Polls vs political betting markets

I had an email exchange a couple days ago with Josh Marshall over at Talking Points Memo about polls (which he’s written a lot about recently) and the election betting market (which he had never mentioned). Yesterday, he used our exchange as a jumping off point to explain why he doesn’t believe the betting market is reliable and certainly no improvement over polling. The money grafs:

“First of all, as I said, bets are largely made on the basis of polls. But let’s go a bit beyond that. In theory at least in equity markets you have armies of industry analysts studying industries and providing insights into the future challenges and profitability of businesses. Same in commodities, currencies, bonds, etc. Investors make investments on the basis of this and other kinds of information. To the best of my knowledge there’s really nothing like this informing political betting markets. Again, it’s mainly polls and the “analysts” who you see in the media. If we’re talking about calling most races right within ten points of the result keeping informed on those fronts is a good idea. But those aren’t the kind of races we’re talking about. If you want to place your money on the basis of political commentators’s predictions about the future, on the basis of the roundtable on the Sunday shows … well, good luck to you.

 

“Then there’s another point. Efficient markets need broad and diverse participation. There’s very little evidence these markets have that. Just to note one example, one of the most prominent of these ‘markets’ this year has been Peter Thiel’s Polymarket. But Polymarket only takes bets in crypto and can’t accept bets within the United States. So we’re talking the insights about US election outcomes of foreigners or expats trading in crypto. I am, shall we say, skeptical of the decisions and prognostications of that group.

 

“The final point is that betting markets, in my experience, tend to disproportionately be made up people who like to play the market. Which means they tend to be fairly right-leaning.”

Read the whole thing at the link.

https://talkingpointsmemo.com/edblog/a-short-note-on-political-betting-markets