Photo (cc) by Gage Skidmore
Proclaiming who you hope will win the White House is one thing. But is it something you’d bet on?
A couple of days ago, I wagered $500 that the Democrats would win the presidency in the upcoming election. It wasn’t a decision based on political leanings: It’s all about the money.
Here’s why I made that bet, and how I did it.
Betting on elections
For the most part, it’s illegal for U.S. citizens to bet on elections. There are, however, two exceptions.
PredictIt is a betting platform operated by, oddly enough, Victoria University in New Zealand. Here you can bet up to $850 on wagers ranging from which party will win the White House to whether North Korea will test a hydrogen bomb by year’s end.
Despite the ban on American political betting, PredictIt is legal. It got an exemption from the feds because it’s operated as a research tool.
Researchers like to study betting sites to see if they’re better predictors of the future than polls. They often are, which makes sense, since expressing an opinion isn’t the same thing as backing that opinion with real money. Bettors tend to use less emotion and more facts.
The picture above shows you what the White House odds were in mid-May. As you can see, the odds of a Democrat winning the White House were 63 percent, and the odds of a Republican winning were 37 percent. To place a bet, you’d pay 63 cents for one Democratic share. If a Democrat wins, your bet will pay $1, which means you’ll make 37 cents on your 63 cent bet. That translates to a 60 percent return.
One fly in the ointment, however: You won’t really win 37 cents because PredictIt takes a 10 percent cut of any profitable trade.
The University of Iowa also offers a legal betting platform, and for the same reason as PredictIt: research. This is the platform I used to place my recent bet.
This platform has a maximum account size of $500. To participate, you first have to print out an online form, then snail-mail it with a check to the university. A week or so later, you’re notified by email that you’re ready to play.
Shortly before I started this article, I bet about $500 on a Democratic White House win. At that time, the price to buy shares, called the ask price, was 62 cents. The price of shares being sold, known as the bid price, was 60 cents. I put in an order between these two prices, at 61 cents. When you specify a price, that’s known as a limit order.
Within a few hours, my limit order was filled. I now own 800 shares. If I choose to wait until the election and a Democrat wins the presidency, each of my shares will be worth $1, so I’ll get $800. If I decide to sell my shares before then, I’ll get whatever the bid, or selling, price is at that time.
Unlike PredictIt, the University of Iowa market doesn’t take 10 percent of any winnings. That’s why I used them.
Place your bets!
Betting on elections is like any other kind of betting: It’s something you only do if you’re using money you’re willing and able to lose. Unlike other types of gambling, however, these sites are fascinating even if you never bet. Because they’ve historically been more accurate than polls and pundits, they’re a sound way to stay on top of what’s likely to happen.
One site I look at often that combines the results of both polls and betting sites, and is exceedingly simple to use, is ElectionBettingOdds.com. Here’s a current picture of it:
Sites like this will keep you in the know. More important, they’ll save you countless hours of trying to figure out who’s ahead by reading articles and listening to the endless drivel on cable TV.
I’ll let you know how my bet comes out. In the meantime, let’s hear from you, either in the comments below or on our Facebook page. Who do you think is going to be our next president? Willing to put your money where your mouth is?