No impeachment? Long shot
Some gamblers buy stock on outcome of current events
President Donald Trump often regards the stock market as a reflection, equating its extended bull run as the ultimate affirmation. But the same free market levers that power Wall Street can also serve as a moving referendum on his presidency and all things Washington.
In an era where you can bet on the name of the next royal baby or whether Elvis is still alive, so-called prediction markets like PredictIt are positioning themselves as serious forecasters of every conceivable political outcome.
PredictIt is a current events stock exchange that poses hundreds of questions — each its own “market” — at any given time. Users can plunk down as much as $850 to tap the next justice to leave the Supreme Court (Ruth Bader Ginsburg at 73%), forecast whether William Barr will still be attorney general at year’s end (92% say yes) or envision a 2020 presidential run by Dwayne “The Rock” Johnson (a hard no at 96%).
Then there’s Trump, whose impeachment battle has dominated the site. The odds of the Democrat-run House of Representatives voting to impeach him stood at 78% Wednesday morning, just ahead of the start of public hearings; they’d been as high as 80% in October. The site doesn’t see the Republican-held Senate voting for conviction.
John Aristotle Phillips, the Washingtonbased company’s co-founder, contends that the very nature of such platforms is a better picture of what people are thinking than what pollsters can extract from statistics.
“When people have a little skin in the game, they are more likely to distill facts from fiction and discount fake news,” he said.”The theory here is that markets can be effective at pricing future risk.”
An asset’s value is based on the size of the trading pool. Traders, much like their Wall Street brethren, make wagers based on their interpretation of news reports, public statements and other factors that can affect performance.
Prediction markets seek to harness the “wisdom of the crowds” — the theory being that large groups of people are collectively smarter than experts and polls.
Though PredictIt’s spokesman Will Jennings says it’s difficult to make a “blanket accuracy assessment, given the variety of markets,” he said the Washington, D.C.based site’s handicappers are correct 70% to 80% of the time.
It forecast, for example, that Brett Kavanaugh would be on the shortlist to succeed Justice Anthony Kennedy on the Supreme Court. It also signaled that Kavanaugh would get the nomination hours before it was formally announced.
PredictIt was on the wrong side of Brexit, when the United Kingdom invoked its separation from the European Union in a letter from Prime Minister Theresa May. Nor did it call Trump’s 2016 election victory; it said Democratic rival Hillary Clinton had a 95% chance of winning Florida, for example, but she didn’t.
PredictIt pegs Trump’s odds of reelection at 41%, which makes him the favorite one year out. As the incumbent, Trump has the historical advantage.
Democratic Sen. Elizabeth Warren, meanwhile, has an 18% chance, former Vice President Joe Biden is at 13% and South Bend, Indiana, Mayor Pete Buttigieg stands at 12%, according to the website.
Though PredictIt comes across as quiz show meets Caesars Palace sportsbook, the 5-year-old site doesn’t have bookies and oddsmakers like the sports gambling parlors that populate Las Vegas or local racetracks. And it’s not a traditional pollster.
Rather, it’s a gambling-polling hybrid that essentially asks people to back up their political prognostications with money.
PredictIt allows traders to make predictions on future political events by buying 1to 99-cent shares in binary outcomes. The resulting share price can be read as the probability of a specific event occurring, based on the collective intelligence of the market participants, according to the company.
The odds are set by the traders and what they are willing to pay. If a contract that pays $1 if “Candidate X” wins an election is currently priced at 53 cents, the market says “Candidate X” has a 53% chance of winning and 47% chance that they will lose.
PredictIt’s team formulates questions that must have two sides to the bet, known as a “contract.” Only one option can be correct, and it’s a dollar, winner-take-all.
Political consultant Pratik Chougule is the author of the 2016 book “How to Make Money from Political Predictions.” He agrees that prediction markets are more valuable than pundits, talking heads and politicians when it comes to discerning political outcomes. But Chougule said PredictIt has deep imperfections due to a demographic dominated by young, highly educated men.
They are predisposed, for example, to gravitate to a presidential candidate like Andrew Yang — a successful entrepreneur who’s polling at 3% — as opposed to lifetime politicians like Biden or Sanders.
“If markets are so rational, why are they putting such a high likelihood of Andrew Yang or Hillary Clinton winning the Democratic nomination?” Chougule said. “The market is overstating their odds because the people who are betting on political markets are not anywhere near a random sample of the population.”
President Donald Trump’s odds of reelection are pegged at 41% on PredictIt, a current events stock exchange.
PredictIt has Ruth Bader Ginsburg at 73% as the next justice to leave the U.S. Supreme Court.
Dwayne “The Rock” Johnson as a 2020 presidential candidate? It’s a hard no at 96% on PredictIt.