It really goes wrong when political betting goes wrong. In the critical states of Pennsylvania, Michigan and Wisconsin, where the race was close, protests began to assemble outside state houses and ballot counting venues, as well as on the message board, where the White House was spreading a conspiracy. It was the beginning of the so-called “Stop the Steal” movement, which was the last ditch effort to save the Trump presidency.
It was also the beginning of what is known as the “shenanigans,” the weaponisation of an array of legal and legislative tools to muddy the water and frustrate democratic majorities; a catalogue of failed dirty tricks that culminated with the insurrection at the United States Capitol.
Money was changing hands at every step of the process.
There is a little wager
Matthew Shaddick, a veteran political analyst for the Smarkets betting exchange, said that the constitution was not designed to be used for betting purposes.
It will be completely straightforward, you think. You are wondering who is going to win the election. That seems like a very straightforward proposition, but as 2020 showed, there was an enormous proportion of people who didn’t agree with the result, and it took weeks or months for some people to settle the results of those markets.
Operators have a nightmare that keeps them up at night. There needs to be measurable win-loss outcomes in order to resolve a bet. In sports, every outcome can be accounted for, and those that are awkward are a matter for referees and governing bodies, but politics is murkier. As 2020 shown, there are referees and rule-makers of a sort, but it may also result in a tangle of allegations and legal disputes, with lengthy delays generating challenging issues about when a bet is won or lost.
It is important that this is accounted for in political betting sites. One of the founding practices of political betting is to have clear and thought-out rules that account for every eventuality or you will lose money.
It is important to have a long list of well-defined rules for every single event. Paragraphs of rules are not allowed next to every single market if you go on to some other operator sites. That is really, really important. Shaddick said that you can’t bury those away and hope someone reads them.
You can’t just rely on general terms and conditions because there are lots of different events that you need specific rules for. You have to do everything you can to get all that right.
The size of the pie is determined
The 2020 presidential election was likely the most bet-on event of all time, with the total handle running into the hundreds of millions of dollars.
The amount of bet has been enormous, not only creating a new market overnight, but also creating volumes of useful information critical for anyone seeking to understand the race.
Some argue that betting markets are more useful than polling in giving a hard numerical value to the conventional wisdom.
The gross gambling yield from political betting has risen dramatically over the last ten years, but are bookmakers looking to take advantage of the new opportunities that the new market might create?
The amount of money being bet on political bets puts it in a qualitatively different category to more trivial novelty bets.
He said that in a lot of major betting operations they still keep politics in the same sort of bucket as betting on the weather and Strictly Come Dancing.
Politics will be ten times as big as any of those things if you look at the amount of money being turned over over a long period of time. That’s basically the only thing that’s happening.
Even if an exchange model would provide it greater freedom to engage in political wagers without having to adhere to a pricing, more traditional fixed-odds operators have always battled with the political wagers’ inherent unpredictability.
There is a good chance that bedfellows will be odds bedfellows
Difficulty effectively calibrating the odds is one of the evergreen problems with political betting. While an operator with a sportsbook in a more traditional vertical might employ in-house experts that it retains year-round to analyse form, operators rarely have such permanent staff for political events.
Political predictions are notoriously difficult at the best of times, with even dedicated poll aggregation and analysis ventures such as FiveThirtyEight or the New York Times’ The Upshot being far from 100% accurate.
If an operator wanted to take the bullet and hire an in-house expert, they would face a lot of questions.
I think if you are a trading director of a very big firm, you might want to think about employing just one full time political specialist to run this for you. You will say that we don’t think we’ll be making that much money anyway.
When there aren’t any big elections on, what are we going to do with this person? I think that puts off a lot of people from trying to progress the product very much.
The hiring of a dedicated political analyst is not a guarantee of success. Not being clear on rules can lead to difficulties when dealing with complex real-world events that can end states beyond simple win-loss scenarios.
When I first started doing this, I made a lot of his mistakes. The potential for things to go wrong is high, so you need someone who is interested and keen on doing it, as well as someone who has experience in the area.
If you haven’t got your rules written spot on, then you’re going to have a poor customer experience, and you’re going to lose money.
You have a recipe for an unprofitable vertical if you add this all together.
For most fixed-odd betting operators, Trump winning in the 2016 election was a very big losing proposition.
Fixed-odds political betting is not a very easy way to make money. The number of operators who offer it is small, and the ones that do put any focus on it, such as Star Sports, more often than not do so to differentiate themselves against larger more dominant sportsbooks.
William Kedjanyi is retained by Star Sports to advise on political odds, and the site in general has carved out a niche as a site hosting novelty bets in addition to its core horse racing betting vertical.
Political betting is going to get bigger in the coming years, as it has done in the previous decade, according to Kedjanyi.
While they have tried in the past, enthusiasm is at a low ebb for the bigger operators.
A lot of people who were trying to take advantage of the market got put off, because they were trying to dip their toes in the water. You know, the range of offers in big operators. Bet365 doesn’t offer any political bets if you look at them just to pick the biggest operator. Six years ago, the Paddy Power brand tried hard. They don’t seem to be making much of an effort anymore.
Political betting isn’t the bookie’s favourite, but betting exchanges like Smarkets and Betfair may be more suited to the product.
The exchange is for the rescue
Is it possible to bet exchanges the answer? Political betting is one of the most important forms of betting, and exchanges can offer a platform for less traditional forms of betting by shifting the risk from the operator to the consumer.
Political betting has always been a part of the Smarkets product, according to Thomas Vermeulen, head of affiliates and international markets for Smarkets.
For many, many years, it has been a big point of focus. The current CEO of the company used to be an analyst for UBS. He said that one of the things that triggered him was the Al Gore–George Bush election back in 2000.
He was interested in how you can trade on political events and the power of people putting their money where their mouths are. We have had a political department for a long time.
This is something that can make political betting interesting. Winning at sports can have real world implications, but they do not compare to political outcomes. Political betting is different from other kinds of sports betting in that the information generated is useful in its own right, helping people plan for real world events.
There is wisdom in the crowds
This informational service is a core ethos of Smarkets.
The advantage we have as a market is because we don’t run this as a money making exercise.
We are subsidizing traders to use our platform in order to arrive at better prices. We don’t restrict people from what they can bet on and what they can’t bet on because they win too much money.
We need those people to move the prices as quickly as possible to get what the correct real-world price should be, if there is even such a thing, so that, thus we may conclude that this is the finest source of knowledge on the likelihood that certain events will occur.
It is possible to see how having a reputation for providing the most accurate odds might be useful for attracting bettors to the site.
There is a question as to what degree these probabilities can be trusted. Is there a “wisdom of the crowd” effect that allows the market to overcome personal biases and reach beyond what might be described as the conventional wisdom, or does it just reflect it and provide a value to the conventional thinking?
The Smarkets exchange has tended to follow the mainstream view, and has not seemed to be able to see around corners like some of the more militant defenders of political betting would like.
The information is useful, but it is not the final word on political prediction.
Not yet, not there
For all the important work done to advance a workable political betting product, the vertical remains niche and in many large markets is unregulated or illegal. PredictIt is a venture that owes its existence to its non-commercial nature, which is why it is the only regulated political betting site in the US.
PredictIt, a research project from the Victoria University of Wellington, received a letter from the Commodity Futures Trading Commission (CFTC), which allowed the site to operate without registration as a designated contract market.
PredictIt’s no-action letter was to be withdrawn by the CFTC due to what it deemed to be compliance failures.
PredictIt is the only inter-state peer-to-peer betting operation in the US with a no-action letter allowing the prediction market to skirt enforcement of the Wire Act.
Political betting will eventually launch in at least a few US states, as the US market continues to open. This has the chance to accelerate the development of the vertical, according to Shaddick.
There are a couple of things that could make a big difference in the industry. This could be made available to more people in the world and in the United States. In the opening up of various states, you can bet on politics, but you can’t legally bet on politics in any state. PredictIt is the only sportsbook platform in the US where you can place some bets.
I don’t know if you know, but it’s a tricky platform with all sorts of restrictions and so on. If you know that normal sports with customers could be on the US presidential election, it would be the biggest betting event of all time. If this was legal in some states in the future, it would be huge.
It is hard thinking
The old truths can sometimes be right. Political betting is still a difficult business, fraught with infrequent events and difficult business models. Operators who have proved themselves successful are specialists in their field who are creative in how they approach the vertical.
It is an intriguing way to put the generation of information at the centre of the exchange’s corporate strategy and the brand’s slogan.
Smarkets sounds more like a media organisation than a gambling platform when Vermeulen talks about it.
We really want to be a source of information because of the focus on the benefits of an exchange and also the uniqueUSP of politics. If you want to know who the next prime minister is, just come to Smarkets, they will be more accurate.
It’s true that people want to know how things will go. Politics is not a game because it is the essential difference between sports and politics. The blue or red team can go back to their lives once they win a race. It really goes wrong when politics goes wrong.
The constitution wasn’t designed for betting purposes, according to Matthew Shaddick, a veteran political analyst for the Smarkets betting exchange. You think it will be straightforward. You are wondering who is going to win the election. “That seems like a very straightforward proposition, but as 2020 showed us there were an enormous proportion of people who didn’t agree with the result when it came in,” he said.