Why Prediction Markets Got the Brazilian Election So Wrong

In brief

• Polymarket priced Lula at about a 20% chance of victory before Brazil's presidential election on Sunday, but beat Flávio Bolsonaro to win a fourth term.
• One whale blamed retail traders for propping up Bolsonaro's odds, while other experts pointed to Brazil's prediction market ban.
• Ultimately though, experts say that something with an 80% chance of happening won't happen 20% of the time—and this just might be that time.

Prediction markets got the results of Brazil's presidential election wildly wrong, with Polymarket putting Luiz Inácio Lula da Silva's chances at just 20% before election day, when he ultimately won out. 

Experts say the whiff is the result of Brazil banning prediction markets in the country and a wave of retail investors diluting the expertise of the money on the line.

Luiz Inácio Lula da Silva, commonly referred to as Lula, beat right-wing rival Flávio Bolsonaro in the Brazilian presidential election on Sunday. Bolsonaro came out ahead after the first round of voting at the start of October, but hadn't reached a majority, and a second round of votes was required. That second round is what Lula won, with a majority this time, and he will serve his fourth term as president.