Political betting markets have recently put the odds that Vice President Kamala Harris will win the presidency as higher than incumbent Joe Biden. Here is what that means and the context.
Wednesday marked some major movement in the political betting markets. There are several platforms that people can use to place wagers on elections and other political drama, among them online sites PredictIt, Polymarket, and Betfair.
The markets showed that gamblers are seeing Biden resigning and being replaced on the ticket as an increasingly likely prospect. The shift might raise alarm bells because unlike polls where people might not have much knowledge of the political realm, those participating in the betting markets are typically more keyed into what is going on, given that they have skin in the game.
“I think that they are absolutely the best available source of information for what’s actually going on,” Rutgers University statistics professor Harry Crane told the Washington Examiner.
How it all works
The platforms have a variety of different individual markets. For instance, PredictIt has one titled: “Who will win the 2024 Democratic presidential nomination?” Within that market, users can buy essentially shares of who they think will win. Each share is priced based on the volume of bets for and against it on a scale that uses $1 as a correct bet.
As of Wednesday afternoon, a share of Biden was going for 40 cents and a share of Harris was going for 43 cents. So if you wanted to bet that Harris will end up being the nominee, you could buy shares at 43 cents, and then, if the bet ends up coming true and she does win, you would end up getting $1 for each share you bought, meaning you would net a 57-cent return on investment for every share.
While 57 cents might not seem like a lot, it adds up if a lot of shares are purchased. For example, if someone buys 2,000 shares of Harris winning at 43 cents per share, it would cost $860. But if Harris ends up winning, that gambler would be awarded $2,000, so a profit of over $1,100.
In the context of those watching the betting markets, those share prices also imply probability. So, if a Harris share is valued at 43 cents, it implies she has a 43% chance of being the Democratic nominee.
Background and reliability
Political betting markets have a long history in U.S. politics, according to Koleman Strumpf, a professor at Wake Forest University who is an expert in political betting markets and has studied them for decades.
“They’ve been around in one shape or another for almost the entire history of the country,” he told the Washington Examiner. “So, you know, not electronic, but people literally betting outside the stock exchange in New York on these elections.”
With the adoption of the internet, betting platforms have moved online, allowing them to become more popular.
Strumpf said the betting markets are something that should be paid attention to because, unlike political polling, the people involved have skin in the game — money. So they tend to do more research than the average Joe.
“It reflects probably the best-prevailing guess as to what’s going to happen,” he said.
“It’s not a crystal ball, like the stock market isn’t a crystal ball, but it wraps up the opinion of a lot of people who generally are pretty smart with the idea that, why are they smart? Because they are putting money on the line,” Strumpf said.
Basically, if someone is going to shell out $1,000 on their opinion, he or she is likely to spend a lot more time researching and assessing that opinion.
Crane said he doesn’t think that the political betting markets are subject to manipulation any more than any other type of market.
“No, there’s no evidence. There’s no real implication that they’ve ever been manipulated in a material fashion,” he said.
What the markets are saying?
There has been a massive shift since last week’s first presidential debate, which featured Biden appearing halting and at times confused throughout the matchup against former President Donald Trump.
The day before the debate, a Biden share on PredictIt’s market for who will win the overall presidential race sat at 45 cents, which means that gamblers pegged about a 45% chance the president would win a second term in November. A day after the debate those odds had fallen to 36%, and now the odds of a victorious Biden are only punching in at just over 20%.
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On Polymarket, users are putting the odds that Biden will drop out of the presidential race at a notable 68%. At one point on Wednesday, the implied odds of Biden bowing out rose as high as 80%.
In another interesting market, whom Trump will choose as his running mate, users of both PredictIt and Polymarket put Gov. Doug Burgum (R-ND) as the top pick. On PredictIt, shares of Burgum are selling for 40 cents, while shares of Sen. J.D. Vance (R-OH) are going for 27 cents. Sen. Tim Scott (R-SC) is running in third, with a Scott share selling for 10 cents.
