Forecasting California
Golden State politics are back
It has been a while since there has there been intrigue or uncertainty at this level in the California governor’s election. In fact, it has been 23 years. In 2003, Gray Davis was recalled and replaced by Arnold Schwarzenegger. Since then, elections for the highest office in America’s most important state have been fairly uncompetitive affairs. Schwarzenegger easily won reelection three years later. Former governor Jerry Brown then swept back into power in 2010, easily winning a second term in 2014. Gavin Newsom took up that mantle in 2018, fending off a recall by a 24% margin and winning reelection by 18%. Now, as he sits as the frontrunner for the 2028 election, eyes around the country are turned to the race to fill his shoes.
And markets can provide clarity. Here’s the polling on the race:
Not super informative. With the top-two primary in six weeks, no candidate currently is polling above 18%. Two of the four candidates polling the highest are Republicans, who haven’t won statewide office in twenty years. And another is, ummm, Eric Swalwell. Until a couple weeks ago, U.S. Rep. Eric Swalwell was the frontrunner in the race. He has since suspended his campaign after serious and credible allegations against him came to light.
The second-place Democrat in the polls, Tom Steyer, has now swapped places with Swalwell in betting odds (see Swalwell in purple drop to zero as Steyer’s in yellow soars up to ~60% above). Steyer is a slightly awkward candidate, as an aging billionaire turned climate activist who has managed to ingratiate himself into three of the resurgent wings of the Democratic primary base: progressives, YIMBYs, and resistance libs. And yet, he’s still only polling around 15%. But with just a few weeks to go, it’s unclear that any other Democrat stands a good chance of making the top two.
Matt Mahan, the tech industry-backed San Jose mayor, was a prediction market darling for a month or two, but has failed to gain momentum in the polls. Katie Porter, like Swalwell a U.S. rep with a nationwide profile, thanks to her schtick of holding up whiteboards in congressional hearings, has also failed to convert that profile into enthusiastic support.
Xavier Becerra has been within striking distance of Steyer in a couple recent polls, and was HHS secretary under Biden for four years, a position now occupied by RFK Jr. Unlike RFK Jr., Becerra isn’t exactly a household name; nevertheless, he finds himself cutting into Steyer’s lead in the markets.
While polls testing the waters for a very late write-in entry, Kamala Harris, have teased her interest, the markets think that it’s unlikely that she’d enter at this stage. Instead, traders continue to think her eyes might lie on the 2028 election:
The nightmare scenario for Democrats, being locked out of the general election in the top-two primary, appears unlikely at this point. But a few % is not nothing. Conservative TV show host Steve Hilton and Riverside County Sheriff Chad Bianco are both polling above 10%, and if the Democratic primary becomes even more splintered, or an independent candidate like Elaine Culotti takes off, this is a remote possibility. For example, imagine Steyer falls in the polls due to a scandal too minor to force him to drop out, or if Mahan starts rising, eating share from Steyer and Becerra. If Bianco gains on Hilton, they could realistically each get ~16% of the vote.
If we wake up on June 3rd and the vote tallies read…
Hilton: 17%
Bianco: 16%
Steyer: 14%
Becerra: 14%
Mahan: 13%
Porter: 12%
Culotti: 9%
Other: 5%
…would anyone be truly shocked? Why would any of these candidates drop out if they’re all polling within a couple percent of each other, with decent odds of making the general election? Betty Yee dropped out this morning, and candidates like Tony Thurmond and Antonio Villaraigosa are potentially poised to do so as well, with their poor polling numbers. But just 4 Dems and one indie candidate remaining alive could allow a comfortable shutout. A ton of people will be on the ballot and a Californian primary election isn’t exactly the place you’d expect the extreme salience of tactical voting required to drive down the “Other” box.
That being said, it’s likely that news coverage around the race, along with top-down action from the Democratic party, will push forward a favorite or two to ensure this doesn’t happen, especially because this election is far less ideologically contentious than you might expect. There’s no clear “progressive” candidate running, with Porter, Steyer, and Becerra all having claims to that mantle. Most of the candidates are more or less amenable to a broad swathe of the Democratic electorate.
This is quite different from the election we’re seeing in Los Angeles, where incumbent mayor Karen Bass is now trailing rising progressive star Nithya Raman.
This wasn’t always the case. Raman has enjoyed a steady rise in prediction market odds since entering the race on the last possible day after observing that there was no strong challenger from the progressive wing.
Karen Bass, who if readers will recall, was close to being selected as VP by Biden in the 2020 election, has not a great run of things as mayor. She has received strong criticism for her handling of the L.A. fires and their aftermath, as well as the inability to address L.A.’s housing crisis. As a result, traders give her less than a 1 in 3 chance at retaining her mayoralty.
Raman’s campaign has drawn comparisons to Mamdani’s, but she’s actually being battled on her left by community organizer Rae Huang. DSA hasn’t endorsed either yet, likely expecting that Raman has better odds of winning but slightly poorer ideological alignment with DSA.
Spencer Pratt, a reality TV star and critic of Bass’s handling of the fire, also stands an outside chance, if he can consolidate the more centrist and populist voters in the primary.
Despite what seem to me to be two of the most interesting and significant elections we’ve seen for a long time in California, Manifold traders seem way more interested in something happening farther down the ballot.
A proposal for a wealth tax on billionaires is trying to make its way onto the ballot this November. Traders think it has a ~73% chance of qualifying, and give it ~58% odds of passing, conditional on appearing on the ballot.
All told, that gives the proposal better than 1 in 3 odds of passing this year.
Billionaires have preemptively begun to flee the state and establish residency elsewhere, as the law retroactively applies to anyone in residence at the start of 2026! Traders think that even if the law passes, there’s a considerable chance that it’s overturned by the courts or fails to practically collect revenue (at least $1 billion):
If you are completely uninterested in the California elections except for as it pertains to AI, perhaps you’ll be pleased to know that traders remain unconvinced by Altman’s threat from a few months ago to move OpenAI out of California…
…despite decent odds of another AI ballot measure this fall:
And if you like mayor elections but only those that have no governor above them, well, that leaves you with just the fascinating and increasingly contentious DC mayor election, where the DSA-aligned Janeese Lewis George is leading against the center-left Kenyan McDuffie.
And finally, if you don’t care about elections at all, and you also hate California, well… perhaps you’ll be interested in this long time-horizon market.
Happy forecasting!
-Above the Fold