Case Study 2: Designing a Market Suite for a Presidential Election

Overview

In this case study, we design a complete prediction market suite for the 2028 United States Presidential Election. This is arguably the most complex and high-profile event for prediction market design, requiring dozens of interrelated markets across binary, multi-outcome, scalar, and conditional structures. We address every aspect of design: question formulation, resolution criteria, outcome spaces, liquidity allocation, lifecycle timing, and edge case handling.

Part 1: Event Analysis

1.1 Key Milestones and Uncertainty Points

The 2028 presidential election involves multiple stages, each with distinct uncertainties:

1.2 Information Structure

Different types of information are relevant at different stages: - Structural factors: Economic conditions, incumbent approval, demographic trends - Candidate-specific: Polling, fundraising, endorsements, debate performance - Event-driven: Scandals, policy announcements, external events - Mechanical: Delegate counts, Electoral College dynamics

1.3 Stakeholder Analysis

Our market suite should serve: - Political analysts and journalists seeking probability estimates - Campaign strategists (ethical considerations apply --- see Section 5) - Academic researchers studying forecasting and elections - General public interested in election outcomes - Traders seeking profitable opportunities from informational edges

Part 2: Market Suite Design

2.1 Tier 1: Core Markets (Highest Priority, Highest Liquidity)

Market 1: Presidential Election Winner (Multi-Outcome)

Title: "Who will win the 2028 US Presidential Election?"

Outcomes: - Democratic Party nominee - Republican Party nominee - Independent/Third-party candidate - No election held (catch-all for extraordinary scenarios)

Resolution criteria: This market resolves based on which candidate is certified as the winner of the 2028 US Presidential Election by a joint session of Congress, as mandated by the Electoral Count Reform Act (ECRA). The relevant certification is the one that definitively determines the next President of the United States.

• Primary source: Official Congressional certification of Electoral College results
• Backup source: If Congressional certification is delayed beyond January 20, 2029, resolution is based on who is inaugurated as President
• Edge case --- contested election: If multiple candidates claim victory and the matter is resolved by the Supreme Court, resolution follows the Supreme Court's final ruling
• Edge case --- no election: If the 2028 presidential election is cancelled, postponed beyond March 1, 2029, or fundamentally altered (e.g., constitutional amendment changing the process), this market resolves to "No election held"
• Edge case --- death of winner before inauguration: If the certified winner dies before inauguration, this market still resolves to the certified winner (the question asks who wins, not who is inaugurated)
• Candidate categorization: A candidate is classified as "Democratic Party nominee" if they are the official nominee of the Democratic National Committee, regardless of any prior party affiliation changes

Initial liquidity: $15,000 Initial prices: Democrat 0.48, Republican 0.46, Independent 0.04, No election 0.02 Creation date: January 2027 Close date: November 7, 2028, 11:59 PM ET (or upon Congressional certification if earlier markets resolve sooner)

Market 2: Electoral College Margin (Bracket)

Title: "What will the Electoral College margin be in the 2028 Presidential Election?"

Brackets (winner's EV minus loser's EV): - 0-19 EV (extremely close) - 20-49 EV (close) - 50-99 EV (moderate) - 100-149 EV (comfortable) - 150-199 EV (solid) - 200-269 EV (landslide) - 270+ EV (historic landslide / one candidate wins all)

Resolution criteria: Resolves based on the certified Electoral College vote totals. The margin is calculated as |Winner EV - Loser EV|. In the case of a three-way split where no candidate reaches 270 and the House decides, the margin is calculated between the two candidates with the most electoral votes.

• Source: National Archives Electoral College results page
• Edge case --- faithless electors: Use the certified electoral vote as counted by Congress, which may differ from the state-certified results if faithless electors are involved
• Edge case --- no election: Resolves N/A

Initial liquidity: $5,000 Creation date: March 2028 (after primary picture is clearer)

Market 3: Popular Vote Winner (Binary)

Title: "Will the Democratic nominee win the popular vote in the 2028 Presidential Election?"

Resolution criteria: Resolves YES if the candidate nominated by the Democratic National Committee for the 2028 Presidential Election receives more total votes nationwide than any other single candidate, based on the Federal Election Commission's (FEC) official election results.

• Source: FEC official results
• Backup: If FEC results are delayed beyond March 1, 2029, use the Associated Press certified results
• Edge case --- exact tie: Resolves NO (the Democrat did not win the popular vote in a tie)
• Edge case --- no Democratic nominee: Resolves N/A

Initial liquidity: $5,000 Creation date: June 2028 (after nominees are known)

2.2 Tier 2: Nomination Markets

Market 4: Democratic Nominee (Multi-Outcome)

Title: "Who will be the 2028 Democratic Presidential Nominee?"

Outcomes: - Current Vice President (if running) - Governor [Name 1] - Senator [Name 2] - Senator [Name 3] - Secretary [Name 4] - Other Democrat (Note: Specific names would be filled in based on the political landscape at market creation. The key is to include the 4-6 most likely candidates plus an "Other" catch-all.)

Resolution criteria: Resolves to the candidate who accepts the presidential nomination at the 2028 Democratic National Convention, or if no convention is held, the candidate officially designated as the party's nominee by the Democratic National Committee.

• Source: Official DNC records and convention proceedings
• Edge case --- nominee withdraws after convention: Resolves to the original convention nominee, not the replacement
• Edge case --- brokered convention: Resolves to whoever ultimately secures the nomination, regardless of how many ballots it takes
• Edge case --- party splits: If the Democratic Party splits into two factions that each nominate a candidate, resolves to the candidate recognized by the FEC as the Democratic Party nominee

Initial liquidity: $8,000 Creation date: January 2027 Close date: Immediately upon convention nomination (or equivalent DNC designation)

Market 5: Republican Nominee (Multi-Outcome)

[Same structure as Market 4, adapted for the Republican Party with appropriate candidate list]

Initial liquidity: $8,000 Creation date: January 2027

Market 6: VP Selections (Binary markets, one per likely nominee)

Title template: "Will [Nominee] select [VP Candidate] as running mate?"

Resolution criteria: Resolves YES if the specified VP candidate is the officially announced running mate of the specified presidential nominee, as announced by the campaign and confirmed at the party's national convention.

• Source: Official campaign announcement, confirmed at convention
• Edge case --- VP candidate is replaced between announcement and convention: Resolves based on convention confirmation
• Edge case --- nominee does not win nomination: Resolves N/A

Create 3-4 binary markets per expected nominee for the most likely VP selections.

Initial liquidity: $1,000 per market Creation date: After nominees are determined (approximately July 2028)

2.3 Tier 3: State-Level Markets

Markets 7-16: Swing State Winners (Binary, one per state)

States: Pennsylvania, Michigan, Wisconsin, Arizona, Georgia, Nevada, North Carolina, Minnesota, New Hampshire, Virginia (adjust based on current political landscape)

Title template: "Will the Democratic nominee win [State] in the 2028 Presidential Election?"

Resolution criteria: Resolves YES if the Democratic nominee receives more votes than the Republican nominee in the state of [State], based on the official certification of election results by the state's Secretary of State (or equivalent certifying authority).

• Source: State Secretary of State official certification
• Backup: AP race call if state certification is delayed beyond December 15, 2028
• Edge case --- recount: Resolution waits for the completion of any mandatory or requested recount
• Edge case --- court challenge: Resolution waits for the final court ruling if the outcome is legally contested
• Edge case --- third-party winner: Resolves NO (the question asks specifically about the Democrat winning)

Initial liquidity: $2,000 per state market ($20,000 total) Creation date: September 2028 (after general election matchup is set)

2.4 Tier 4: Conditional Markets

Market 17: Conditional on Democratic Nominee

Title: "If [Candidate X] wins the Democratic nomination, will they win the general election?"

Resolution criteria: - If [Candidate X] is NOT the Democratic nominee: Resolves N/A - If [Candidate X] IS the Democratic nominee: Resolves YES if they win the presidential election per Market 1 criteria, NO otherwise

Rationale: Conditional markets reveal crucial counterfactual information --- "What would happen IF this person were the nominee?" --- that is not available from the nomination and general election markets separately.

Create one conditional market per major contender for each party's nomination (approximately 4-6 total).

Initial liquidity: $1,500 per market Creation date: January 2027 (same time as nomination markets)

Market 18: Economic Conditional

Title: "If Q2 2028 GDP growth exceeds 2%, will the incumbent party win the presidential election?"

Resolution criteria: - Condition check: BEA advance estimate for Q2 2028 GDP growth (annualized, real) - If GDP growth <= 2.0%: Resolves N/A - If GDP growth > 2.0%: Resolves YES if the candidate from the party that held the presidency on January 1, 2028 wins the 2028 presidential election, NO otherwise

Rationale: This market tests the "economic voting" hypothesis directly.

Initial liquidity: $1,500 Creation date: January 2028

2.5 Tier 5: Scalar and Supplementary Markets

Market 19: Democratic Vote Share (Scalar)

Title: "What percentage of the two-party popular vote will the Democratic nominee receive in the 2028 Presidential Election?"

Range: 40.0% to 60.0% Resolution value: $\frac{\text{Democratic votes}}{\text{Democratic votes} + \text{Republican votes}} \times 100$

Resolution source: FEC official results Edge case: If either major party does not field a nominee, resolves N/A.

Initial liquidity: $3,000 Creation date: June 2028

Market 20: Total Electoral Votes for Winner (Scalar)

Title: "How many Electoral College votes will the winning candidate receive?"

Range: 270 to 538 Resolution value: The certified Electoral College vote total for the winning candidate.

Initial liquidity: $2,000 Creation date: June 2028

Market 21: Voter Turnout (Bracket)

Title: "What will voter turnout be in the 2028 Presidential Election?"

Brackets (as percentage of voting-eligible population, per US Elections Project): - Below 55% - 55.0% - 59.9% - 60.0% - 64.9% - 65.0% - 69.9% - 70.0% or above

Resolution source: United States Elections Project (Michael McDonald) final turnout estimate Backup: FEC reported turnout divided by Census Bureau voting-age population estimate

Initial liquidity: $1,000 Creation date: September 2028

Market 22: Election Night Call Timing (Bracket)

Title: "When will the AP call the 2028 Presidential Election?"

Brackets: - Before 11:00 PM ET on election night - 11:00 PM - 2:00 AM ET - 2:00 AM - 8:00 AM ET the morning after - 8:00 AM ET day after through 3 days post-election - More than 3 days after election day

Resolution source: Associated Press race call timestamp Edge case: If AP does not call the race within 30 days, resolves to the last bracket Edge case: If AP calls the race and then retracts, use the final call

Initial liquidity: $1,000 Creation date: October 2028

Market 23: Debate Markets (Binary)

Title: "Will [Democrat] lead [Republican] in the first post-debate poll (by FiveThirtyEight polling average) after the first general election debate?"

Resolution criteria: Based on the FiveThirtyEight (or successor, e.g., 538/Silver Bulletin) national polling average calculated 3-7 days after the first general election presidential debate.

Initial liquidity: $1,000 Creation date: Upon debate schedule announcement

2.6 Tier 6: Novelty and Engagement Markets

Market 24: Election Night Viewership (Bracket)

Title: "How many total viewers will watch election night coverage across major US networks?"

Brackets: [< 100M, 100-120M, 120-140M, 140-160M, 160M+]

Resolution source: Nielsen ratings report Initial liquidity: $500

Market 25: Concession Speech Timing (Binary)

Title: "Will the losing candidate deliver a concession speech within 24 hours of AP calling the race?"

Resolution source: Major media coverage of concession speech, AP call timestamp Edge case: If AP does not call the race, resolves N/A Initial liquidity: $500

Part 3: Liquidity Allocation Plan

3.1 Budget: $50,000

3.2 Subsidy Decay Schedule

All markets use exponential decay with: - Tier 1: $\lambda = 0.005$ (slow decay, subsidized throughout) - Tier 2: $\lambda = 0.01$ (moderate decay) - Tier 3-6: $\lambda = 0.02$ (faster decay, expect organic liquidity)

3.3 Reallocation Rules

• If a Tier 2 market resolves early (nominee determined), reallocate remaining subsidy to Tier 3 and Tier 4 markets
• If any market attracts organic liquidity exceeding 5x the subsidy, reduce the subsidy and reallocate to underperforming markets
• Reserve 5% of the total budget ($2,500) for emergency liquidity provision (unexpected events, market disruptions)

Part 4: Lifecycle Timeline

2027 Jan:  Create Markets 1, 4, 5 (winner, both nominations)
2027 Q2:   Create initial conditional markets (Market 17)
2027 Q3-Q4: Monitor, adjust liquidity
2028 Jan:  Create Market 18 (economic conditional)
2028 Mar:  Create Market 2 (EC margin) as primary picture emerges
2028 Jun:  After nominees determined: Create Markets 3, 19, 20 (popular vote, vote share, EC total)
           Close Markets 4, 5 (nominations resolved)
           Reallocate nomination liquidity to general election markets
2028 Jul:  Create VP markets (Market 6) after convention
2028 Sep:  Create state markets (Markets 7-16), Market 21 (turnout)
           Create debate markets (Market 23)
2028 Oct:  Create Markets 22, 24, 25 (election night timing, viewership, concession)
2028 Nov 7: Election Day
           - Debate, VP, and nomination markets should already be resolved
           - State markets begin resolving as AP calls states
           - Core winner market resolves upon AP call or certification
2028 Nov-Dec: Resolve remaining state markets after recounts/certifications
2029 Jan:  Final resolution of any outstanding markets after Congressional certification
           Complete settlement
           Archive all markets

Part 5: Edge Case Contingency Plans

5.1 Candidate Drops Out After Nomination

Scenario: The Democratic nominee drops out in October 2028 due to health issues.

Impact on markets: - Market 1 (Winner): Continues --- the replacement candidate runs under "Democratic Party nominee" category - Market 4 (Dem Nominee): Already resolved to the original nominee; no change - Conditional markets: If conditional on the dropped-out candidate, resolve N/A - State markets: Continue with replacement candidate - VP markets: May need N/A resolution if the entire ticket changes

Resolution clarification: Add to all relevant markets: "If the nominated candidate withdraws or is replaced after convention nomination, the party's replacement candidate inherits the 'nominee' designation for resolution purposes."

5.2 Contested Election

Scenario: The 2028 election is disputed, with both candidates claiming victory.

Impact on markets: - All resolution is delayed until a definitive legal determination - Markets remain open (no trading, frozen state) until resolution - Timeout: If no resolution by March 1, 2029, an arbitration panel convenes - State markets resolve independently based on each state's certification

5.3 Election Postponed or Cancelled

Scenario: Extraordinary circumstances (war, pandemic, constitutional crisis) prevent the election from occurring.

Impact on markets: - Market 1: Resolves to "No election held" - All other markets: Resolve N/A - Full refund of all subsidies and trader positions at cost basis

5.4 Third-Party Candidate Wins Electoral Votes

Scenario: A strong independent candidate wins electoral votes but not the presidency.

Impact on markets: - Market 1: Resolves normally (winner is still one of the four categories) - Market 2 (EC margin): Calculated between top two candidates - State markets: Resolves based on whether Democrat won each state (third-party winning a state means it resolves NO)

Part 6: Quality Monitoring Plan

6.1 Metrics to Track

6.2 Cross-Market Consistency Checks

The suite includes markets that should be mathematically consistent:

Check 1: Sum of state-level Democratic win probabilities, weighted by electoral votes, should approximately equal the national Democratic win probability from Market 1.

$$P(\text{Dem wins}) \approx P\left(\sum_{\text{state } s} EV_s \cdot P(\text{Dem wins } s) \geq 270\right)$$

This is not an exact equality because of correlation between states, but large discrepancies indicate a problem.

Check 2: The conditional market prices should be consistent with nomination and general election prices:

$$P(\text{X wins general}) = P(\text{X wins general} | \text{X wins nom}) \times P(\text{X wins nom})$$

Check 3: Bracket market prices should sum to approximately 1.0 (within 2% due to fees and rounding).

6.3 Intervention Triggers

Part 7: Lessons and Generalizable Principles

7.1 Suite Design Principles

1. Hierarchical structure: Organize markets into tiers by importance and expected volume. Allocate resources proportionally.

2. Temporal staging: Create markets at the appropriate time --- not too early (wasted liquidity) and not too late (missed information aggregation).

3. Cross-market consistency: Design markets so they can be cross-checked for consistency. Inconsistencies reveal design problems or arbitrage opportunities.

4. Modular resolution: Each market should be independently resolvable, even if other markets in the suite have problems.

5. Edge case planning: For a major event, the edge cases are not hypothetical --- contested elections, candidate withdrawals, and third-party spoilers all have historical precedent.

7.2 Applying to Other Major Events

This framework can be adapted to other major events:

Discussion Questions

1. With 28 markets in the suite, how do you ensure that liquidity is not spread too thin? Is it better to have fewer, more liquid markets or more, thinner markets?

2. The conditional markets (Market 17) provide counterfactual information that is extremely valuable but difficult to maintain liquidity for. How might you increase participation in conditional markets specifically?

3. State-level markets can reveal information about the Electoral College outcome that the national market misses. How should a platform handle situations where state-level markets imply a different winner than the national market suggests?

4. How should the platform handle the period between election day and official certification, when the outcome is known but not officially confirmed? Should markets be frozen, allowed to trade, or immediately resolved?

5. Campaign staff and political insiders have significant informational advantages in election markets. Should they be allowed to trade? How would you enforce restrictions?