Edition 02: What about PredictIt? The Nuances of Political Gambling
A look under the hood of the biggest betting event in history
Welcome to Edition 02 of The Handle, where we’re going to take a deep dive into the American political gambling scene.
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In the United States, betting on political outcomes is broadly banned. Across the country, gaming regulators shy away from allowing offerings as simple as “Who will win the next Presidential election?”. On the other hand, offshore books face none of the same restrictions as regulated books. Shops such as Betonline.ag and Bookmaker.eu both do significant volume each year on election bets, including from American consumers. These books function much the same that a regulated book does, deposit money and place a bet. In an effort to drum up action and attention, these books offer odds on politics. In 2020, BetOnline.ag even offered two-way markets on each of the 50 states in the Presidential elections.
Offshore shops have large incentives to offer these bets: often the markets exist far in advance of the event, meaning that the deposited money used for the wager is held by the book for longer. Also, because people want to be able to say “I bet on the Presidential Election” and with a large amount of uncertainty, books often stretch the hold percentage on political events. A 50-50 proposition may have an implied probability of 55%-55%, or higher in multi-way markets. Untethered from regulation, some books were even offering live betting as the votes were pouring in on election night.
To understand the potential of political betting, one must take a look at the live odds trackers from the 2020 presidential election (Action Network)
Odds for Biden to secure the presidency swung all the way to a Tuesday 10 P.M. low of 25.8%. Balancing media news break swings and public action within such small time frames allow for such dramatic shifts in odds, making political betting potential an electric future possibility.
Whether those books should have been taking money from Trump supporters at 2 A.M. is up for debate. Although we’ll never know exactly how many bets these books took, bookmaker Dave Mason from BetOnline tweeted the following.
The Super Bowl is the consensus biggest betting event in the United States and was far outstripped by the Presidential Election. BetOnline took more action on the 2020 election than the two previous Super Bowls combined.
Obviously, the appetite is there for betting, but what other options are there for a recreational bettor in the United States who doesn’t want to make the foray into unregulated books?
A site known as “PredictIt” also offers a variety of political propositions which American users can take advantage of to bet on politics. PredictIt is the only functional betting exchange in the United States, and it exclusively offers political markets. So how does PredictIt work? It functions as an exchange where an event “happening” redeems at a dollar, and an event not occurring redeems at zero. Shares of the event are traded in increments between $0.00 and $1.00 depending on how likely an event is to occur. Traders can sell their shares at any time. For example, I could have bought shares of President Biden to win the 2020 election at around 20 cents after the Iowa caucus. After Mr. Biden secured the nomination, I could have sold those shares for around 55 cents, nearly tripling my investment. Alternatively, I could have held shares until after the election, when they would be paid out in full at $1.00. I would buy and sell these shares from other traders on PredictIt.
The obvious next question: how is PredictIt allowed to operate? How can a small, independent site offer these wagers when behemoths like Draftkings and Fanduel cannot? PredictIt is incorporated under a non-profit associated with Victoria University in Wellington, New Zealand. Further, they limit the maximum position of any single trader to $850, meaning that the stakes pale in comparison to the thousands of dollars taken by regulated and offshore books. PredictIt received a no-action letter (meaning no regulatory actions would be taken against them) from the Commodity Futures Trading Commission, ensuring that at least in the short term, they would be able to function.
PredictIt may not have deep liquidity and has strict limits on trading, but it represents the first functional exchange in the United States. It operates with an understanding from regulators and provides tight spreads. Whether PredictIt can survive the era of legal gambling is something that remains to be seen, as well as whether or not legal books will be able to take political bets, but for now, it is something any recreational bettor interested in politics should take a look at.
Miscellaneous Recent Consumption
Press
Former MGM resorts & NASDAQ CEOs invest in Sporttrade, US Sports Betting Exchange
Sporttrade is aiming to apply principles of open financial markets to the sports betting world, and CEO Alex Kane & his team raised a $36 million funding round to help them do so.
Fanatics taps FanDuel CEO Matt King for sports betting and gaming venture
Fanatics founder Michael Rubin has hired a big fish to oversee his company’s gaming venture, former Fanduel CEO Matt King. Fanatics has accumulated mass amounts of consumer data derived from partnerships with all major sports leagues and numerous teams & players.
Louisiana Sports Betting Regulation Bill Signed Into Law: Targeting Fall ‘21
On June 22nd, Louisiana Governor Edwards signed their mobile sports betting regulation bill into law, allowing operators to enter the state as early as this upcoming college football season.
Operators To Run Sports Betting Ballot Initiative In Florida
Draftkings & Fanduel are pushing a proposal that will push sports betting to the ballot in 2022, which is a major step forward for legalization efforts in Florida.
Pods Across Sports Worth Listening To
Opportunities
Sporttrade (Camden, NJ or Remote) - Market Operations Analyst
BetMGM (Jersey City, NJ) - Sports Content Management Specialist
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