was the tattoo. Then it was the Reddit comments. Then it was the Kik app. Now the last attack from the Maine Wire this week is that Graham’s oyster company and his campaign website were set up at the same time, meaning the oyster company isn’t real, which is not true, and already been debunked. I think they realize they can’t figure out how to take him down, and his support is actually growing.

Polymarket odds for Platner went from around 75-80% before the oppo dump, down to 50, and are now recovering to around 62%.

As I’ve said, this race was always going to be close. The early odds of him being 80-20 — okay, this is Susan Collins, and we’re talking about Maine, which is incredibly difficult to poll accurately. I think what you’re seeing right now is pretty damn close — 60-40, 55-45, 50-50, somewhere in that range makes sense to me.

Now, who are the swing voters in Maine? The people that are going to decide this election are the people who were either independent, or Republicans that voted for Kamala Harris in 2024. That’s key. When you see polling come out, look at the cross tabs instead of looking at the top line. Look at people that are registered independent in that boomer age group. Look at people that are identified Republican in that age group. Start to see if you see any movement there. Both sides are going to have their base, that swing voter is going to decide the election in Maine.

Share The Oracle by Polymarket

What is Graham’s actual platform? If you go to a Graham Platner speech, what does he hit?

Health care is one of his top issues. He’s a Medicare for All person. He talks about rural hospital closureS, the One Big Beautiful Bill that passed in the Trump administration basically decimated rural health care. We’ve had hospitals already close in Maine because of that. He’s your classic populist going after the elite class that he believes isn’t paying their fair share in taxes, that they’re getting all these tax breaks while working Americans are seeing higher inflation, lower services, and higher tax bills.

He’s the same cut of cloth as AOC or Bernie Sanders or Ro Khanna. And by the way, this has been a long time coming in Democratic politics. The frustration with the National Democratic Party has been that they focused on identity politics when the one thing that is still essentially identity politics, but is not race or sexual orientation or religion-based, is class-based. It’s middle and working-class America versus the elite class. You’re starting to see those changes in the Democratic Party, and it’s resonating.

What about the Israel question? He’s been described as an Israel-skeptic. Is that fair, and does it help or hurt him?

You’re spot on. Any cross tabs in the polls show a pretty good sample of Democrats that share the same view Graham does; about Gaza, about deterring and stopping funding of Israel. That is a key component of that Democratic coalition. And at the national level, a lot has been made about the autopsy report from 2024, where Democrats lost Michigan because a lot of Arab Americans voted for Donald Trump. I’m willing to bet those folks do not support the president now.

To the normies, the people that aren’t in the weeds of this every single day, they want to know simply: how are you going to make my life better? How are you improving the economy? Why do I have to drive 100 miles to go to a hospital? The national stuff plays in, but it all really comes together.

Will the Democratic establishment try to sabotage him?

He has said Schumer shouldn’t be the majority leader, and I believe the majority of Democrats will tell you the same thing. Schumer has already endorsed Graham. There was a well-covered meeting after these stories came out last week, Graham went to Washington and met with senators including Schumer, Gillibrand, Warren, and Sanders. The one way you’ll know if Graham is in trouble is if any of those folks withdraw support. You’ve seen the opposite, they’ve doubled down.

The one person I thought was really interesting is the godfather of establishment Democratic politics: James Carville. Carville endorsed Platner this week in a funny way, where he essentially said, maybe this is what we need…For an establishment Democrat from Louisiana, who is most certainly not a leftist or a progressive, to realize what Maine’s politics are about and why he’s a good fit for this cycle tells you something’s happening.

If you were a Platner YES holder on Polymarket, what would make you panic and dump your shares?

Number one, of course, is people who have endorsed him withdrawing their endorsement. Bernie’s obviously the big one. Ro Khanna would be another. Elizabeth Warren would be another. Tim Walz was the first person out of the gate to endorse Graham, had an event here in Portland at the very beginning of the campaign, so I remind hardcore Kamala Harris supporters who are anti-Graham that Kamala Harris’s own VP candidate was one of the first people to rally for him. If one of the most popular Democrats in the country says something negative about Graham, AOC being one, Barack Obama being another, that’s important.

On the flip side, what would make me want to buy more of Graham: post-primary, the rallying that’s going to occur. I guarantee the press stories on Wednesday will be: despite all the scandals, despite all the red flags, the people of Maine have decided it’s Graham Platner. That’s when you’re going to see the rest of the Democratic Party, who’ve been a little wishy-washy, come in, both inside the Beltway and with donors.

Unless there’s what I call the Hindenburg, the nuclear bomb, the one thing that could possibly do it, they’re not going to be able to sustain this. And at some point people are going to say, are we going to talk about the economy at any point? Are we going to talk about the rural hospitals that are closing? The lobster catch in Maine last year was the lowest in 17 years, prices are dropping, diesel prices are higher, fishermen are getting out of the business. That’s what this election is ultimately about.

Will Collins debate him?

If I’m a Susan Collins advisor, I’m avoiding debates. Just the optics alone of a 73-year-old woman who has visible health issues against a young 42-year-old who has an aura and a presence when he speaks with that deep baritone — you put them on television, that’s quite the comparison. I would compare that to the Biden debate that basically derailed a presidency. Where you went out there and look like a damn zombie against a vigorous Donald Trump. That’s an optic you want to escape. She’s going to have to debate eventually, especially if this race stays tight.

One thing I’ll tell you: it’s been a rumor all cycle that Susan Collins didn’t want to run for reelection. This was the latest in her 30-year career that she made an announcement she was running, and it came after the National Republican Senatorial Committee promised $40 million in ad spending. That’s when she jumped in…This is the first time Collins is going to have to campaign hard. I’m not sure she’s up for it.

On election night, where are you watching to get an early read of how the day went?

We only have two congressional districts. Any Democrat is going to win Congressional District One, that’s Portland, no Republican will ever win it. Congressional District Two is where everything happens. Trump won that district by nine points in 2024, but a Democrat has won the congressional seat the last three cycles. That’s what I’m looking for.

Susan Collins in 2020 won Maine’s second congressional district by 24 points. The last polling has her winning it by only five — that’s major. If Platner makes Maine CD2 competitive, if she only wins that district by 10 or 12 and he runs up the score in the Portland district, he wins. That’s the key.

On the coast, Hancock County up to Washington County, right up to Canada, those will come in first. Those are the population centers here. You have Bangor two hours inside. That’s where he’s going to try to run up the score. And then the coastal communities, which are less populated but more liberal. Much like the Trump model of winning by running up the score in sparsely populated counties, Graham’s going to follow the same playbook, going to his liberal strongholds in Bangor but also driving turnout in those coastal communities with registered voters who aren’t necessarily likely voters yet.

Big picture, Democrats need Maine to take back the Senate. How do you see the path?

The Democratic path to the Senate majority hasn’t changed. They need to win Maine, North Carolina, and Alaska. North Carolina is basically settled. Cooper’s going to win by seven or eight points. Alaska, Murkowski challenger Sola is ahead of Sullivan. Then Maine, which we’ve already talked about. That’s three. Then they only need to win one more. Texas, Ohio, Nebraska, Montana, Florida is competitive, South Carolina is going to be interesting because of Lindsey Graham’s unpopularity. All they’ve got to do is win one.

And if Graham doesn’t win, you still have Ohio, where Sherrod Brown is leading. You still have Talarico in Texas, who I think has the best chance Democrats have had to win Texas since Lloyd Bentsen– I think the Senate ends up 51-49 Democrat or 50-50. That’s where we’re headed.

Leave a comment

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

Chris DeMuth Jr. is the founder of Rangeley Capital, an event-driven hedge fund, and writes Sifting the World on Seeking Alpha and Substack.

In his first Oracle conversation, he named Paramount as the likely buyer of Warner Bros. Discovery while Netflix was still the heavy favorite.

Now he is back to chat about the rightward shift in Latin America, and the latest M&A chatter around eBay, SpaceX-Cursor, and more.

This interview has been edited for length. All answers are his own.

Subscribe now

You’ve been looking closely at the upcoming elections in Latin America. What stands out to you?

The rest of Latin America is going the way of Argentina. I had big equity positions around a Javier Milei victory. I will disclose I was a supporter of his. As an investor I was actually unduly tepid in the short term, because I thought a man that principled would take a lot of short-term pain to get things right long term. It went extremely well almost immediately. Even the things I flagged as caveats turned out fine. Argentina has been a triumph, and I think everybody else is going to follow. I have the same view now in Chile, Colombia and Peru, a little less edgy than a few months ago, because they have gotten more priced in.

Colombia is your big one. What did you see there?

Espriella was super, super undervalued in April, under 25%, when he should have been at least 50/50. The right is united in Colombia, with the moderates and the conservatives consolidated around somebody offering a combination of El Salvador tough-guy with Milei libertarianism, which is going to be very popular there. That unity is exactly what was needed.

The dynamic was a jungle race with two brands of conservative against one candidate on the left. There is a shyness among the conservatives, an effort to look a bit more moderate, and then they consolidate. It looks similar to early Trump, where a lot of Chamber of Commerce Republicans would not have gravitated toward him stylistically but were almost unanimous in collapsing their support around him once it became binary. I watched the same thing happen in the Colombian business community, including a prominent ex-president. I built the call on polls, second-choice data, and connections to people in the country with real money on the line. It is hard to get excited about a market already sitting at 85% in Latin American politics, but the read I really care about is that this is going to be extremely good for Colombian equities.

And Peru?

I feel less sure about Peru, but I think Fujimori wins. It is a smaller market, less connected to the US, though there is interesting mining exposure, including lithium and electric vehicle minerals. She is the more business-friendly, more conservative option. Our right-left terminology grafts onto Peru less cleanly, and the recent left there has not been terrible to deal with, so it is a softer version of the Argentina story. But it fits the same theme, the Mileification of Latin America. She is going to win an election that is good for equities and good for mining interests.

You have professional interests in Venezuela too. What is the angle?

I am very interested in Venezuela, though it is more an investing interest than a market call. My exposure there is largely on the gold side, several claims pending resolution, and some of it monetizes through the Citgo auction. The current political situation opens up a lot of different ways to win.

Venezuela is also the perfect lesson in reading the footnotes. There is a Maduro market where it matters enormously that he is officially still president even after everything that has happened. People trade on a casual understanding of who is in charge. The actual resolution depends on the precise terms. It is the same discipline as reading a definitive merger agreement instead of the press release some PR person wrote. The filing is what is legally binding, not the verbiage.

You mentioned your equity book is aligned with these political views. Could a prediction market work as a hedge?

In principle, yes, and it is something I am watching, especially where you can get leverage and an option-like payoff. Right now my equity exposure already points the same way as the politics, so it is really a Texas hedge, which is to say not much of a hedge at all. Where it gets interesting is an isolated political blind spot. Say you have a big position in Fannie and Freddie and you are worried Republicans get hammered in the midterms, Democrats launch investigations and impeachment, the administration gets distracted for two years and then gets replaced. That would be doomy for those names. A big bet on Democrats sweeping would be the offset. That is the kind of structure these markets are built for.

It is also where the space is going. The hedges that are barely worth the effort at small size today are exactly what I would want at tens of millions once the liquidity is there. As the institutional desks show up, there will be real depth on these markets to hedge corporate events at scale. I want to get smart on that now.

Let’s turn to your day job, merger arbitrage. Which deal looks most mispriced right now?

GameStop’s bid to buy eBay. I think the correct odds are zero. If you had ten or twelve things to check on whether this gets consummated, all ten or twelve give you a clear answer. It is a much smaller company making a bid for a much bigger company, with no credibility on any aspect of it and no financing in place. The oddness of it is that they never even approached the target. In the most hostile situations I have ever looked at, you at least walk up to the potential target. This was just something they said.

I could launch a bid for eBay too, in the sense that I can tell you right now I will buy eBay if somebody gives me financing on terms I want and the other side agrees to it. That is completely unserious. The NO side at 85 cents on the dollar pays better than a savings account, and it lets you express the view without ever shorting the stock.

Why does not having to short the stock matter here?

Because I actually like eBay. I think it is undervalued, I would not want to short it in size, and in the days after the bid it was trading well, so you could lose money shorting it even if you are completely right about the deal. The appeal of a prediction market is that the deal failing becomes its own instrument. You can take that view directly, with no opinion on where the equity trades. You do not need a theory for why GameStop did this. You just need to be right that it will not happen.

One caveat I give everyone: triple check the rules, always. I read a market description the way I would read a press release, then I go read what is actually binding. There was an aliens market where the description was not about a three-eyed man landing, it included any senior official making the claim, which made it much wider than the headline suggested. You are allowed to be wrong. You are an idiot if you are not even looking at the thing you think you are looking at.

You have been watching the SpaceX and Cursor market, which is unusual because Cursor is private.

That is what makes it interesting. There is now a way to do pre-merger arbitrage on a private target with no publicly traded stock. The market was a little better than 50/50 when it first appeared. It is now in the 80s. I believe SpaceX is not just going to acquire Cursor, I think they have already determined that they want to. Elon wants it, and Elon is good at getting what he wants.

There was an entertaining public back and forth. He wanted to buy them while SpaceX was in the quiet period before its S-1, and the lawyers would have torn their hair out, because you cannot do major M&A then without redoing all your filings. So it is a poorly concealed, already negotiated deal that I expect to go forward in the weeks following the IPO.

Last time we spoke you were on the Warner Bros. Discovery deal. How is that playing out?

Really well. That was something like one in three when I first mentioned it. We then got a definitive deal announced with Paramount as the buyer, which is the side I had favored and the side I was long in the equity. They have very good antitrust counsel and are farther along in the approval process than I would have guessed. They have German approval and a handful of other foreign approvals, and they have aggressive, bordering on audacious, plans to slam this shut.

The market now puts a successful close around 83%, and I think even that is a little low. On a roughly 31 dollar cash deal with about a 4 dollar spread, the math is a 46% IRR assuming an October close, which is my timing assumption. The scuttlebutt is that they want to slam it shut in July, so the real number is better than 46% if it pays out that fast. I discount the timing even beneath what they think they can do, and there is still upside.

It reminds me of Tegna, where they closed and did some of the litigating after. As a shareholder that is fun, because you get cashed out before you have to worry about whether they win. Caesars was similar. I was a shareholder, the deal was not rich, so the stock popped only a percent or two on announcement, while the market on the deal itself roughly doubled that day. Practically nothing in the equity, everything in the deal.

Final words of wisdom?

My compliance officer would kill me if I said riskless, or free money, or a lock, so I will not say any of those things about GameStop and eBay. But if somebody else said it, I would not disagree.

Follow Chris on X / Substack

Leave a comment

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

Hedge fund manager by day, Substacker by night, Anusar Farooqui has a background in military history and holds a PhD in black hole geometry.

Just one week into the start of the Iran war, Farooqui published “Why the US is facing strategic defeat“ on his popular Substack, Policy Tensor. The piece argued what was clear to him at the time: that the United States could not win the war by any definition of success.

As Trump alternates between teasing a deal and resuming strikes, according to Farooqi, the realities of geography and drone warfare have already determined the outcome.

The Oracle spoke with him about how he developed his call, the destruction of American bases in the Gulf, and why Iran now controls the most powerful strategic weapon in the world.

This interview has been edited for length. All answers are his own.

Your "US Strategic Defeat" piece went viral on March 6, one week into the war. What did you see that others didn't?

Courtesy of Policy Tensor

By the end of the first 72 hours, the decapitation path to a US win had closed. If you could take out Iran’s leadership and shatter its ability to coordinate, you’d have a path to victory. But Iran isn’t a power structure like Saddam’s or Assad’s. It’s not one junta. It’s a deeply institutionalized regime with many centers, and they had spent years hardening it against exactly this kind of strike. So that was gone.

That left two ways to win. One was coercion: bomb the enemy into submission, destroy his will to fight. That’s the original fantasy of air power, and it has never worked, not once. Robert Pape documented at length that no coercion campaign has ever succeeded this way. The defense establishment knew the history perfectly well. What they were claiming was that precision strike is now so good, we can see and track everything, that maybe it works this time. That’s protecting a failed hypothesis. In reality, there was no possibility of air coercion yielding capitulation.

So the only serious theory left was interdiction, the official Air Force theory. You destroy the enemy’s ability to field and supply its forces. In this case, that meant destroying Iran’s capacity to make and launch drones and missiles faster than Iran could rebuild it. So I built a model. Very simple, attrition-style. You look at the rates each side needs. How fast can the US destroy these sites? And how fast can the Iranians rebuild them? When I ran the numbers, the rates required for the US to prevail were not plausible. Not even close. I was able to make a high-confidence call very early, and I may have been the only analyst who flipped to “we lose” who hadn’t already believed it going in.

So this wasn’t your prior view going in?

No. Like the rest of the defense community, I believed the United States was certainly powerful enough to defeat Iran. I was wrong. I corrected my thinking because that’s what the math told me.

So why did interdiction fail?

Two reasons. First, people assume cost is the problem. It isn’t. The United States is so bloody rich that cost-exchange ratios can’t defeat us. We can spend two hundred dollars for every cent Iran spends and still win. Money was never the issue.

The issue is physical. Iran’s drones are technically loitering munitions, not reusable drones. The Shahed-136 is a poor man’s cruise missile — an air-breathing weapon, slow, extremely cheap, and extremely effective. They can be made in a basement. And it’s nearly impossible to find from satellite reconnaissance. You cannot identify where these things are being made. You cannot interdict the process by which Iran generates strike capability. If it had been drones alone, you might pour everything into defense and manage it.

But it wasn’t just drones. The missiles were the bigger story. According to JINSA, a reliable Israeli source, Iran fired roughly 2,200 medium- and short-range ballistic missiles. That’s as many as the Pentagon told Congress were in China’s arsenal last year. . And Iran still has 70% of its missiles left. We had catastrophically underestimated Iranian power. Iran is a great missile power, a technological and quantitative leader in precision mass, and we simply hadn’t priced that in.

You’ve said the most telling early signal was the radars. Why?

Because of what they are. They hit more than a dozen radars, including four AN/TPY-2 radars that power the THAAD system, the most exquisite missile-defense system in the world. These are not soft targets. An AN/TPY-2 is one of the most sophisticated objects on earth; the radar engineers who build them are rarer than rocket engineers. And it isn’t defended by itself alone; it’s ringed by Patriot batteries firing dozens of interceptors at anything that comes near it. It is the most well-defended fixed object on the planet.

If Iran can get a hard kill on that radar, what can it not get a hard kill on? Once you see that, the rest of the counter-force picture falls into place.

There were reports of US bases being destroyed across the Gulf. How bad was it?

Iran destroyed all US bases on the Gulf littoral. Kuwait, UAE, Bahrain, Qatar, Oman, even as far away as central Saudi Arabia. The biggest losses were at Prince Sultan Airbase, which is where we lost the E-3 Sentry airborne command post. Once you understand that Iran is a great missile power conducting a deliberate counter-base war against American assets, and then you look at how that played out, it was catastrophic for the United States.

There was also a report about an aircraft carrier leaving the area due to a laundry room fire. Do you buy that?

Absolutely not. And I think the Ford was likely hit and it’s being covered up. Aircraft carriers are specifically designed and tested for fire risk. Fire is the single biggest threat to a ship; there’s an entire regime of regulations and inspections built around it. These vessels are supposed to function in the middle of a war with a great power. A laundry room fire forcing a carrier out of the theater is a six-sigma event. When was the last time a laundry room fire emptied a building in New York City? It does not add up.

The downed-pilot story is the same. There was an enormous amount of talk about a heroically rescued airman, and then he simply vanished. Where is he? Look at the scale of that episode: never fewer than 150 aircraft involved. You don’t surge 150 aircraft to recover one pilot. That was an operation, almost certainly near the buried enriched uranium, which would have been a major prize for the United States. It failed, and we took heavy losses. The down-pilot story was the front; the laundry fire, the down pilot, the Kuwaiti ace supposedly downing three F-15Es in a single sortie: these are all information operations. The details in each one collapse the moment you ask basic questions. And the reporters carrying these stories aren’t asking them.

What about the threats to bomb the infrastructure? Is that what is bringing Iran to the table?

That’s the counter-value theory: destroy the power plants, the water treatment plants, the running water, push them back to the Stone Age, make Iran look like Gaza. It assumed a one-sided war of punishment. It was not one-sided. It was a two-sided war of punishment, and the exposure was, if anything, rigged against the Gulf.

Iran had escalation dominance from day one. You attack Iranian oil facilities, Iran destroys Gulf oil facilities. You attack water desalination plants in Iran, Iran destroys the Gulf desalination systems that supply 70% of the region’s water. The proof came when Israel hit Iran’s South Pars gas field, the largest in Iran, and Iran immediately struck the largest gas field in Qatar, plus fields in Saudi and the UAE. That’s a huge chunk of the world’s energy infrastructure. It spooked Trump, and within hours he went on Twitter and said he had forbidden Israel from attacking any more Iranian energy facilities. That was direct proof that Iran had established escalation dominance.

You model the US and Israel as separate actors. Where do they diverge?

The high-agency actor here was Netanyahu — in many ways the Americans were the NPC, at least at the start. But on the goals, this White House and the Israelis completely agreed: first-best is topple Iran and install a client regime; second-best is disarm it so it can’t threaten anyone and Israel rules it from the air; third is just push it back and reduce its capacity to threaten Israel and the Gulf protectorates.

The disagreement was never about objectives. It was about risk appetite and pain tolerance. The Israelis have gone completely mad — they’re willing to run down the American magazine and disarm the United States in the attempt to disarm Iran. The US is obviously not interested in blowing up its own position in an extended effort to gut Iran. So the divergence was predictable and predicted: the US would move to sue for peace, and that would be opposed by Israel and the lobby. Which is exactly what’s happened.

Is there any military path to reopening Hormuz??

No. This has now been conceded by essentially all serious military people. The clever stratagems they reached for, naval escorts, convoys, seizing Kharg island — were never workable, because the convoys are themselves at risk and the marines holding territory that close to Iran would be very vulnerable. The best the US can do is the double blockade it’s running now. There is no path to taking the Hormuz weapon back from Iran.

And this isn’t just a tactical or operational fact — it’s a strategic one, with implications not for weeks or months but for years and decades. Even if Iran never imposes a permanent toll, even if traffic returns to normal, everyone now knows Iran retains this weapon and that the United States cannot take it away. Gideon Rachman at the FT was one of the first in the mainstream press to grasp the full implications back in mid-March.

What does that mean in practice?

It makes Iran a world power, as Robert Pape has been saying. Without the Hormuz weapon, it’s hard to see how Iranian influence extends much beyond the Gulf. With it, the reach is global.

Iran can coerce any state, inside the Gulf or far outside it. Germany can no longer sanction Iran — Iran would shut off German energy access through the Gulf. India just told its shippers to obey IRGC instructions categorically; Reuters interviewed them and the line was, “we’ve been told to just obey, and that’s what we’re doing.” Think about what that means: India is vastly larger than Iran, the country you’d expect to be the great power — but the balance of leverage is such that the Indians can’t push the Iranians around, and neither can the Koreans, the French, or the British. The West will have to abandon the idea that it can put Iran back in a box the way it did Saddam. The use cases of the Hormuz weapon are still being discovered.

The Hormuz normalization market is pricing this low — around 35% and falling when we looked, resolving off the IMF PortWatch data, which shows only a few ships a day. But there are reports of dozens of ships transiting under Iranian escort. Is more getting through than meets the eye?

Both things are true. The IRGC is in effective control, and we’ve seen Western press reports of dozens of ships passing after paying the tolls. The American blockade is very porous — they’re intercepting a few vessels based on flag, whether they think it’s an Iranian ship, but they’re not stopping everyone. Ships are getting through.

The open question is whether that amounts to the end of the blockade. I wouldn’t call it that yet — the flux of vessels through Hormuz is still low enough that we can’t say effective post-war Iranian control of the Gulf has arrived. We’re not at that stage. But what’s striking is that the Iranians have already built the architecture for it.

Where does this end?

The Iranians have put in place the architecture for post-war control of the Gulf. There’s a new transit authority, it’s already on Twitter, and they’ve passed legislation governing Hormuz. They’re in negotiations for joint custody with Oman, and that’s probably going forward because the Saudis have given the green light. The Americans and Israelis are opposed, and that’s part of what’s being haggled over in the negotiations. But the leverage has shifted in a way that is now very difficult to reverse.

I wrote a little paperlet that used game theory to analyze armed bargaining in Islamabad. I found that a deal obtains in equilibrium. It looks very much like this is where this is headed. The only question is whether it will be a thin deal that merely reopens Hormuz, or a thick deal that ties the hands of both sides, with the Iranians cooperating on enrichment and the Americans offering sanctions relief. The risk of a thin deal is that Iran is likely to get the bomb. The US really does not want that. The problem is that the power of the lobby in Washington makes sanctions relief very challenging. But that’s the price if you want to prevent Iran from getting the bomb. We’ll see how it plays out.

Disclaimer:

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

The World Cup is the biggest sporting event in the world, reaching more than 5 billion people during the 2022 tournament. And 2026 promises to be the biggest yet, at least in terms of scope. After a quarter-century of World Cups containing 32 teams in eight groups and a 16-team knockout round, this year’s tournament field has expanded to a whopping 48 teams spread across 12 groups, leading into a new 32-team knockout structure, with the whole thing playing out across Canada, Mexico and the U.S. for more than a month.

Looking at the Polymarket futures, we see some familiar World Cup themes mixed in with some new twists: Europe is still the sport’s center of gravity. The top expected goalscorers are the usual suspects. The co-hosts are getting some attention — though maybe less than we’d expect. And because the expanded group-stage format makes survival easier and bracket seeding more complicated, the most interesting market questions may not be who gets through, but who earns a comparatively clear path once the knockout rounds begin. So as we approach opening kickoff on June 11, here’s what traders know — or think they know — about the biggest World Cup ever.

Subscribe now

The favorites are priced a tier above the rest — should they be?

Although there isn’t any single overwhelming favorite to win the most coveted prize in world soccer — no team is above 20%, unlike some recent World Cup cycles — there are two teams that the market places above all the rest: France (18%) and Spain (17%). Winners of two of the past four World Cups, Les Bleus and La Roja have combined 35% odds to win the championship, and they each carry roughly double the odds of any other team in the field aside from third-ranked England (11%).

Does that check out? Certainly, Spain and France look like the strongest national teams in the world on paper if we plot out all of the 2026 contenders along two axes — their World Football Elo Rating (which measures how well they’ve been playing in recent matches) and the total estimated transfer value of all the players on their roster — as compared with their market odds:

But the numbers are not without some interesting wrinkles as well. England, for instance, has a higher roster value than any other team in the field, though its Elo lags behind the market favorites. On the other side of things, Argentina — the defending champ, by the way — is actually No. 2 in the world Elo ratings, but their roster quality lags behind those of France and Spain. Still, La Selección might be getting undervalued — they’re at least as close to the favorites in our chart as Portugal and Brazil, who have slightly higher title odds.

Further down the chart, a few teams are positioned better than their odds suggest. Colombia, Ecuador and Croatia all rate well by Elo — higher than several teams with similar or better market odds — while Turkey, Senegal, Uruguay and Switzerland sit in a dangerous tier where the raw title probability is low but the résumé is as good as teams with higher odds. None of them is being priced as a true championship threat, which, fair enough: winning seven matches in a 48-team World Cup is a tall order. But if we’re looking for teams whose market odds may be underselling their ability to bust the bracket, the middle cluster of the chart is a good place to start.

Related: The market LOVES Europe.

As mentioned above, the defending champion is Argentina. But when Lionel Messi and company won in 2022, it broke a streak of titles for European nations that spanned four World Cups and two decades, dating back to Brazil’s most recent title in 2002.

After South American teams won seven times in 12 cycles from 1950-1994, Europe has now won five of the past seven World Cups. And traders don’t see that changing anytime soon. In our chart of likely champions above, each of the Top 3 entries (France, Spain, England) hailed from Europe, as did eight of the Top 10 — Brazil and Argentina being the only exceptions. (This makes sense, as Uruguay is the only other South American squad to ever win the Cup, and it last happened in 1950.)

In the winning team continent polymarket, traders think there’s a 71% chance a European team will win this year, followed by South America all the way down at 23%:

Maybe the more interesting part involves non-European or South American winners. Famously, the tournament has never been won by a continent aside from those two, but it is being held in North America this year for the first time since 1994.

Typically, host nations get a sizable boost — almost always reaching the knockout stage — and that effect wasn’t even diluted the last time multiple hosts shared the World Cup (with Japan and South Korea in 2002). So what does that mean for America, Mexico and Canada?

Each has at least an 83% chance to advance from the groups, which would be a pretty good result for each by their usual standards. The U.S. also ranks much higher in the odds (14th) than their Elo (41st) would seem to warrant, though they also have more valuable talent than we’d expect. Home-cooking aside, North America sits at just 2% to win the World Cup anyway — lower than either Africa (led by Senegal and Morocco) or Asia (Japan).

The group stage is less deadly now…

One of the consequences — and we can’t say it was “unintended” — of expanding both the number of total World Cup entries, and the number of groups, is that it makes life a lot easier for the favorites early in the tournament.

With 48 teams split into 12 groups of four apiece, the Top 2 teams from every group will advance — as well as the eight best third-place finishers across all the different groups. (Under the previous format, only the top two teams from each group moved on.) While you’d still prefer not to sweat out being in third place, the pressure to be in the top half of your group, so vital in creating tension during earlier formats, is no longer as much of a factor anymore.

Share

And for the juggernaut teams, the danger is now less about going home early and more about what kind of path through the bracket your seeding sets up. The dilution of groups has contributed to a 77% chance the eventual champion goes unbeaten in the tournament. And in the market odds to advance, we can see that nine teams are all but assured to make the knockouts already (with 91-100% odds), 10 more teams are solidly in the next bucket (81-90%), and overall there are 32 teams — two-thirds of the field — with at least a 61% chance to make the knockouts.

Based on the odds to win the group and/or advance, we can sort each group favorite into “safety net” tiers. The x-axis in the chart below shows how likely the favorite is to simply win its group; the y-axis shows how likely that same team is to advance anyway if it doesn’t win the group. So the farther right a team is, the more control it has over the group; the higher it is, the more room for error it has if something goes wrong.

France is the best example of the 2026 format’s new safety-net dynamic: It is not the single most likely group winner, but if it slips up, the market still gives it a very strong chance (90%) to survive anyway. Spain, Argentina and England are more straightforward cases — heavy favorites to win their groups outright. Brazil, Germany, Belgium and Portugal are a little less secure at the top, though still insulated from too much danger by the expanded format if they wind up needing the back-door. The U.S., meanwhile, sits in the true danger zone: It is only a modest favorite to win Group D, and it also has the weakest conditional safety net of any group favorite on the board. (Mexico isn’t too far from that predicament, either… so much for home advantage!)

Long story short, the new format gives favorites more ways to reach the knockouts. No longer will an off-day potentially derail a promising tournament, even if your odds still depend some on the group you were drawn into.

…But bracket paths matter more.

The other massive side-effect from the expanded field (and expanded knockouts) is that your placement within the bracket suddenly takes on greater importance. If the groups are easier to survive than before, then instead of the old “Groups of Death”, teams might instead have paths of death.

Take, for instance, Argentina. Theoretically, winning Group J should be a good thing — the bracket structure keeps the Group J winner away from another group-winner until at least the quarterfinals. But based on the market odds, their reward could still be drawing dangerous Uruguay — an 88% advancement team despite being in the same group with Spain — in the Round of 32. Or consider Brazil, whose 76% favorite status to win Group C might merely mean a first-round knockout date with Group F projected runner-up Japan, who made the Round of 16 in three of the previous four World Cups.

Including those, here are the group favorites who have the most certain-to-advance opponents potentially waiting in the wings as runners-up in the Round of 32 to face at the start of their knockout journey:

The opposite of that involves the eight group winners who are slotted to face third-place teams in the first round of the knockouts. If things go chalk and the favorites win, that group includes: Germany (Group E), France (Group I), Mexico (Group A), England (Group L), the USA (Group D), Belgium (Group G), Switzerland (Group B) and Portugal (Group K). This isn’t to say those teams are automatically in great shape — the third-place slots could unexpectedly offer a difficult opponent, and the bracket is designed to have them face another team in the same situation the following round (should they win).

But they do represent a softer immediate landing in the knockout rounds than other teams have to face, and in a tournament where every little edge helps and the group-stage incentives have shifted under the new format, where you land in the bracket might matter as much as who you were in a group with.

View all World Cup Polymarkets

In the market for a Golden Boot

So far, we’ve been focusing on the team markets, which help tell us who’s situated best to make their way through the chaos and lift the World Cup trophy in July. But another set of interesting markets involves players — including who’ll win the Golden Boot for most goals scored, who’ll have the most assists and who’ll have the most combined goal contributions (goals + assists). Those markets are partly about individual ability, obviously. But they’re also not-so-secretly about your country’s path — it’s a lot easier to win the scoring race if your team is playing six or seven matches instead of just three or four.

England’s Harry Kane and France’s Kylian Mbappé sit in a tier of their own because their teams have the second- and third-best chances to make the final, which should give them plenty of chances. Spain has the highest odds to make the final of all, but the market is banking on their scoring being more diluted. Meanwhile, Messi and especially Norway’s Erling Haaland don’t have as much of a Golden Boot chance because their team’s run might be more limited than Kane’s or Mbappé’s. (Although, if Argentina is actually underrated per our Elo chart earlier, Messi could be a big value play.) But at the same time, Haaland’s odds are much higher than we would expect from Norway’s advancement probability.

We can also see these effects at play in the “nation of top goal-scorer” market. The multiplier between Norway’s Golden Boot odds (16%) and finals odds (6%), 2.67x, is the highest of any realistic contender in the field. Other teams with premiums include France (1.32x for Mbappé plus roster depth), England (1.25x for Kane), Portugal (1.22x for Ronaldo and Rafael Leão) and Argentina (1.09x slight premium for Messi and Julian Álvarez). Meanwhile, Germany only has a 0.73x multiplier because they lack as many obvious go-to scorers.

All told, these player markets really scratch the itch of trying to balance multiple, semi-correlated probabilities at once. The Golden Boot winner (and his team) need a combination of several ingredients — elite finishing talent, team potential and a clear enough path to let the goals pile up. And that brings us back to the broader lesson of the 2026 World Cup markets: The expanded tournament is bigger, but it’s also more path-dependent. The favorites have more chances to survive longer, but more things can also happen, for more teams, in more weird ways than ever before. So with the probabilities set, all that’s left is to kick things off and see where the chaos takes us.

2026 FIFA World Cup Polymarkets

is the proprietor of Neil’s Substack, a newsletter that looks at all sports through the lenses of both analytics and storytelling. He is also a freelance writer for a variety of outlets — and before that, he was the sports editor at FiveThirtyEight and an analytics consultant for the NBA’s Atlanta Hawks.

Leave a comment

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

John McDermott has spent 11 years in Los Angeles covering celebrity and culture for Esquire, GQ and Rolling Stone. In 2022, he was one of the first journalists to profile Spencer Pratt’s second act as a content creator, a piece that traced how The Hills bad boy had reinvented himself for the influencer era. He had no idea he was documenting the origin story of a mayoral candidate.

When the Palisades fires tore through Pratt’s neighborhood in January 2025 and the promised rebuilding never came, Pratt turned his grief and frustration into an insurgent run against LA’s Democratic incumbent mayor, Karen Bass.

The Oracle spoke with McDermott about the May 6 debate that reshuffled the race, why the media keeps getting the AI fan videos wrong, and what 40% undecided voters in a deep-blue city actually means for Pratt’s chances.

This interview has been edited for length. All answers are his own.

Subscribe now

You profiled Spencer Pratt back in 2022 as a washed-up reality star trying to reinvent himself. Did you have any idea you were documenting the origin story of a political candidate?

Zero idea. I wrote about him because I thought he encapsulated something real about how celebrity works now. What fascinated me about Spencer was that you could trace the history of contemporary media through him. He was at the forefront of reality TV, the birth of this entirely new genre of television, and as TV’s relevance faded, he became an internet influencer.

So what turned him political?

The Palisades fires in January 2025. They burned down his home. And the promised rebuilding — Karen Bass herself promised she would expedite the permitting process and get the Palisades back in record time — never materialized. A year and a half later, there hasn’t been much rebuilt. He’s been a very vocal critic of the fire readiness, or lack thereof, leading up to and during the fires, and the slow rebuilding process. And that culminated with him running for mayor.

Walk me through Bass and the fire. How bad was it for her?

She was not in LA at the time. She was in Ghana, doing a photo op with President Biden, despite myriad warnings that LA was at an incredibly high fire risk. And then afterward, there was an after-action report on the fire response that Bass’s office had edited after it was written to lessen her culpability. The author of the report came out publicly and said: “This is not what I wrote. They changed this after I submitted it.”

Let’s talk about the May 6 debate. Raman, the leftist, got cut nearly in half overnight in the odds. What happened?

The overwhelming consensus is that she was the worst in the debate. She hesitated, didn’t have clear answers. And Pratt — who everyone expected to stumble on policy questions — spoke very fluently and very to the point. Two moments went viral, and both favored Pratt.

Raman also accused Bass and Pratt of working together to keep each other in the race at her expense. Explain that.

The structure of this race is unusual. It’s not a partisan primary — it’s an open election. If somebody gets more than 50%, they win outright. If not, there’s a runoff between the top two candidates. Raman’s accusation is that Bass and Pratt were deliberately friendlier with each other in the debate and ganging up on her, trying to knock her out of the top two so they can face each other in the runoff.

Pratt is at 27% as a registered Republican in one of the most Democratic cities in America. Is there any real structural support for him?

People thought Rick Caruso had a genuine chance in the last election against Bass, and he lost. What Pratt has going for him that Caruso didn’t is a massive undecided voter pool. One poll has 26% undecided, a UCLA poll has 40%. Those undecided voters are not closet Republicans. They are typical Democratic voters who are questioning the status quo. If those people are in play, they could swing to Pratt.

Share

What is actually driving his support, underneath the memes and the charisma?

He is channeling real impatience with the homelessness issue — billions of dollars spent on a soft-handed approach, to little effect.

You’ve written a lot about viral media and celebrity culture. The AI fan videos have gotten a ton of attention — Pratt as Luke Skywalker, Pratt as Batman. What’s actually going on there?

The media has completely botched this story. The LA Times and Vanity Fair both reported Pratt’s campaign is making these videos. That is outright false. He made none of them. They are made by random people on Twitter who are good at AI video production. Many are pretty provocative, borderline violent in some cases. Karen Bass went on CNN and said Pratt is putting out violent videos that could have dangerous consequences. He did not make them. They’re pretty much all coming from one guy — someone called Charles Curran.

It’s wildly misleading coverage. And it matters because it lets Bass frame him as a threat while the actual story is that he has organic, fan-driven momentum she cannot manufacture.

If it ends up as a Bass-Pratt runoff, who wins?

The analogy I keep coming back to is Trump-Hillary. Bass is the old-school Democratic Party machine politician. He’s the anti-that. He is charismatic in a way that Bass and Raman simply are not, and that was on full display in the debate.

The trading on Polymarket is telling. The volume on Pratt is six times greater than anyone else in this race. That national interest is real. He’s already a national figure whether or not he wins. The question is whether he can convert attention into votes in a city that, when it comes down to it, is still a Democratic stronghold. That is the challenge. But with 40% undecided and a broken record of Democratic governance on the issues people actually care about, I wouldn’t write him off.

Share The Oracle by Polymarket

Are we seeing any evidence of a rightward shift in the California governor’s race?

The California gubernatorial race is even more wide open than the LA mayoral race. Xavier Becerra has pulled ahead as the leading Democratic Party candidate, but Steve Hilton, a Republican, is polling just behind him. Tom Steyer (D), Chad Bianco (R) and Katie Porter (D) all have an outside chance. The fact there are two viable Republican candidates for governor of California again speaks to how disillusioned California voters are with the Democratic leadership that’s held the office since 2011.

Leave a comment

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

is the CEO and founder of Oath, a platform that uses algorithmic forecasting to help liberal donors maximize the impact of their contributions. A former campaign manager and Democratic political operative, Brian has been moneyballing every competitive House and Senate race in the country since the Supreme Court’s Callais decision dropped.

The Oracle spoke with him to unpack how the ruling will reshape the congressional math in 2026 and beyond.

This interview has been edited for length. All answers are his own.

Subscribe now

What did the Supreme Court’s Callais ruling yesterday do?

The case was about the Voting Rights Act of 1965, specifically section two, which deals with how race is considered in redistricting decisions. The decision essentially says that as long as you claim the motivation for redistricting is partisanship and not outright racial discrimination, it’s fine. It created an avenue to eliminate majority minority districts, but also to gerrymander more aggressively generally.

What this decision changes is it severely, severely narrowed the Voting Rights Act. In the dissent they talk about it now just being a meaningless piece of paper. It’s also created a supercharged arms race from both parties around redistricting. For Republicans, it means they can go into states in the South like Tennessee, South Carolina, Alabama, and Mississippi, where there are currently majority Black districts that have been there for many decades, and break those up and dilute those voters across many other suburban and rural districts to eliminate a Democratic seat. For blue states, which also have majority minority districts, they also can break up those districts and dilute Republican voters in other places. So this is also an unlock in blue states.

The loser here is voters, because it means more and more politicians are choosing their voters instead of voters choosing politicians.

I know the decision threw out one district, the Louisiana 6th, but what does redistricting mean for the whole state map?

Courts do sometimes order a third party to draw a map, but oftentimes they just say “not this one” and send it back to the legislature. That’s what’s happening here. In Louisiana, they’re going to have to propose a new map. The governor has already said they’re going to delay their primary in order to redistrict. They could just break up Louisiana Six as ordered by the court, or they could actually come after Louisiana’s Second Congressional District as well, which is the New Orleans-based seat, and go for a maximal gerrymander that would eliminate two Democratic seats. So it’s unclear right now which path they’re going to pursue. Their original primary date was just two weeks away, so they’re going to have to rush through a decision.

Louisiana 06 jumped heavily towards Republicans after the decision dropped. Is that an appropriate reaction?

I would actually probably push it a little bit further. I would be favoring the Republican side right now in this seat, because I think Trump is going to get personally involved in trying to juice this as much as possible.

What are the odds Republicans redraw Louisiana 02 as well?

Maybe 50-50 chance they do it. They want to maximize here, and Trump is going to be pushing for it.

How many seats total could this mean for the midterms?

In our base case, up to four seats could be now in play for 2026, including the Louisiana district the court struck down directly. For 2028 it could be up to 12.

The other states that could redistrict for the 2026 midterms are South Carolina and Tennessee, because they have late primaries. The districts impacted would be South Carolina Six, which is Jim Clyburn’s seat, and Tennessee Nine, which is Memphis-based.

What odds would you put on Tennessee and South Carolina redistricting?

Tennessee is more likely than South Carolina, although Lindsey Graham has been getting involved and getting very vocal about redistricting South Carolina, they want Jim Clyburn out. I’d say 50-50 on both at this point.

Our House seats forecast barely moved after the ruling. But you’re saying Republicans could pick up four. Why is the market not reacting?

My guess is that gas prices just went up almost 10 cents overnight to a four-year high, particularly in battleground states, and we just got a weak GDP report this morning. Those are probably playing a bigger role than the Callais decision right now. Republicans can only net benefit from Callais in 2026, there’s no path for them to lose seats as a result, but with cases like this they tend to be too esoteric for voters to respond to directly, so the economic headwinds are swamping the redistricting tailwind in the market right now.

What is your overall forecast for Democratic House control?

Based on current data, I would put it higher than the current 85% market odds. I would feel more confident at around 90 to 93%. The 7% is sort of pricing in some major global or national event in the next four or five months. If the election were today, I’d put it at 99%.

We see the absolute maximum upper limit as 242 Democrats to 193 Republicans. We think that’s basically the upper limit of what Dems will achieve in 2026, which means the current market is pricing in roughly the best case scenario for Democrats. A base case would be more like 200 to 202 Republican seats. The battleground has narrowed a lot from gerrymandering over the last 20 years, which has shrunk the number of seats decided by a narrow margin.

Is there an even worse scenario for Democrats if Republicans go really aggressive?

The more extreme, unlikely scenarios involve states like Georgia, Alabama, and Mississippi. In Georgia, they would come after Georgia’s Second Congressional District, that’s the easier one. There are four Democratic districts packed in and around Atlanta that would be much harder to break up because Georgia is a 50/50 state, and those voters have to go somewhere. The more of one party you have to work with, the easier it is to gerrymander, but a 50/50 state is harder. And Brian Kemp, who’s the current governor through November, is no fan of that kind of play.

But the bigger issue is that people are already voting in Georgia. Ballots are already sent out. They would be canceling a currently ongoing election. Even if they wanted to and had everyone on board, I don’t know that it would even be possible. That’s why I feel maximally bearish on Georgia moving this cycle.

Florida is already a lock, they just passed their map and it’s about to be signed.

Share The Oracle by Polymarket

Let’s go to the Senate. Do you see a path for Democrats?

Republicans currently control the Senate by a three-seat margin. In order for Dems to take control, they need to hold all of their seats, including competitive races in Georgia, Minnesota, New Hampshire, and Michigan. And they need to flip four of five Republican seats: Alaska, Ohio, North Carolina, Maine, and Texas. That’s a very difficult task. We are bearish on control, but confident in Dems picking up seats, which is not a given. Back in 2022 Dems won the popular vote for House seats by around seven points and still lost seats, so they can move in opposite directions. But that won’t be the case this year.

How do you feel about Jon Ossoff in Georgia?

Democrats have been massively overperforming in Georgia. We flipped some Public Service Commission races last November by over 20 points, statewide races in an off cycle. And we had the Georgia special to replace Marjorie Taylor Greene where Democrats overperformed by more than 20 points, our largest overperformance of the Trump era. Ossoff is a star, he’s doing incredible on fundraising, and the Republican primary is a disaster. If he wins by four or five points, his 2028 presidential odds go much higher. He could actually be a front runner.

Alaska, Peltola at 63%.

That’s a little surprising on the high side to me. She’s proven she can win statewide in Alaska, she very narrowly lost her seat last cycle, and this is a much more favorable environment. But polling has been dropping in a bunch of these races recently and I think there’s a trend nationally giving people confidence. I’d want to watch more closely before going that high.

What about Maine and Susan Collins? Platner just became the de facto nominee after Mills dropped out. Polymarket has Platner at 71%.

Susan Collins is a cockroach. You literally cannot beat her. I have several members of my team who have worked in Maine politics, for Gideon and others, and they pretty universally believe Collins will pull it out. I would not put money on Platner at 71%.

Texas, any chance of a flip?

We have it rated as the eighth or ninth most competitive race of the cycle. It’s shocking, but not shocking because nothing Trump does is shocking, that he’s refusing to weigh in for Cornyn. That could change the dynamic. But we are not ranking this highly, certainly not in the top five most competitive.

Putting it all together, Dems pick up seats but probably fall one short of Senate control due to Maine and Texas?

That’s exactly right.

What Supreme Court wildcards could still shake things up?

There’s a case that could make it possible for parties to spend unlimited sums on behalf of candidates, which would just unlock a lot of money and be a significant factor.

And I expect one of the justices to step down at the end of the term in June.

Alito or Thomas?

I think it’s probably one of them. They’re motivated to have Trump pick their successors, and I think that lesson, the Ruth Bader Ginsburg lesson, has been learned. Any vacancy would be a significant mobilizing event for Democrats.

Leave a comment

Are there any markets you’d like to see on Polymarket that don’t exist?

State trifectas would be fascinating and are probably the most consequential outcome of this cycle. Will Wisconsin turn entirely blue? Will Michigan secure a trifecta? It’s wonky, but those outcomes determine redistricting in 2030, election certification in 2028, and the entire downstream political landscape.

And that’s why the timing of Callais mattered so much. My team celebrated every week that went by without the decision coming down. The ruling seemed pretty much predetermined, so delaying was even more important than the ruling itself. What’s coming in 2028, that is going to be nuclear warfare.

Follow Polymarket's Midterms Dashboard

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.

Polymarket’s defi exchange makes it possible to track the trades of every wallet on the platform.

This has created an evolving game of cat and mouse as sharp traders try to hide their tracks from the coattail-riders, assisted by a growing number of apps that help users find signal in the noise.

In February, the prediction market trading terminal Stand (and on Substack) launched a Polymarket copy (& counter) trading feature, allowing users to automate custom copy strategies, and it has since tracked over 1,500 Polymarket wallets and 5,000 strategies in two months.

The Oracle spoke with Ridgely, co-founder of Stand, to get an update on how the copy-trading meta is evolving. And we managed to get him to cough up some of Stand’s internal data on the 10 most copied wallets on Polymarket.

This interview has been edited for length. All answers are his own.

Subscribe now

Copy trading is controversial. Many are saying it’s an easy way for traders to get rekt. Presumably you disagree, but what are some of the pitfalls of copy trading?

The most obvious problem is that a lot of the sharpest traders know they’re being watched. We’ve interviewed several of them, and they’ve told us directly that they run secondary or tertiary accounts. So the public account you’re following might not be their full book. You can become exit liquidity for them if you are not getting a full picture of their activity across wallets. Then there are also things we notice, like iceberging, merging, and bots.

Iceberging?

Take Domer. He knows people are watching him closely. So rather than placing one large buy that triggers copy-trading alerts, he could accumulate in small piecemeal orders over time, like the tip of the iceberg. If you’ve set a minimum volume threshold before your copy triggers, you may never catch him entering. He can afford to be patient because his portfolio is large enough that he can take his time filling a position.

What about merging? How does this frustrate copy traders exactly?

Merging is when a trader holds both YES and NO shares in a market and converts them into USDC instead of selling. It’s a way to quietly exit a position without it looking like a sale in the activity feed. Some copy-trading apps don’t flag this as a distinct action, so you can miss the exit signal entirely. We’re working on capturing it.

Share The Oracle by Polymarket

And why are bots hard to deal with?

Bots are the trickiest to copy trade because of the speed and frequency. They’re placing orders in the mempool and getting fills at specific price points faster than any human could react. If you’re copy-trading a bot, you’re almost always going to get a worse price, and in high-frequency markets like the five-minute crypto contracts, a few cents of slippage kills the strategy. 55% of traders on the five-minute markets are bots, according to a recent Dune Analytics report. It’s going to be difficult to out-speed them.

Okay, let’s get to the wallets. Did anything surprise you in the data?

We pulled every wallet address being followed on Stand. Of the top ten most-copied wallets, all but two were in the top 200 lifetime P&L on Polymarket. I was surprised by the category breakdown: six crypto, two sports, one weather, and only one politics.

I did not expect crypto to be number one. I genuinely thought it would be politics and elections at the top. But these are retail traders who see an account going straight up with no drawdowns and think, I need to be in that.

Several of the crypto ones are either bots that have gone quiet or just not that interesting to dig into. Several went dark in March right around when Polymarket changed the fee structure on crypto markets. So rather than go through all ten, let’s focus on the ones that are actually worth talking about.

#1 0xdxD: Crypto Bot (Inactive since March)

Our most followed wallet ran an automated strategy on the up/down crypto dailies before moving to five-minute markets. You see that the wallet ran a super clean upward profit from December through late March.

The likely explanation is the new Polymarket fee structure on crypto markets decayed the edge, or they simply changed wallets after getting too big. Still, for retail traders looking to understand how crypto bots operate, this is the one. It’s a lesson that copy-trading is far from passive. By the time you’re copy-trading someone, the edge may already be closing.

#2 RN1: The Sports Quant

This is a crazy one. Number seven all-time in P&L on Polymarket, over $7 million lifetime, close to a million in the account right now. The equity curve is just absurd. There was no meaningful dip over the entire period. For a sports trader, that’s almost unheard of.

It’s almost exclusively soccer. I’ve never met this person, never had any contact. But when you look at how they trade, you just assume there’s a model running somewhere - it’s too consistent to be vibes.

The thing that really stood out is that over 53% of their trades are priced under 50 cents. This is not someone hammering favorites. They’re finding value on the other side consistently, across EPL, Liga, and Copa del Rey. I’ll be watching this wallet very closely when the World Cup comes around.

#3 Sharky6999: The Crypto Bonder

Still active, crypto only. Sharky6999 has almost a million in lifetime P&L, a couple of notable dips along the way, and a trading pattern that is almost certainly automated because 95% of their trades are priced above 80 cents. They are doing a pure bonding strategy, buying high-probability outcomes and holding to completion.

The dips suggest there are some triggers stopping them from taking too much loss at once, so it’s not completely brainless, but the core approach is simple.

#4: Crypto Price Bot (Inactive)

This likely bot went dark in March when Polymarket changed the fee structure on crypto markets. Probably did the math and moved on. Nothing actionable here.

Share

#5 Domer: The Geopolitics Goat

The only politics account in the top ten. Domer’s record on politics and geopolitical markets needs no introduction. He’s probably one of the most visible traders on Polymarket after his 60 Minutes appearance.

I have often wondered why he continues to trade so heavily in his public wallet, and he actually addressed this in a conference recently, saying something like: while there’s probably less alpha available as the markets get more efficient, the opportunities that do exist are bigger. More money in the ecosystem means that when you do find edge, you can make more dollars from it.

If you’re copy-trading Domer, know that you are very likely not seeing his full book. Follow him in geopolitics and elections only. His worst categories on Polymarket are Ethereum and crypto, which are nowhere near his top half.

#6 ColdMath: The Weather Trader

ColdMath is a genuinely weird one. A weather trader, barely in the top 1,000 by P&L overall, made it into the top ten most-followed wallets. Their strategy is daily temperature markets in Buenos Aires, Cape Town, Dallas, Atlanta, and a handful of other cities. Worst categories are politics, Venezuela, and crypto, which makes sense. This is a pure niche play.

The volume of copy-traders following this wallet suggests people are correctly identifying that domain specificity equals edge. This trader isn’t trying to be good at everything. They have, presumably, some information or model advantage on temperatures in a small number of cities, and they grind that edge every day.

#7, 8, 10: Assorted Crypto Bots

0x1979, 0x1d003, and 0xd1eb are an assortment of bot crypto wallets. One had 1.29 share buys in a consistent pattern across many markets, almost certainly bot-driven. Nothing actionable for non-crypto traders.

#9 Swiss Tony: The Soccer Whale

Swiss Tony is the most active trader in this list by raw volume. He is on the whale feed constantly, placing large positions across EPL, Liga, Serie A, UCL, EFL Championship, you name it. His worst categories are very specific: Copa del Rey, UCL knockout stages, EFL Championship. So even within soccer he has sub-domains where the edge degrades.

Like RN1, over 60% of Swiss Tony’s entries are priced below 50 cents. Two of the top most-followed sports wallets in prediction markets are both underdog pickers. That is probably not a coincidence.

Any final words of wisdom for someone dipping into the copy trading game?

Start with a small percentage of the position rather than a fixed dollar amount. A percentage tracks the trader’s conviction level: if they’re putting 20% of their portfolio on something, that tells you more than if they’re putting in $100.

Set category filters so you’re only following someone into their area of expertise. Domer in geopolitics and elections, yes. Domer in Ethereum price markets, probably not. And set tight budget controls. Don’t blind copy anyone across the board.

Leave a comment

Disclaimer

Nothing in The Oracle is financial, investment, legal or any other type of professional advice. Anything provided in any newsletter is for informational purposes only and is not meant to be an endorsement of any type of activity or any particular market or product. Terms of Service on polymarket.com prohibit US persons and persons from certain other jurisdictions from using Polymarket to trade, although data and information is viewable globally.