Online Betting Began to Poll US Elections And Excludes Sanders
A new form of election polling may be on the horizon: online betting in a method similar to making trades on Wall Street. PredictIt, an online political stock market that allows users to wager small amounts of money on "yes" or "no" predictions about whether an event will occur. The online betting includes who will win the U.S. presidential election in November although it exclude Democratic presidential hopeful Bernie Sanders, who has yet to drop out of the race officially.
Launched in 2014, PredictIt now has more than 30,000 traders registered, up from 19,000 at the end of 2015. Bets are not big. The U.S. Commodity Futures Trading Commission caps each participant's position at US$850 per market, and the average deposit when people sign up is just US$100. Predictions markets like PredictIt and a similar venue run by the University of Iowa have emerged as an alternative to polling for election forecasters. PredictIt is bigger than the Iowa Electronic Markets, which has only about 2,000 active traders with access to its political markets.
"It is very expensive," David Rothschild, an economist at Microsoft Research who runs a predictions-market aggregator called PredictWise, which draws heavily from PredictIt, to Reuters. "It's a slow process. It's not very flexible."
Knowledge of polls does also feed into betting decisions on PredictIt. "Predictions markets translate this and other information into probability," Rajiv Sethi, professor of economics at New York's Barnard College, said in an interview with Reuters. "The basic intuition is that it's a 'wisdom of crowds' effect."
For example, a Trump share shot from 30 cents in early February when he lost to rival Ted Cruz in the Iowa primary to 80 cents a month later when Trump dominated on Super Tuesday. They then lost half their value by early April as Cruz appeared to regain momentum with a big win in Wisconsin.
With Cruz and another rival, John Kasich, now out of the race, Trump had risen to 94 cents by Monday. For November's election, though, Trump is trailing on PredictIt with 40 cents against Clinton's 59 cents. While PredictIt's precision has yet to be closely examined by academics, other predictions markets such as the Iowa Electronic Markets, have proven to be just as accurate as polls, experts who have studied them said. It seems the market does the run election.