We're four political betting experts. It's been a volatile couple of years in the world of politics, and we spend our time trying to predict what will happen next. Ask us anything!

Why, in your opinion, is there a discrepancy between BetFair / PredictIt / Smarkets and polling average on RealClearPolitics on the Democratic Nomination markets? The difference is especially big for Biden.

3 reasons in particular. First, Warren has momentum whereas Biden started with a big name recognition advantage - something that usually fades as the primaries develop. Second, a perception that Warren's more radical positions will be more favourable among primary voters. Third, she's in the strongest position in the first two primaries. No presidential candidate in recent times failed to win either Iowa or New Hampshire.

She seems to be losing momentum if you look at RealClearPolitics graph in terms of polling.

Sure, but we are still a long way out. The more media she gets the better she'll do.

Polling is about representative samples at a particular point weighted by other factors. Prediction markets are based on confidence (expressed by money put into the market) on a particular contract and a view of the movement of the price.

So someone can trade into a market on a contract that they don't personally support, move the price up and then trade out before the contract is paid out. This kind of behaviour is not present on polling data AFAIK.

How do you compare the predictive value of betting markets as opposed to polling? What are the benefits and drawbacks of each method?

I see polling as a type of two dimensional data - asking the person a question that could be biased and the person giving an answer they think is acceptable to the interviewer.

Prediction markets ask the trader to consider the most likely outcome and whether the market is correctly priced. The trader also has skin in the game which makes them answer differently about the probability of events.

Many polls will inform betting markets - the General Election market roughly reflects the poll of polls at Star. The benefits of betting markets as a guide are that you can get a read on the trend faster for the polls if you can spot serious money. The benefit of reading the polls is the methodology involved - don't believe those who will tell you that the polls are wrong because they didn't get a result exactly right.

Link to GE market: https://starsports.bet/event/108944/next-general-election

It is circular. There is a clear connection between opinion polls moving the news, the news moving the prediction markets and the prediction markets (where big enough) changing people's views.

Hows Andrew Yang lookin?

Currently at 4% for next Democratic presidential nominee according to: https://smarkets.com/event/886734/politics/us/us-presidential-election-2020/democratic-nominee-2020

And Hillary Clinton is at 5%. How does that make any sense?

Our prices will move if people trade the contract. The money isn't going on her so the market is not moving. :-)

You might have to dumb this down.

As an exchange (Smarkets) the prices move when someone takes the existing liquidity offered at the stated price. The money then 'refreshes' with a new price. If that is taken the same thing happens again. So as it is being traded the prices change.

This might help a bit more:

https://help.smarkets.com/hc/en-gb/articles/115001820389-What-is-a-betting-exchange

How profitable is accepting bets on politics in a broad sense? Certainly not as profitable as sport, I'd imagine.

Sports is clearly a better understood area for most trading exchanges. However, people trade indirectly on politics on stock markets, etc to a much greater degree. Directly trading (legally) on politics is much newer and we are seeing solid growth.

It's still pretty niche, but compares favourably to some lower/mid level sports.

if we got a general election and a POTUS election next year, politics might overtake (in terms of money taken) things like Rugby League, Formula 1, maybe Boxing.

We manage to turn a profit most years anyway!

I think 2020 is going to be the biggest year for politics in a while!

I have £10 to put on a political bet and want odds of at least 10/1. What's the best bet out there?

I'd go niche: Johnson PM's constituency majority in the next General Election: https://smarkets.com/event/4246682/politics/uk/next-uk-general-election/borisjohnson?marketid=30411949

Does the average "punter" typically place bets on politics? In what ways can betting on politics be made more appealing to a wide audience?

Most people who trade on politics also trade on sports with us.

Politics can be made more appealing if they laid down some proper rules of procedure as exist for sports. Then people could understand better what is going on and feel informed enough to trade on it.

I live in Canada and can bet on the US presidential election through a provincial sports betting agency.

What I don't understand is that they give better odds for president to a bunch of people who aren't even running than to some of the main Democrat candidates. Right now they have better odds for Hillary Clinton to become president than anyone other than Trump, Warren, or Biden.

Is this an attempt to sucker people into an obviously unwinnable bet by offering odds that make it look like a strong possibility? What's going on here? I could understand if they gave it long shot odds, but not better than most actual Democratic presidential candidates.

I can't answer about other companies, but the name recognition factor can go a long way and they wouldn't offer odds on contracts that they didn't think they could sell.

What's the process for setting initial odds for an election (or other event)? And how about the process for updating odds as more info (and betting patterns) becomes available?

I'm imagining a boardroom full of experts shouting over assorted polls and historical data, then finally the boss is like, "12/1 it is."

We'd look at all available pricing sources, whatever that might be for that election and then discuss them.

Where there is no good pricing source we have a price discovery algorithm that we use.

More and more I've noted traders jumping into our new markets and setting their own prices directly. I've no idea how they choose their prices.

Sadiq Khan for mayoral 2020 seems like a good shout at 1/2?

I'd give it a go!

How have eccentric and wildly unpredictable politicians like Trump and others affected your predictions? Do you account for their randomness to a degree in your formulas?

Edit: Also what do you guys think of more mainstream sites like PredictIt?

Little chance doesn't mean no chance is a rule you learn pretty quickly on prediction markets. If something has any chance of happening it should be priced into the market - including the status quo continuing, which although it doesn't feel like an option, is one that should be on many markets of late.

Predictit is a great academic experiment running in the US. As a non-commercial operation, it can't quite be as dynamic as a fully open commercial market with its user limits.

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You'd have to define that more! We often get asked questions like this and coming up with settlement criteria that everyone is happy with is one of the biggest problems we have.

How is the liquidity in Political markets nowadays? (appreciate that's a pretty broad question)

It is building, however, most people don't have an expectation that they will gain their entirely livelihood from political betting at the moment.

In the big political markets there is plenty of liquidity.

One critique I've seen of European oddsmakers in respect to American elections is that because of the legal restrictions on Americans betting with you guys, there could be a skew in your odds or at least a much less functional market than you'd see in, say, sports betting.

Do you think that critique is accurate? If not, can you elaborate on how you make sure the markets are thick enough to get good information given the legal constraints?

There can be a skew, but when something is loud enough in the US to be heard over here, the market will normally get to the right result quickly.

We have some very keen Political Traders on Smarkets who move our markets very quickly in response to relevant information.

• What are the odds that trump completes his term in office?

• What are the odds that the Democrats win the next presidential election?

• Which Democratic candidate has the best odds of winning the next presidential election?

• What are the odds that the candidate that was your answer to the last question is the candidate put forward by the DNC?

Thank you!

Rather than give you out of date prices, you can find our markets here: https://smarkets.com/politics/us

Can Bernie win or will the super PACs sink him like last time?

There is a lot to be said for a strong 'ground game' (just ask Change UK), and even in the face of Super PACs, Bernie did a lot better than I expected.

I think it is a mistake to write him off at the moment.

How do you decide when to resolve political bets in general? For example, a US presidential election could be "called" on election night, but the electors don't vote til mid-December, and the Congress doesn't certify the electoral votes until January.

If I had bet Trump to win 2016, when would it have been resolved?

At Smarkets we try to resolve on the official source of information. However, there can be issues with this and in the midterms in 2018 we had candidates conceding and unconceding races. Here we reopened the markets and then resettled them when the official result was known.

In case of dispute, we are members of the arbitration body IBAS who will make judgements we follow.

Random question; but my UK passport expires in Feb 2020. I'm due to fly to France on 3rd November. If no longer in the EU, under current rules my passport has to be valid for longer than 6 months. The only solution would be for me to get an emergency passport and spend £170 which I would rather not. What is the likelihood we will still be officially in the EU come 3rd November for me to fly with a passport expiring within 6 months?

79% that the UK won't leave the EU on the 31st October 2019 according to this: https://smarkets.com/event/2756591/politics/uk/brexit/uk-brexit-31-october-2019

How do you think political betting is going to change in the next decade, aside from the fact it will likely get bigger?

I think that we are going to popularise political betting so a wider group of people will be involved and the credibility of our markets will increase as the mainstream media will use our markets as data points in wider stories.

Prediction markets are great ways to cut through the bias of any news source and I see them being increasingly used for this purpose.

If there was to be a second Brexit referendum, what odds would Remain and Leave be?

I'd go 55% remain at this point.

Tricky, it will all depend on the nature of the options being presented on the ballot, as it almost certainly won't be a re-run of the 2016 vote.

Logically, you might expect a 3 way ballot with remain/deal/no deal as the options with voters given a first and second preference.

I'm pretty sure Remain would win if it went like that.

I agree, but I think it is more likely to be BJ deal versus remain in which case remain will also win.

Thanks a lot for all of the questions, I've really enjoyed it. I'm going to be signing off for now, but keep your questions coming and I will reply to them soon!

How do you take into account that "conventional wisdom" isn't a thing anymore?

The lack of historic data mean that traders have to price uncertainty into the market. This means traders get better prices, which can lead to greater rewards to accompany the greater risks.

What is the most recent political bet you've made?

Year of next General Election.

Wait, what? This deserves more explanation. You think the GOP will go along with suspending elections?

Think he means the UK

Yup UK election. I think it might be earlier than people think.

If someone wants to make a large bet, would they just post it to the exchange or will they get in touch with you guys and try to find someone else to do it with?

For Smarkets the money would have to be in their account and they could post it directly on the exchange. It would be matched automatically when another customer requested the other side of that contract.

What are the differences between bookmakers and exchanges?

Bookmakers offer one side of a bet and add a margin. An exchange allows you to be on either side of the bet at odds you chose. Also you can trade in and out of your position on an exchange.

What are the odds on various candidates (Biden, Warren, Sanders, etc) against various candidates? I'm the case or the 2016 election, how did odds shift in October as scandal after scandal shaped the political landscape?

We have many markets on the next US Presidential election, is this kind of thing you are thinking of? https://smarkets.com/event/886736/politics/us/us-presidential-election-2020/2020-election-winner