Election probabilities: are political bets more accurate than polls?

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While Joe Biden continues to lead most presidential polls, the betting odds reflect poll skepticism and the possibility that Trump’s secret voters will shut up. While Biden leads by more than 7 points in the Real Clear Politics (RCP) average, he only leads by 3.4 in the Battlefield States. Meanwhile, the RCP’s average bet as of October 29 gives outgoing underdog Donald Trump a 36% chance of winning, with Bovada LV climbing to 39%.

“My own opinion,” says Sascha Paruk, political writer and gambler at SportsBettingDime.com, “is that, as a bettor, I trust the money more than the polls.” But are betting odds more accurate?

“Although it is sometimes claimed that political betting markets are a recent invention, they clearly are not,” historians Paul Rhode and Koleman Strumpf write in “The Long History of Political Betting Markets,” “C ‘ is rather the absence of such markets during the mid and late 20e century which are the exception.

Rhode and Strumpf studied betting for papal conclaves in 16th-century Italy, elections in Victorian Britain and Ireland, and elsewhere. In the United States, political bets are as old as our Constitution. “They don’t have Gallup polls yet,” Rhode told NPR’s Planet Money about the beginnings of America. “They don’t have scientific polls yet. And it turns out that the probabilities are remarkably precise.

After the Civil War, the betting markets became more and more concentrated around Wall Street. Rhode says of the 15 presidential elections between 1884 and 1940, the betting markets got it wrong only once. Embodying the wisdom of crowds, betting markets allow bettors to benefit from inside or expert information – presumably the people who bet enough money to move these markets have done their homework.

“These markets are likely to be a useful tool,” conclude Rhode and Strumpf in “Historical Prediction Markets: Betting on Presidential Elections” – but vulnerable to manipulation. Studying the 2008 US elections for President and Senate, David Rothschild of Wharton agreed. Rothschild discovered early in the election cycle that betting odds could provide more accurate probabilities than polls.

Still, fears of manipulation and immorality have led Vatican leaders in Britain to ban political betting. In the United States, the advent of the scientific poll – commonly cited as the 1936 US presidential election – combined with changes in tax laws, anti-gambling laws, and Wall Street’s desire to decouple investment from gambling during the Great Depression. The result? The end of legal political betting.

A reversal began in the UK in 1963, edited by William Hill Sports Book, after Prime Minister Harold McMillan resigned in the Profumo affair. In the United States, PredictIt and Iowa Electronic Markets – started in 1988 – have obtained special exemption from the Commodity Futures Trading Commission (CFTC) due to their academic connections, but must limit betting. In recent years, the rise of online sports betting on the internet has made it technically legal for people in most states of the United States to bet on politics – as long as sports betting is not based in America, according to VegasElectionOdds. In 2013, Nevada bookmakers offered political bets, but the Nevada Gaming Control Board rejected them. After the federal sports betting ban ended in 2018, West Virginia allowed FanDuel to take bets on Trump against Biden in April 2020. It went on for about an hour before the state told them to withdraw it. .

Rhode and Strumpf warn betting markets remain vulnerable to political manipulation. In 2013, economists Rajiv Sethi and Rothschild, now at Microsoft Research, concluded that a single “whale” had bet $ 4-7 million on Mitt Romney to defeat President Barack Obama in 2012 – or a third of the entire money bet on the Republican. Scientists conclude that the “Romney Whale” might have hedged against Obama’s previous bets or sensed an upheaval, but was more likely an attempt to boost the morale of Republican voters. Amid CFTC investigations, Intrade quickly shut down for “financial irregularities.”

“When you see these offshore lines of US presidential betting and things like that, I really don’t take them too seriously,” Circa Resort & Casino CEO Derek Stevens told PlayUSA. “These are limited stock markets, mostly small sample sizes, and I don’t think this is really a real market.”

But from 2016, these markets became much larger. “Starting with Trump’s initial salvo on the political realm,” Paruk explained of SportsBettingDime, “the market has grown bigger every year, if not month.

In 2016, most betting markets did no better than pollsters and pundits – maybe worse, according to business reporter Josh Barro. OddsShark, on the other hand, found that betting markets outperform the polls – but still lose money. In the most infamous example, Irish online sports betting company Paddy Power, for reasons still unclear, paid Hillary Clinton’s bets ahead of the election. Paddy ended up suffering £ 4million in losses – about $ 4.7million.

“The bets on this year’s election are five times higher than in 2016,” says Bovada political punter Pat Morrow, “which also broke records for us.

One person bet a record 500,000 pounds on Biden (around $ 650,000) to win at 1.53 thanks to UK-based Betfair. And Betfair, which gives Trump a 34% chance of winning, reports an unusual pattern. Their ten biggest bets were all on Biden, but they took more money overall on Trump – £ 83 million to £ 74million.

“Betfair’s next chairman’s market is now the biggest betting event of any kind in history, including sport,” Betfair reported on October 28.e. “Based on current and past trends, the total could well exceed £ 400million” – more than half a billion dollars.

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