Prediction Markets Fail as Lula Wins Historic Brazil Runoff

Lula Defies Prediction Markets to Retain Brazil’s Presidency

Luiz Inácio Lula da Silva, Brazil’s current president, has defied the odds and retained his seat after losing the first round election by over 2 million votes.

With 99.99% of the total votes counted, Lula received 51.78% of the popular vote, with 64,248,884 votes, while Senator Flavio Bolsonaro, son of former President Jair Bolsonaro, reached only 59,822,138 votes (48.22%).

Lula’s performance showed a remarkable recovery from the first round, when he registered 45.16% with 53.9 million votes, while Bolsonaro had 47.03% of the popular vote with over 56 million votes, with the rest of the popular vote distributed across other first-round candidates.

Before the election, prediction markets, banned in Brazil, gave a clear edge to Senator Flavio Bolsonaro after his victory in the first round.

On Sunday at 12 p.m., Bolsonaro had 80% odds of winning the runoff according to Polymarket. Nonetheless, at 6 p.m., when voting results started being published, odds were reversed, and Lula took the advantage as results showed improved performance in several relevant locations in the country.

Prediction markets beat traditional pollsters during the first round, giving Bolsonaro an edge while local polls favored Lula by a narrow margin. This time, prediction markets were proven wrong: Lula made history, becoming the first Brazilian president to win a fourth mandate and the first one to win a runoff after losing the first-round election.

Analysts projected a pullback in local markets, which surged expecting Bolsonaro to become president and stabilize the Brazilian market with fiscal reforms.

After Lula’s victory was announced, a perpetual contract linked to EWZ, the Ishares MSCI Brazil ETF, which tracks large and mid-cap Brazilian companies and has been featured in the portfolios of renowned investors like Stanley Druckenmiller, plunged over 22% on Hyperliquid as investors braced for the continuation of Lula’s economic policies, including strengthening the country’s ties with the BRICS bloc and maintaining its tepid relationship with Washington.