Canada was supposed to be the perfect country, the old maxim goes: It was going to have French culture, American ingenuity, and British politics. Unfortunately, it ended up with American culture, British ingenuity, and French politics.
The world will once again know how accurate that adage is as Canada braces itself for Monday’s election – and the markets are putting up money on what the results will be.
Yet prediction markets, which require bettors to put “skin in the game” by having cash on the line and are thus considered a more accurate indicator of how things may turn out, show a very different outcome. Investors in these markets are betting strongly that Justin Trudeau will keep his job as prime minister. How the next Liberal government will be formed is a slightly different matter.
The cryptocurrency community has begun to embrace prediction markets as a way to sort the signal from noise on questions it cares about. For example, on Polymarket, investors can bet on whether Amazon will accept bitcoin payments in the U.S. before next year, while Hedgehog Markets allows users to wager on various metrics tracking the Solana blockchain’s growth.
The situation in the Great White North, however, is somewhat more nuanced..
How bets are shaping up
On the question of “Will the Liberal Party win a majority in the 2021 Canadian federal election?” Polymarket, one of several blockchain-based betting venues, has “no” trading at 84 cents, while yes is at a mere 16 cents. The two were trading at about even a week after the election was called. A slightly different question, “Will the Liberal Party win the most seats in the 2021 Canadian federal election?” has “yes” at $0.78 and “no” at $0.22. That gap widened from two-thirds saying yes back in August. Thus, the market is saying that while the Liberals will win more seats than any other party, it won’t be enough to make a majority.
Polymarket runs on Polygon, a sidechain, or parallel network, to the Ethereum blockchain, and the bets are managed by software programs known as smart contracts. The advantage of this setup is that an open system can allow “anyone, anywhere to create markets on anything,” as Polymarket founder Shayne Coplan puts it. But it’s hard to use. Bets are denominated in USDC, and the gas, or on-chain computation fees, to deposit and withdraw the dollar-pegged stablecoin to and from Polymarket can cost more than the amount being wagered.
Liberals currently hold 155 out of 338 seats. The last time it held a majority was in 2015, when Trudeau – just two years after winning the party’s leadership contest – led the Liberals to 184-seat victory against former Prime Minister Stephen Harper’s Conservative Party.
Poll averages show Liberals going down to 150 seats this time around, while the Conservatives may pick up a few seats, with their averages coming it at 130 versus its 121 currently in parliament. Therefore, it looks most likely that the Liberals will form the next government since they will likely be coming in with more seats than the Conservatives. The NDP is expected to gain 14 seats to bring them up to 38 while the Bloc Québécois is averaging 29 seats in the poll, three fewer than its current total.
