Election Gambling Explained: How to Bet On The Next U.S. President And How Political Gambling Works

Personal Finance

by Susan Lyon

Do you feel pretty sure that Obama is going to win?  How sure, exactly?  Our statistical election tracker, which we update daily with the most recent polling data, currently has Romney’s odds of winning at 32%.  So how sure are you really – sure enough to bet some of your life savings?

While we don’t recommend doing so, it is worth noting that a lot of American do gamble on the presidential election outcome every 4 years.

Prediction Markets: How to bet on this year’s election

If you feel confident about the 2012 election outcome and want to put money down, this section explains how to do it.  Keep in mind that any bets placed are not guaranteed or insured.

At websites like InTrade, which bills itself as “the world’s leading prediction market,” individuals can bet on any outcome or situation that can possibly be predicted.  People can buy “shares” representing just about any scenario they desire, in all sorts of ‘hot markets’ from politics to finance to entertainment.

In this manner, you can gauge a slice of public opinion – not about who people want to win, but who people think will actually win.  If you’re interested in specific Congressional and Senate races, like the hotly contested Elizabeth Warren & Scott Brown race in Massachusetts, you can bet on those too.

Right now, the leading outcomes you can buy or sell shares of are:

  • Barack Obama to be re-elected President in 2012 ($6.50 lowest ask to buy a share)
  • Mitt Romney to be elected President in 2012 ($3.52 lowest ask to per share)
  • Democratic candidate to win MA ($7.35)
  • Republican candidate to win MA ($2.89)

How a Prediction Market Works Like the Stock Market

InTrade explains how its exchange works:

“Intrade is an exchange – like the New York or London stock exchanges for example. When you buy shares you are buying them from another member of Intrade. And when you sell shares, another member of the exchange is buying them from you. You do not buy shares from Intrade, and Intrade does not buy shares from you. You are always trading shares with other members of the exchange – other people who are making predictions, just like you. 

It is important to remember that Intrade is a market. This means you may not always be able to get what you want. If you are looking to buy some shares, but nobody is selling, then you can’t buy the shares that you want.”

Here are some other crazy things you can bet on if your heart desires:

  • NASA to announce discovery of extraterrestrial life before midnight ET 31 Dec 2013
  • Average Global Temperature for 2012 to be among five warmest years on record
  • USA and/or Israel to execute an overt Air Strike against Iran before midnight ET 31 Dec 2012

Lots of investors are big gamblers, too

Gambling is a risk-reward tradeoff like an investment.  Be cautious: whether you’re hitting the slots in Las Vegas or just at an online brokerage website, you have to know that your money is not guaranteed and you could even lose it all – of course, you could also win big.

Gambling can be highly addictive, too, so be careful.  The numbers behind gambling are pretty staggering, as the National Council on Problem Gambling reports:

  • 2 million people, or 1% of all U.S. adults, are estimated to be pathological gamblers
  • Another 4-6 million Americans are considered ‘problem gamblers,’ meaning they meet some both not all of the diagnostic criteria for pathological gambling

The lesson?  Anywhere there’s demand for a product, a market can be formed: that’s the beauty and the curse of markets.