Opinion

What You Need to Know About the Growth and Influence of Political Prediction Betting

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Posted: Aug 08, 2018 2:51 PM
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What You Need to Know About the Growth and Influence of Political Prediction Betting

Surely you are familiar with the old cliché, “Politics is a blood sport” — but now I suggest an update, “Politics is a betting sport” — due to the growing popularity of political prediction betting.

Of course, through the lens of the media, politics is already covered as a “game” with winners and losers, while the presidential Election Day equates to the “Super Bowl.” 

Thus, with campaigns costing millions and daily lives affected by policy decisions, it is logical that prediction betting has become an armchair sport with odds that may foretell the outcome of an election or political event.

If you want to play along, the most popular online political prediction market where trading is legal for U.S. residents is called PredictIt.  On Oct. 29, 2014, the federal government's Commodity Futures Trading Commission authorized the use of a “not-for-profit market for event contracts” operated by Victoria University of Wellington, New Zealand. Days later, PredictIt launched on November 3, 2014. 

But if you are not a betting person (myself included) the prediction market is still fun and informative to browse. The market offers a wide range of “contracts” where participants have placed bets with real money on the outcome of primaries, campaigns, elections, issues, events and various hot topics ripped from the headlines. 

Let’s say you are enticed to join the game. After registering with a credit card you can begin monetizing your political hunches — or lose money following your political instincts.

How much can you bet? On PredictIt, the amount per contract is limited and regulated by that previously mentioned arm of the U.S. government as stated on the site:

“PredictIt operates under no-action relief from the Division of Market Oversight of the Commodity Futures Trading Commission. An $850 limit on investment by an individual participant in any contract is a condition of this relief.”

Also displayed on the site is this tip: “A key to success at PredictIt is knowing when to sell in order to take a profit or prevent a loss.”

Undoubtedly, over the next two years, a great deal of profit and loss, buying and selling will transpire speculating about this all-important market contract:

Who will win the 2020 U.S. presidential election?

As proof of this hyperactive market, while in the process of writing this piece, the contract prices changed four times!

Currently, President Trump dominates the market at 39 cents per share. (Meaning 39 cents reflects the price the entire market is willing to pay for that contract, not necessarily that 39 percent of players believe that Trump will win.)

Naturally, the President leads a large pack of Democratic Party competitors. The closest is former VP Joe Biden at 13 cents, followed by Senators Kamala Harris and Bernie Sanders tied at 12 cents each. Sen. Elizabeth Warren’s contract is worth 6 cents — the same amount that players are willing to pay for the chances that VP Mike Pence will win the White House in 2020.

In all PredictIt market events, the probability is displayed in cents as explained on the site:

“PredictIt allows you to make predictions on future events by buying shares in the outcome. Each outcome has a probability between 1 and 99 percent. We convert those probabilities into US cents.”

Each winning share is redeemed for a dollar at the close of the event. However, it is very important to read all the rules governing the buying and selling of contracts.

Moreover, unlike on the Wall Street “casino,” where trading based on inside information is illegal, at PredictIt utilizing “political” inside information is perfectly legal.

Perhaps you or someone you know works on Capitol Hill and has a keen insight as to whether or not Republicans will keep control of the House and Senate after the November midterms. You are free to make prediction bets using that information — which begs the question, “Where does the prediction market stand on the outcome of the midterm elections?” Here are the contract prices at this writing:

"Which party will control the House after the 2018 midterms?"

Democrats: 64 cents

Republicans: 37 cents

"Which party will control the Senate after the 2018 midterms?"

Republicans: 74 cents

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Democrats: 30 cents

Besides election results and presidential horseraces, PredictIt is filled with trivial prediction markets — even about Trump’s tweets! (You can’t make this stuff up.)

“How many tweets will @potus post from noon Aug. 3 to noon Aug. 10?”

Furthermore, in response to the Trump Administration’s “market” for drama and chaos, PredictIt created a new category of prediction events aptly named "Investigations." Here are some active markets reflecting the legal jeopardy of some Trump friends and family:

“Will [Michael] Cohen face changes by 12/31/18?”

Yes 77 cents

No 23 cents

“Trump, Jr. faces charges by the end of 2018?”

Yes 27 cents

No 73 cents

“Will [Roger] Stone face charges by 12/31/18?”

Yes 57 cents

No 43 cents

Another aspect of the political prediction market is those enmeshed in politics have been known to look at PredictIt to gauge whether opinion polls are compatible, or signal a vastly different outcome. Then, closer to Election Day, don’t be surprised to hear PredictIt odds quoted in media reports.

Finally, here is some surprising news about PredictIt as a brand. “Washington politicos are not common users. PredictIt players are typically working in finance and other analysis and data-heavy industries,” according to PredictIt spokesman Will Jennings in a June interview with Business Insider.

Jennings also said, “The average PredictIt user is young, male, and relatively affluent from major US cities like New York and San Francisco.”

Business Insider also reported this info-nugget: “The gamblers who regularly play PredictIt will often reach out to seasoned political reporters asking for some kind of inside scoop.” Prompting the question, “Who is influencing whom?” Are the “gamblers” and “politicos” influencing each other? If so, that makes PredictIt rather circular. And if circular, PredictIt is even more interesting and potentially more influential to watch.

Editor's note: This column has been updated.