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Sh*ttin brix in the tail…

After my conversation with Andrew yesterday about The Economist election forecasting model I got curious about how G. Elliot, Merlin and Andrew want their prediction to be assessed given the menu of strange contingencies we have in front of us.

I checked Betfair rules for some guidance:

This market will be settled according to the candidate that has the most projected Electoral College votes won at the 2020 presidential election. Any subsequent events such as a ‘faithless elector’ will have no effect on the settlement of this market. In the event that no Presidential candidate receives a majority of the projected Electoral College votes, this market will be settled on the person chosen as President in accordance with the procedures set out by the Twelfth Amendment to the United States Constitution.

This market will be void if an election does not take place in 2020. If more than one election takes place in 2020, then this market will apply to the first election that is held.

10/03/2020 10:30am – Once voting (whether postal, electronic or at the ballot box) begins in the year 2020 for the US Presidential Election 2020, the election will be deemed to have taken place for the purposes of this market. We will then settle the market as per our rules regardless of whether the election process is fully completed in 2020 or beyond.

A correspondent replied: “betfair lawyers r sh*ttin brix”

So what happens if Biden wins, Trump goes ballistic (no if there),  Democrats impeach, and the Republican Senate assures an “orderly transition” with 20+  of their senators recognizing the unique opportunity to rehabilitate themselves well before they have to face *their* voters again?  Will the next president forecast be correct then?

We can always go further into the tail…  a contested outcome, widespread civil unrest, no mechanism for resolution, calls for the military to step in, a second constitutional convention, etc.

People want an oracle

I guess the great thing about this forecast is that they don’t have to shit br*x on the spirit vs. the letter here — nitpickers & well-actuallies can’t take them to court (I know it’s a forecast of  “vote intentions for Election Day” but we all know what we do with this forecast)

Incidentally, the Betfair “Trump Specials” market currently has the probability of Trump finishing his 1st term at 90%. This is higher than the current, and still too low, 98% chance of Biden winning Cali that we discussed (here and here). The Trump Specials market isn’t nearly as deep as Cali tho — you can get a 9-to-1 payoff betting against him finishing his first term only up to a $10k stake before you exhaust all sellers based on current limit orders. But still.

I know Andrew doesn’t think much of betting markets: “The market doesn’t produce the forecast so much as it motivates investors to find the good forecasts that are already out there,” and neither does Nate Silver: “Political betting markets are basically just a competition over what types of people suffer more from the Dunning–Kruger effect.

But these markets do tend to order the probabilities correctly, even in the olden days before polling.  Of course this isn’t magic — bettors may employ various simple and useful heuristics like the “nature of the times” (see Philip Converse’s work), or more disciplined algorithms that tally factors for & against (e.g. see Allan Lichtman’s model).


Full disclosure: I have a stake backing YES here, it is not a big one, but with long-shots it doesn’t have to be.

Ps. Looks like there is free money in the popular vote betting market, 16% net return on investment if you back Biden winning the popular vote.  Of course, if there is a 10% chance of madness  your stake could sit in escrow for awhile.

PPs. If I sound like I have my head in the sand it is because I do.  I haven’t checked the news in two weeks and we were just released from a 3.5-month lockdown here in Melbourne, Australia.



  1. Evan Zamir says:

    The California odds are so funny. It’s basically unimaginable that CA goes for Trump. It’s not considered a swing state by either side, not even the crazy Republicans that honestly believe Trump is about to win NY. You can win $1000 by putting $20K down. It’s basically free money. And yet there it is.

    • Joshua says:

      It’s all brix in the tails, I guess…

      • Joshua says:

        ps. at the moment, on Betfair, backing Biden in California yields you a 2% net return (up to $40k stake, and 1% thereafter). Given you are waiting, what, 2 weeks at most for the outcome, that is quite the annualized return.

        • Anoneuoid says:

          Deposit fees, withdrawal fees, commission, counterparty risk, opportunity cost… It’s not free.

          I dont know what the fees are but is it really worth it to transfer $40k somewhere to make something less than $800 after two weeks?

          • Yeah, if you have a US bank account, it isn’t worth it. For betting markets I agree that fees can be an issue. The difference here is that Betfair has zero deposit fees, zero withdrawal fees, they charge 5% commission on net winnings, and the chance they go bankrupt is slight with such a short time horizon. So, you get 760 in two weeks. It is a good excuse to buy all your friends a round. It won’t change your life, of course. I wouldn’t be bothered to do it myself, but that is just my behavioral inertia talking.

            On the other hand, the 15% net return on the Biden popular vote bet is worth putting serious money on. Free vacation.

            Of course none of this is worth it if you don’t find it a little fun. You aren’t going to make real money on these kinds of mispricings.

  2. Garrett says:

    Man do I wish it was legal to bet in the US

  3. Z says:

    Damn, got a message that it’s illegal to register for Betfair in my territory. I think this is for the best.

  4. Peter Gerdes says:

    In theory such markets would do very well but I’ve lately realized the whole project is undermined by the fact that there is a low limit to how much money you can stake and number of traders (prez market isn’t accepting new traders).

    Not only does it mean that there is little incentive of people to build complex models for the markets but you lose the ability to elicit private info. I mean suppose I know a big Biden scandal ahead of it being revealed. The idea of prediction markets is that I should be willing to sell Biden shares on the principle that the pool of people who would counterfactually intervene if the current price was different will adjust their beliefs in response to the scandal so I can then sell and take my profits. Once the market can end up locking out future traders I can’t be sure that I’ll be able to make enough money to be worth my while since if most market participants just want to buy and hold so the market doesn’t even recieve this private info.

    In other words a real prediction market seems likely effective but once you limit market cap and individual exposure it’s not very useful.

  5. Carlos Ungil says:

    > Full disclosure: I have a stake backing YES here, it is not a big one, but with long-shots it doesn’t have to be.

    I’m curious, what is it? Following links to just shows a message about accessing the Betfair website from a country that Betfair does not accept bets from.

    • It is called “USA – Trump Specials – Trump To Leave Before End of 1st Term”

      Rules are here:

      Will Donald Trump officially cease to be the President of the United States of America before the end of his first term in office has been completed?

      This includes, but is not limited to, if Donald Trump leaves office due to death (excluding assassination), incapacity, illness, impeachment or resignation (or anything comparable). All bets will be voided if Donald Trump ceases to be President of the United States of America due to an assassination or an assassination attempt.

      Customers are entirely responsible for their positions at all times. Betfair will not be responsible for suspending the market when an official announcement is made. However, Betfair will suspend the market as soon as it becomes aware of an official announcement.

      If Donald Trump fails to be inaugurated then this market will be void.

      ****Note: The above line referred to possibility of Trump failing to be inaugurated in 2017. The market will now be settled based on the date Trump ceases to be President as per rules. (Updated: 29/07/2020)*** **Note** For clarity Donald Trump will be deemed to officially cease being President when he is replaced on a permanent basis. Any situation where he steps down on an interim/temporary basis will not count(Updated 05/10/2020 @ 17:00 GMT)

      In the event of any ambiguity over an official announcement, Betfair may determine, using its reasonable discretion, how to settle the market based on all the information available to it at the relevant time. Betfair reserves the right to wait for further official announcements before the market is settled.

      Betfair expressly reserves the right to suspend and/or void any and all bets on this market at any time in the event that Betfair is not satisfied (in its absolute discretion) with the certainty of the outcome.

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