Brazil election odds flip as Lula upends prediction markets

Brazil election odds offered one of the year's starkest lessons for prediction-market fans. For three weeks before the Oct. 25 runoff, traders on Polymarket and Kalshi made Senator Flávio Bolsonaro a heavy favorite over President Luiz Inácio Lula da Silva. Lula won by more than 4 million votes.

What happened

After Bolsonaro topped the Oct. 4 first round with 47.03% to Lula's 45.16%, contracts on Lula collapsed from around 41 cents to 12 cents, Action Network reported. By Oct. 22 Bolsonaro traded at 79% on Kalshi and 78% on Polymarket, even though traditional polls showed a statistical tie. Next.io put the pre-runoff split on Polymarket at roughly 78% to 22%.

The first wobble came during voting. Supreme Court Justice Cristiano Zanin extended voting until 7 p.m. at sites that were still open, a decision issued at 5 p.m. after a request from Lula's Workers' Party, and Polymarket prices began to move, the outlet ND Mais reported.

Then the count arrived. At 8:25 p.m. Brasília time, Kalshi gave Lula 90% and Bolsonaro 10%, while Polymarket showed Lula at 92.8% against 21.3% for his rival, Folha de S.Paulo reported. By about 9 p.m., with roughly 80% of ballots counted, Polymarket gave Lula a 99% chance, according to Next.io. The final tally was 51.79% to 48.21%.

Why it matters

Money was not the problem. Polymarket's Brazil presidential winner event has traded about $249 million, according to the exchange's public data. That depth did not stop the crowd from extrapolating the first-round surprise. The same pattern showed up in our coverage of midterm betting volumes: large books can still lean the wrong way.

There is also a structural catch. Both platforms have been banned in Brazil since April, and the companies themselves argue the block hurts their forecasts, Folha said. If most traders sit outside the country, Brazil election odds may have reflected foreign investors' hopes for a market-friendly government as much as voters' intentions. Fund managers made the same bet with real money, which is why Brazilian assets slumped overnight.

The result also matters to the betting industry. Lula's government shut down Brazil's licensed sports-betting market with a provisional measure signed on Sept. 25, and operators' websites went offline on Oct. 6, Next.io reported. Congress must vote on that measure within 120 days or it lapses, and the sector had been counting on a new government in Brasília.

Disclosure: our own Record backed a Bolsonaro win at 83% on Oct. 5, using Polymarket pricing. That call is a miss, and we are logging it as one.

What's next

Prediction markets have called other races this year, including the Spanish snap-election odds we tracked this month. Brazil is a reminder that a market price is a crowd's guess, not a measurement. The swing in Brazil election odds during the count, as visible on Folha's live report, will likely be cited by critics and fans alike as the U.S. midterms approach.