The Wonk's Guide To The Presidential Betting Market

Tyler Durden's picture

Via Brandon Adams of Macroeconomic Woes,

This October, as the presidential election nears, we witness the strange intersection of the worlds of the gambler and the policy wonk. Daily, our best political observers reference the current prices of the presidential betting market. Unfortunately, I think their lack of knowledge of gambling mechanics leads them astray.

For starters, why do we care about what gamblers think about the election? The power of simple consensus estimates is remarkably powerful in a wide variety of settings (see James Surowieki’s The Wisdom of Crowds for examples). Each individual’s guess contains a kernel of truth and a lot of idiosyncratic error; when we average together individual guesses, the idiosyncratic errors filter out. Market prices are a much more powerful form of consensus estimate in which the more informed participants tend to be given much greater weight in the market. Indeed, a stronger condition holds: one perfectly informed individual can fully determine price.

So, in theory, market prices can tell us quite a lot about the election. In practice, we have to look at the institutional peculiarities of the market to determine if it is in fact well functioning and informative. This is where you have to ask yourself some simple, common-sense questions. Is the market big enough to matter? Are people staking large amounts of money on the outcome? The answer to these questions, in the case of the presidential betting markets, is yes. The amount bet on this election is in the ballpark of $100 million.

In betting markets, it’s wise to be conspiracy-minded. We should ask: Is there an endogeneity to the market, such that movements in market prices actually influence the outcome? The answer to this is “yes, probably”. This opens up the possibility that there is gaming of the market. You then have to ask, “How costly is such gaming?” The answer is that it’s somewhat costly, but the dollars are quite small relative to total campaign spending, so we have to leave this open as a possibility. I personally think that market gaming is exceedingly unlikely, but it’s a possibility that one must consider in an examination of market mechanics.

Another crucial betting mechanics question is: can a lot of money be moved at relatively low spreads? You want a lot of money to be moved so that sophisticated speculators have an inventive to dig deeply in an attempt to understand the underlying reality; if it’s a small dollar market, no one can be bothered. A low friction, low spread market is going to react much more quickly to news. Day-to-day, hour-to-hour fluctuations will tend to have more meaning in a low spread market than a high spread market.

This brief introduction to betting mechanics brings us to the first uncomfortable tension between gamblers and policy wonks: policy wonks love to quote Intrade, and gamblers think it’s by far the least important and least informative presidential betting market. It’s easy to get a small amount of money on Intrade but hard to get a large amount of money on or off; as a result, you have a huge number of people betting small amounts, resulting in a middling level of total volume (some of the other sites I will discuss are far bigger). You don’t want the gambling to look like the voting, where everyone casts a vote and all votes count the same. You want the most sophisticated market participants to have more money on the site and much more influence in determining marginal price. Intrade lacks these high balance, sophisticated accounts. One way to see quickly that Intrade is lacking these large accounts is to note that a no-arbitrage condition does not hold between Intrade and sites such as Pinnacle and Betfair that are booking a huge amount of presidential action. The prices between Intrade and Pinnacle are often dramatically different; this remains true because it is difficult to get large amounts of money on or off Intrade.

The people that know the most about the presidential race are, presumably, American analysts, but, since operating online sites is illegal in the US, almost all the action is booked on offshore betting sites. These sites are difficult for Americans to deal with, and so the prices on US elections are much less informative than, for instance, the prices of British elections of comparable import (it’s very easy for Brits to get money on and off of betting sites).

There are three betting sites worth paying attention to: Pinnacle Sports, Betfair, and Matchbook. Betfair and Matchbook are both exchanges that match bets and take a commission. Pinnacle is more of a traditional sports book. Among traditional sports books, Pinnacle takes the most action on the presidential race by a huge margin. All other sports books are anchoring their prices to Pinnacle.

When a sports book like Pinnacle is taking the lead on a market like the presidential race, they can choose to set their line with a heavy hand, where they have strong opinions about what the price should be and are slow to move the line as new money flows in (they will as a result sometimes accumulate big positions on one candidate or the other), or they can set their line with a light hand, where they are quick to move the line as new money…

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adr's picture

How about a bet on who gets signed for a new reality show first, Obama's daughters or Michelle?

Or maybe the odds of Barack taking over the OWN if he loses.

Who cares about election bets?

Put $5 down on whose dick is longer, Barry's or Michelle's. Hint go for Michelle.

Ruffcut's picture

I bet, I'll be fucking drinking on Nov 6th, not giving two shits or a mitt.

I'll vote with O'bottoms up.

bank guy in Brussels's picture

As to 'I bet ...'  the above article by Brandon Adams gives us a long talk saying Intrade is worthless because big hitters don't go there, and Pinnacle is the place to be on Obama vs Romney

But then this dorky Brandon Adams doesn't tell us shite about Pinnacle or what is going on there now with bets and odds etc.! - Sheesh, give us current info at least.

Here is the Pinnacle page on US Presidential election Obama vs Romney ... as of this moment it seems to say, if I read it correctly -

1,415 bets 'all in' for Obama
3,150 bets 'all in' for Romney

Have not dug deeper into the site but here is the link ... maybe blocked for Yankee USA punters ? -

redpill's picture

I'm no fan of Mittens but he is going to win.  And it won't be as close as people think.

BlueCollaredOne's picture

I dont remember who said it on ZH, but someone said "The best thing about this election is that only one of them can win."  

It may have been you Redpill.  That comment was a fucking gem

Ruffcut's picture

regardless of who wins, we the people, always seem to lose.

Stock Tips Investment's picture

I think the economic situation is not good, and not forecasts. I am very critical of the measures that are being taken. I think there are many things to do for lack of political decision not made. But in my opinion, we should not fall into pessimism. This is a great country with a people accustomed to challenges. Although many people can not see it yet, within the U.S. economy are being produced dramatic changes. Each day we are more competitive and space is leaving Europe we cover ourselves.

vast-dom's picture

i despise them both. but i think i despite Obummer a touch more. still only a moron would vote this year, unless maybe they are gambling, which they are anyhow...

redpill's picture

There are state and local issues that will make it worth filling out the ballot.  For Pres it will be either Gary Johnson or a Ron Paul write-in.


redpill's picture

You misspelled Joseph Stalin

CommunityStandard's picture

I've seen some Gary Johnson signs and bumper stickers here and there.  Not a lot by any means, but enough to make me feel like there will still be people around to barter with after the crash.

redpill's picture

Just need enough folks that understand that oro y plata are real money and we'll take it from there, no daddy gov needed.

Harbanger's picture

SEC. 23-15-547. Improper ballot not to be deposited or counted. If the voter marks more names than there are persons to be elected to an office, or if for any reason it be impossible to determine from the ballot the voter's choice for any office voted for, his ballot so cast shall not be counted for that office. A ballot not provided in accordance with law shall not be deposited or counted.


Lucius Cornelius Sulla's picture

I only vote becaue the local stuff still matters.  Keeping the local governments out of my pocketbook is priority 1.

Flocking swans's picture

My offshore site has Dims -300 and Rips +200

Dims win pays $3.33 fo $10 bet- Same bet on Mittens pays $20

Double ur money, I double dare you.

b-rad-is-rad's picture

Wrong. That means you put down 300 to win 100 for the dims. If you put down 100 you win 200 on the rips.



vast-dom's picture

Let's hope Bernanke et. al. are hard at work figuring ways to influence these charts too.

Hugh Jorgan's picture

Barry gets the first reality show-  "Living On The Downlow: From Boystown in Chicago to the Whitehouse"

DeadFred's picture

Only important question is if the sites have an inside connection with Diebold.

disabledvet's picture

The problem with polling data is the fact that 60% of the electorate doesn't vote. That's a BIG sampling problem...which is the basis for the very idea of polling to begin with. That's why debates are the MOST important thing for a Presidential candidate to do well in. This is Gladiator time and that's why I tune in. I'm here PERSONALLY to pick a winner and a if you take my vote for granted I'm more than just offended. There was an obvious winner in the debates...someone who might not be your buddy...but he isn't afraid of at least DOING something. I mean was that an apology Mr President? For what? Anywho this throws the whole outcome in doubt and hopefully leads to a ratings bonanza come number 2. And I will tune into the Veep debate tonight as well.

Ivanovich's picture

Veep debate is tomorrow.  Just don't want you to sit down in front of the tube and leave angry.

redpill's picture

I'll mute Ryan's rambling, but surely Biden should provide some good fodder for a ZH drinking game.

Seasmoke's picture

since i do nt want to fall off the wagon, my word for Biden will be CORZINE and my word for Ryan will be BUSH

Coldsun's picture

Corzine's bush? Great, now I need a fucking drink...

b-rad-is-rad's picture

That is why they only poll registered voters. Closer to the elction (now) the polls switch to likely voters.


I swear, the average IQ on ZH has dropped by 20 points in the last 6 months.

SheepDog-One's picture

Meh....may as well just go to Vegas, bet it all on 01 black, get a free drink and a comp'd room.

onebir's picture

Policy wonks and ZH...

Olympia's picture

From the Wall Street Crash of 1929 to the Global Financial Crisis of 2007


It all started with the big crisis of 1929. The American economy reached a deadlock because of its social "pathogenesis"; a deadlock that led it to economic crisis in a different - faster- pace than the rest of the industrial forces of that time. Important decisions had to be made - mostly social - and the Whites didn't like that, especially the Whites' rulers, the Anglo-Saxons. The USA society had to either be homogenized and "forget" about racism against black people or find itself in a permanent deadlock that would threaten it with social uprising. If they didn't equate the black working people with their white colleagues so that there wouldn’t be an issue with the salaries that threatened the national currency, they couldn't avoid reactions and all that goes with it.


The problem which began as social but was turning into economic was simple. As long as the economy functioned adequately and the Blacks worked and asserted what they deserved for their work, the white employers had to "fund" the white working force with extra money because of their skin color. To avoid complaints from a white worker who received the same salary with his black colleague, the employers had no choice but to give them more money. The demands of the Blacks were used as an excuse by the Whites to demand more and everything ended up in the same pocket, since they were under the same employ. The problem that arose from this "strange" tactic was that the increased takings of the "superior" White employers were seeking outlet in investments and that threatened the capital. Having higher salaries, they bought more houses; they bought stocks and so on.


Authored by Panagiotis Traianou

news printer's picture

Update !!!

Turkish F-16 forced Syrian civilian airplane to land in Ankara


SilverRhino's picture

That could get very unpleasant.   Russia is one the only nations left still able to project power. 

Carl Spackler's picture

Yes, either rusted out Russian tanks or nuclear weapons, both of which are a giant question mark, when considering whether they will operate as intended. (of course, with nuclear weapons that could mean SERIOUS unintended consequences)


However, why would the Russian people want to fight a war right now ?

They no longer live in your father's Soviet Union.

Harbanger's picture

It's too bad it took so long, but the truth is finally coming out on the Administrations lies about the ME.

Lara Logan, the CBS reporter sexually assaulted in Egypt informed a crowd yesterday that a “lie” is being propagated by the American government. This is an indictment on Barack Obama, and everybody in Washington not telling the truth. Logan says that people have been duped into believing that the threat of radical Islam is merely a thing of the past.

Lara Logan 2012 BGA Annual Luncheon Keynote Speech:



vegasjack's picture

where is this story 

The CEO Letter Heard Around The World "Vote Obama; Lose Your Job"

company Westgate Resorts on Monday threatened to fire someemployees if Barack Obama is reelected

Duke of Con Dao's picture

also threatened to fire employees if wife's bra size dropped from 40-DD

to anytthing below 36-C...



my guess is that you haven't seen Queen of Versailles. this man is a friggin' idiot...

shouldn't have married that stripper ;)   (see John Kluge)

Duke of Con Dao's picture

YouTube - Obama on Romney's Debate Promise for Rich People
"I will not reduce the share of taxes paid by high income individuals!" sez RomBot!

and Obama's response.

vegasjack's picture

no one here likes either one. who then do you want to lead us then  & explain


Duke of Con Dao's picture

Mr President, how 'bout another Bitch Slap?

why certainly Mitt!

YouTube - Obama on Romney in 7 Seconds

Count de Money's picture

I'll stick to gambling in a place where I know how the game is rigged: the stock market.

RichardENixon's picture

Professional Wrestling is the only honest game in town.

Baldrick's picture

Sorry this is off topic, but I'm weary and done with this charade. Being a registered independent I receive spam from both parties. Today I have replied to ALL of them "Why have none of the executives of the too big to fail been imprisioned, and why is Corzine still free, and why has there been no independent investigation of the justice department for gun-running?"
Just thought I would throw this out there. Prior to The Declaration of Independence there was a great deal of attempted commmunication with parliment.

Seasmoke's picture

this is one of the oldest tricks in the boxing book......have the champ lose the 1st fight to the challanger, so fight #2 is a BONANZA !!!!!!!!!!!!!

Carl Spackler's picture

Yeah, but the "champ" is an effing weakling.

Find an analogy that is actually real.

d2themfi's picture

Nice to see a fellow poker player get some play on Zerohedge!

Carl Spackler's picture

Just went long Romney on Pinnacle.  (and put in both an NFL AND Champions League bet!)

Between the debate beach slap that Romney gave Obama and the brewing Benghazi-gate scandal, it's sure looking like game, set, match, championship.  Possibly, as red pill a runaway for Mittens.

DecisionTime's picture

If you go long Obama on InTrade for $1,000 and long Romney on Pinnacle for $521, you make a guaranteed $100 or about 6%.  Not bad.  Unfortunately, it appears that neither Pinnacle nor the other two sites mentioned in this post allow US customers.

Winston Smith 2009's picture

All you need to know about the FARCE that is the supposed "choice" to be made in this election by the hilarious, observational (and, therefore, rightfully cynical) humor comedian who has replaced George Carlin as my favorite:

Bill Burr on Steve Jobs and Political Conventions