Election Betting Markets

Election Betting Markets

The betting markets are projecting Donald Trump to win Tuesday’s election by 62 percent. That’s a huge shift over the past few months since Kamala Harris became the presumptive nominee.

From seasoned election commentators and experts, you'll hear that betting markets are never wrong. And they usually aren’t. But anyone who has ever gambled at a casino or knows the statistics behind it understands that the casino always wins.

I’ve heard the average bettor, commentator, and seasoned news anchor say, “What do the betting markets know that we don’t? It’s got to be something.”

Well, I’ve got news for you—it’s nonsense.

Do you think the betting markets have private polls that the candidates cannot access? Why would the betting markets show 5 or 6 percent odds that the winner won’t be inaugurated on January 20? (Don’t get too excited, Tim and JD!) While that’s pretty wild, it’s not based on private insider information.

The same goes for predictions of a Trump win. That’s because you have to understand what drives these betting markets — the bettors. They’re not betting on anything more important than the “atmosphere” that made Harris’s win seem inevitable earlier this summer.

The groups betting hundreds of millions on Trump, which in turn are driving the markets toward his victory, are using their own models that aren’t based on polls but on how social media is treating the candidates. They track things like comments, engagement on posts, and reach, especially in swing states. But there’s a problem with these atmospherics on social media—someone controls them.

When you create a new model that predicts who will win in the future, the best way to test it is to take the same social media information from a previous election (2020), plug it into the same data, and see who it predicts will win. Ostensibly, when these designers did that with their model, it correctly predicted a win for President Biden. Now, when they feed all the new social media data (shares, likes, comments, etc.) into the model to predict who will win in 2024, it predicts Donald Trump… by a wide margin. Otherwise, they wouldn’t have bet $100 million on it. But there’s a major flaw in their system.

We know that Twitter and Facebook interfered in the election by suppressing documents and information that would have been damaging to Joe Biden — think Hunter Biden’s laptop, the lack of scientific basis for COVID-19 restrictions, and everything in between. It’s not a stretch to think that Republican speech was being suppressed in other ways across social media platforms.

However, social media has profoundly shifted since the last presidential election. Elon Musk, a staunch free speech advocate, took control of Twitter/X in 2022, and as for Facebook, the revelations about its cover-up operations have brought it into sharper focus this time around.

What does this all mean? That means that betting models that predict a Trump win based on the “vibrations” generated by social media engagement may not be seeing a surge in Republican sentiment toward Trump so much as a change in the social media ecosystem. The model thinks social media is booming for Trump, but in reality, it’s only seeing more engagement that was suppressed last time when Trump lost.

Additionally, does anyone rule out Musk exploiting Twitter’s algorithm to show more pro-Trump material in the run-up to the election?

If that’s not enough to dissuade you from betting, I’d add this: In 2016, Hillary Clinton was an 88% favorite to win on the Sunday before the election. If you had the smart idea of ​​putting your life savings on the favorite to make a quick buck, you’ve lost everything.

My gut instinct is still that Trump will pull off one of the greatest comebacks in political history and win. However, the betting markets and gamblers who have placed hundreds of millions of dollars on Trump may be losing their shirts.