Political betting markets are junk. Stop treating them as if they were polls.
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Gambling is everywhere. It’s inescapable. Since the Supreme Court allowed states to legalize sports betting at their discretion in 2018, the industry has exploded. Advertisements for sports betting are running seemingly everywhere all the time. But it’s not enough. We need more. Gambling should not infect just every facet of athletics, it should pervade every facet of our society. Thankfully there is another place to get your fix; political betting markets. For anyone yearning for a gambling addiction but lacking an interest in sports, fear not! Brave pioneers have turned to the internet (and the cryptocurrency industry) as they seek to make money off what they know best, politics. The best part? You can lose massive amounts of money without ever risking the loss of your dork bonafides.
This is obviously a strange development, if not a new one. These markets have existed for years (the longest-standing purveyor being PredictIt, which was founded over a decade ago), but what is new is the attention these websites are getting not from gamblers, but from pundits. To a confusing number of prominent media figures, political betting markets have become a place for “insight” into the state of the 2024 election. And the markets themselves are seemingly thrilled to be receiving not just the free advertisement, but the legitimacy that comes with them being viewed as a meaningful measure of public opinion or bellwethers for elite decision making.
In a Politico piece earlier this month, Obama Administration Economist (and frequent hack) Jason Furman said that prediction markets are so good that “If I was away from the news for six straight hours, I would check the prediction markets before the news.” Furman’s confidence in political betting markets is not unique though. In a June article on the consequences of President Biden’s disastrous debate with former president Trump, Semafor reported on the jump in odds that Trump received in the PredictIt betting markets. Similarly, NPR reported on the bets being made on Harris’ potential VP picks back in July, while Fox Business used the markets to declare Pennsylvania Governor Josh Shapiro the “clear favorite.” According to Fox, before Shapiro took the lead, Arizona Senator Mark Kelly had been the clear favorite in the VP betting markets (apologies to any gamblers who lost their shirt in part due to my writing on Kelly’s poor labor record).
Certified Revolving Door Project hater Matt Yglesias has also turned to the political betting markets for “insight,” pointing out that immediately following Biden’s announcement that he would step down from atop the Democratic ticket, political betting market odds for Trump had barely budged. In reply to Yglesias’ observation, polling savant Nate Silver explained that this was because Biden’s withdrawal from the ticket was “already pretty priced in” and because “markets think Mystery Dem > Harris > Biden.”
Silver’s analysis is revealing of why these pundits think the gambling websites offer analysis; because bettors will factor in the odds of any possible outcomes. Silver, though, isn’t just an impartial polling analyst; he’s actually a paid advisor to the world’s largest US politics betting site, the cryptocurrency-connected firm Polymarket. Every time that the supposed insights of these markets are promoted, his client receives free advertising. Silver being hired by the firm brings one of the political world’s most respected numbers guys to the side of political betting markets and helps legitimize their “insights” to journalists. As Silver himself said to Axios about the market’s insights for political campaigns, “probabilities really matter when you’re trying to make plans.”
The problem is that political betting markets do not offer real probabilities of outcomes. They simply reflect the expectations of hopelessly online political junkies and gamblers. The markets do not properly “price in” every possibility because there is no fundamental value like there is for a stock. Whereas companies on Wall Street disclose assets, obligations, profit and more every quarter, offering real numbers for potential investors to base their investments on, political campaigns do not. In fact, the campaigns themselves often have no idea where they stand, let alone outside observers making predictions based on the insights offered to them by their Twitter “for you” page.
One only needs to look at recent examples to know this to be the case. On July 22nd, Tim Walz was not listed as in the top 6 candidates for Harris’ VP on Polymarket. Above him were Josh Shapiro, Roy Cooper, Andy Beshear, Mark Kelly, Pete Buttigieg and Gretchen Witmer. In the days before this, odds on Walz to be the Democratic VP nominee were below 100 to 1. Was any of this based on real analysis, underlying fundamentals or other things that can be accurately priced into markets? No. It was based entirely on speculation, rumors, and vibes.
Just last week, as news of a “special guest” at the DNC spread on Twitter, Polymarket once again entered the fray, offering odds on the chances that it would be Beyonce. The odds that it would be her hit 61% a little after 4:00 PM, reached 96% after 7:00 PM and eventually hit as high as a 99% chance a little after 8:00 PM. None of this came to pass as Beyonce’s representatives told reporters she was never scheduled to perform at the convention.
Obviously the chances of a celebrity performance at a party convention are even more divorced from quantifiable probabilities than the general election odds which can take polling into account. But this does not mean that the latter should be used by serious journalists or pundits as if it was insightful. If polling is what you’re after, look at it, but do not pollute factual information with the insights of gamblers looking to make a buck.
Given that political bettors are often politically-minded (with all the partisan bias that comes with it) and lack real information about campaigns, the markets reflect a distorted view of reality. Economists and supposedly economically-minded pundits should know better than to trust market insights that are based on incomplete and asymmetric information.