Prediction markets are moving fast as the race to succeed Governor Gavin Newsom has officially entered the territory of pure volatility following Eric Swalwell’s exit amidst serious misconduct accusations.
With California’s election just hours away, the Kalshi contract on “California Governor's winner?” shows massive shifts regarding the implied probabilities of two main candidates: Tom Steyer and Xavier Becerra.
Let’s see how the market is feeling about the political future of The Golden State.
The Evolution Of The Market
Up until mid-April, billionaire businessman Tom Steyer held a comfortable lead with a 66.3% chance of succeeding Gavin Newsom, but the positive market sentiment has since shifted drastically. Now, Xavier Becerra is the clear trader’s favorite.
Becerra's high-volume Yes contracts reflect his strong baseline support among traditional, institutional Democrats amidst a messy governor’s race.
While Becerra’s low-profile campaign style initially kept his prices modest, now he seems like the locked-in option. As the former Biden Administration Health Secretary and California Attorney General, he boasts the political experience that many Californian voters seem to favor.
In the last few weeks, Tom Steyer has lost a lot of ground on the trading board. While his self-funded advertisements have allowed him to surge in various polls, voters’ skepticism toward billionaires could cut short his aspirations. Currently, traders don't believe his exposure can translate into enough votes to surpass Becerra in the long run.
Swalwell's Drama
To understand why that Kalshi contract has experienced such wild swings, we have to look at the dramatic reordering of the field.
Early in the cycle, Democratic Representative Eric Swalwell held a solid grip as the nearest thing to a frontrunner among ten major candidates. However, a high-profile scandal involving misconduct allegations prompted Swalwell to withdraw from the race under immense pressure from Democratic allies. His decision shook up the entire board.
Swalwell's sudden exit fractured the Democratic bloc, leaving a massive pool of undecided progressive voters up for grabs while triggering a parallel market phenomenon on the Republican side, where Steve Hilton emerged as the Republican lead after receiving Donald Trump’s endorsement.
The Effect On The Democratic Side
In the Democratic camp, things were more complicated.
As an initial political underdog, Xavier Becerra heavily benefited from Swalwell’s catastrophic flameout. A few months ago, Becerra’s poll numbers were firmly in the single digits. After Swalwell’s exit, the former Health Secretary became a conciliatory choice for those who couldn't trust the other Democratic candidates, such as Tom Steyer, Katie Porter, and Matt Mahan. That’s exactly the line that Kalshi traders are reading.
With a massive trading volume of over $38 million, the contract for the California election winner keeps attracting new traders even just hours before the ballot dance begins. Will Becerra make history as the first Latino to lead California in modern history, or does this already unpredictable election have more surprises in store?
