Richard Rubin reports on a young economist who staked his “life savings”—$342,195.63—on federal spending increasing during the first year of the Trump Administration, compared to the final quarter of the Biden Administration. And he won.
More on the intersection of prediction markets, herd wisdom, and mandatory spending—plus the economist’s winnings—below the fold.
Richard Rubin, The Tax Nerd Who Bet His Life Savings Against DOGE, Wall St. J. (Feb. 25, 2025):
Musk’s boasts [about his Department of Government Efficiency efforts] and his eager fans brought an unusual opportunity into the burgeoning U.S. prediction markets: People willing to bet that the world’s richest man would transform and shrink the federal government.
[Tax Foundation economist Alan] Cole took the opposite position, one he didn’t see as a gamble at all [because of mandatory Social Security and Medicare spending] . . . .
Cole gradually amassed more than 3% of one particular $12 million federal-spending prediction market. He spread risk across several [carefully structured] sub-bets . . .
Cole collected $470,300, for a profit of more than $128,000, or 37%. . . .
“My wife knows that I’m not this type of person most of the time,” he said.
Cole notes that his 2025 federal tax return will be complicated.
Related TaxProf Blog coverage:
- Sports Gambling Meets Prediction Markets at the Super Bowl (Feb. 7, 2026)
- Sports Gambling and the Taxation of Prediction Markets (Jan. 17, 2026)
