by Zeus O’Dea
I’ve been considering writing about political betting for a very long time. How should I start? What should I talk about? Would people be interested? As a bettor with some semblance of a clue, sometimes you’re loathe to give out information. I know other bettors – it feels weirdly wrong to say ‘colleagues’ – who would chop off their right am before talking about something even slightly adjacent to a bet they’ve made, or an edge of theirs, or even a side they like. To be clear – this makes sense: edges are finite, and if you share, you’re – more often than not – diluting the amount of profit you could make. It makes sense to keep your cards close to your chest; and thus keep your ‘colleagues’ none the wiser.
That said, I’ve come to the conclusion that potential edge dilution is something I can live with, and something I can mitigate. I might be providing a peek behind the curtain, but I like writing, and being able to flesh out ideas and mental processes is something that appeals. I’m aiming to cover any political event that I find interesting, and relate it to betting. Sometimes that will include betting recommendations. Sometimes it might just be commentary.
Hopefully you enjoy reading this series as much as I’ll enjoy writing it
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I started betting on politics in early 2020 – about a year before I started betting full-time. I stumbled across this podcast called Star Spangled Gamblers. It was a fun listen, and I learned a lot. Soon enough, I was hooked on the idea of betting politics. I liked it because it was different, and, unlike many other things you can bet on, made you more aware of the world around you and how politics shapes it.
It was – and still is – also incredibly soft (easy to beat).
Politics has this amazing ability to bring out the dumbest of money from the smartest of people. Whether through blind partisan loyalty, ego, or just being uneducated about the ins and outs, I would argue that the median dollar wagered from sharp bettors on politics is not sharp. With politics, there’s this perfect storm of people who are accustomed to throwing money around when they think they have an edge and an event in which these very same people think they have an edge but do not. To give you an example: a very good NFL bettor is probably not going to be wading in with size on an NHL match, or on a Wimbledon future. Yet, somehow, for whatever reason, they’ll bet into an election.
Now, add the average joe into the mix. Donald Trump winning in 2016 was a massive boon for political betting, (albeit perhaps not as massive a boon for political bettors – many dollars were lost betting on Clinton). It was before I started betting on politics, but it was the first time that I had friends message me about betting on politics. I was bemused at the time. Little did I know!
Trump has this incredible ability to dominate media coverage, for better or worse. Much has been written about his rhetoric and how it resonates with more working-class, less frequent voters. To a whole swathe of people disenchanted with how stereotypically greasy politicians moved and spoke, his authenticity was refreshing. He excited them, and they refused to believe that Hilary Clinton, of all people, would beat him, and thus were shocked to see odds implying near 90% on her to do so
And so, they bet on him.
My good friend Alun Bowden recently wrote an excellent Substack post about how betting firms have to tread a fine line between increasingly higher margins and customer retention. Put simply, it was a warning: be careful not to kill the golden goose. It reminded me of a video I watched about the decline of oyster beds in New York Harbour – overfishing in the late 19th and early 20th century meant that the oysters could never recover, and the harbour, and city, were worse off for it. It might sound paradoxical, but customers – and oysters – need to win occasionally for business to be healthy. The dopamine needs to be replenished. The coffers need to be refilled. The priors need to be validated.
One of Alun’s paragraphs in particular made me laugh: betting firms realised that they might have gone too far – customer perception was that they were losing too much too quickly. So, what did they do? They introduced lay-up wins, like boosting the price of some sure thing to even money. They threw drowning customers a proverbial lifejacket, and allowed them to lick their wounds.
This is why the best thing that could have possibly happened for political betting was Trump winning in 2016. The laymen, whether through sheer luck, or perhaps, dare I say it, good judgement, got one right. The dopamine was replenished. The coffers were refilled. The priors were validated. The oysters in New York Harbour survived. For now.
From that point on, people were confident. They had won money betting on a big election, often for the first time in their life, and thus they thought they could do it over and over and over again. Political events were now not just about the politics – they were also seen as things to gamble on. When 2020 came around, and Joe Biden was christened as the Democratic nominee, people refused to believe he could win. Sleepy Joe Biden? No way! Trump was the chosen one.
And so, they bet on him.
There was so much cash bet on Trump that bookmakers were leaving their Biden price above Betfair. Matthew Trenhaile, former head of growth sports at Pinnacle, and podcast guest extraordinaire, noted the asymmetry in the market. People were betting millions on Trump because almost nothing would push his price out. If something slightly favourable happened, it would cause his odds to crash. There was no such fear the other way.
Then, the 2020 election happened. Biden won.
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A year and a half later was Australia 2022. The Liberal and National coalition (the Liberals are the major right-wing party in Australia – confusing, I know) were shooting for a fourth consecutive term in office. That itself is already a warning sign. The public yearns for change eventually. Scott Morrison, the Prime Minister, was not well liked. He’d made a series of political gaffes and wasn’t seen as a ‘nice guy’ by a lot of the electorate. His government had presided over several well-publicised scandals. Add the polling – labour had large leads leading in.
Taken together, these data points paint a picture of an election where the government should be underdogs. In actuality, you could back Labour at above evens for months and months and months.
Then, the election happened. Labour won.
Later in the year were the American midterms. The President isn’t up for election, but all 435 house seats, a bunch of governors (state premiers, for my Australian readers) and one third of the senate is. The conventional wisdom is that President’s party always loses ground in a midterm. This is, like, page one, line one in the political betting handbook. If all else is going to shit, you can always bet on that.
But what happens if you can’t?
Leading up to the midterms, the polls were pretty even! Some lower-quality (lower-quality is being nice – there was a bunch of outright fraud) pollsters showed the Republicans (GOP) ahead, but the higher quality polls had it neck and neck, if not the Democrats slightly ahead. This is unusual for a mid-term, but polls are most accurate right before an election. If you’re seeing close polling in the days before an election, you can generally operate on the assumption that it’ll be reasonably tight.
Polls are great for measuring the mood/intention of the electorate. They do not, however, generally influence the outcome of an election themselves. There’s been lots written about the factors that did influence the 2022 midterms – and I’ll probably write about them in more depth at some point – but there’s one that stands out above all others.
The repeal of Roe vs. Wade in the middle of that year had sent seismic waves through the fabric of American society. Uproar abounded. Abortion access was suddenly front and centre in ways it hadn’t been for nearly 50 years. Many states had ‘trigger laws’ – laws that ban or restrict abortion in that state immediately if the federal ban was overturned – on the books. As of now (27/03/2024), 14 states have fully banned abortion. A further 7 have restricted it in some way. This was a seminal moment for the GOP; something they had been working towards ever since Roe was made the law of the land. This was their Superbowl; their pièce de résistance. Their voters would reward them, right?
Except they didn’t.
The issue for the GOP is that access to abortion is broadly popular, even amongst Republicans. Roughly six in ten Americans support access to abortion in most or all cases. Every time abortion has been on the ballot, even in deep red states – Kansas, Ohio, Kentucky – the pro-choice side has outrun Biden’s 2020 vote share by double figures. In fact, across the country, the percentage of the electorate that supports abortion access is bigger than Biden’s vote share in all but three states (California, Maryland, and Louisiana) according to this analysis from Split Ticket. This implies that there are millions of Republicans who didn’t vote for Biden, but are pro-choice – a strange dichotomy given the Republican Party’s strong pro-life platform.
Suddenly, millions of women across the country were faced with unthinkable situations regarding reproductive health; situations most had never had to face. The GOP had found themselves squarely in the crosshairs of an angry general electorate, who rightly blamed them for the disaster. When the midterms came around, they gained only nine seats in the house, while the Democrats gained a seat in the senate. The Democrats also held on to several important gubernatorial races. If you look at these results in the context of them being a mid-term, that’s an exceptional overperformance by the Democrats. Post election analysis showed that many more Republicans than Democrats voted, but the Democrats managed to hold their own through persuasion. To put it simply: the electorate was turned off by the GOP.
What were the odds of the Democrats retaining the senate? Around 2-1, but they did it easily. They were given a 10% chance of retaining the house, and nearly pulled it off. The reason I’m talking about the midterms and Australia 2022 is to hammer home the point that the markets got them badly wrong. People learned all the wrong lessons from Trump in 2016. Right-wing populism probably isn’t some magic bullet to winning elections. People don’t like parties who focus on weird culture wars rather than kitchen table issues. The prices of conservative parties to win elections have been artificially inflated for years, because Trump got lucky. Consequently, the prices of more liberal parties have been artificially depressed. Did millions of people recognise this? I would argue that they did not. Who’s to say this pattern of overcorrection won’t continue in perpetuity?
The majority of people – even very smart people – thought that the Democrats would get wiped out in the 2022 midterms. I haven’t even mentioned Lula in Brazil, or the SDP headlining a ruling coalition in Germany, or the red tide sweeping across much of South and Latin America. All these elections had one thing in common: the conservatives were far shorter in the betting than they deserved to be, and they all lost. In a world where betting markets generally correct themselves, political betting markets refused to do so in the most magnificent of ways.
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Politics seems deceptively simple. Most votes wins, right? Except that it’s not quite that easy. There’s often quite a lot going on under the hood. In a more quantitative way, there are many, different ways elections are conducted and methods of government. Australia and the UK use a parliamentary system. Many people who aren’t familiar with that are shocked to find out that the Australian or British prime minister isn’t directly elected by the people. The USA has the electoral college, which is an absolute cluster-fuck of a concept to understand at first. Then you add things like reconciliation bills, proportional representation and the 1922 Committee, and politics can start to become pretty complicated, pretty quickly.
Then you have polling.
Polling deserves an entire article all to itself – which I plan to do – so I’ll touch on it only briefly here. There is no single more ill-understood/misused concept in politics than polling. It does my head in. Incredibly smart people are just tied in knots by the concept. I’ve seen people who make millions betting sport come up with the most outrageous reactions to polls. As I said, I want to keep this short, so I’ll leave you with this nugget of wisdom until next time: polls do not matter, until they do.
You also have the qualitative. As I said, polls don’t matter, until they do. Outside of a few weeks prior to elections, you’d do better to ignore polls and think about fundamentals. This is stuff like length of term, popularity (and I don’t mean polling about popularity!), scandals, economy, jobs etc. The abortion issue described above was one phenomenal example. Leaning on polling alone is a fool’s errand. Any old gimp can read the topline of a poll and take information away (and best be sure that plenty do!). Less common is the ability to process more subtle data and frame priors based on that. The best, obviously, do both.
It would make sense then that there are different ways to make money betting politics. There are unbelievably smart people who take precinct-level data LIVE on election night and extrapolate out entire states from it. You can get as granular as you want, and these guys get pretty fucking granular. One of the best political bettors I know made a model for the 2022 midterm elections that spat out odds for all 435 house seats. I didn’t even ask how it went. From my brief look at it, and the corresponding odds, I didn’t need to. The only thing holding some of these guys back sometimes are election bureaus themselves – some provide an enormous amount of voting data, and some provide barely anything.
That being said, you can obviously still make money without being the Tony Bloom of election betting. If your strength isn’t modelling though, it’s super important to have good priors. As an aside, a ‘prior’, in Bayesian statistics, is an estimated probability of an event occurring before something happens and you get new information (i.e. an election). It might sound difficult to anyone who doesn’t have experience in politics, but you can pick it up pretty quickly. Your priors, with practise, will get better and better. What isn’t negotiable is common sense and an ability to put partisanship aside, and this is where most people come undone.
The Australian federal election is one where your priors should’ve been heavily weighted towards Labour winning. Your priors in the mid-terms should’ve told you that, although historical trends suggested big Republican gains, that recent cultural earthquake and increasing polarisation and demographic shifts might mitigate that fairly strongly. Even if you go all the way back to 2016, late polling showed Clinton leading by 3-4 points. Even if you took just the polls into consideration, and ignored everything else, that doesn’t justify her $1.15 starting price. Clinton bettors were seduced into thinking that there was no way that she could possibly lose, and from there, the damage was done.
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In 2016, Donald Trump ran for President. He ran on a message of economic populism and protectionism, but was also incredibly inflammatory and had several severe scandals. He was disliked by the majority of the electorate but won the election against Hilary Clinton, a candidate, who, despite being supremely qualified, had her share of baggage.
Fast forward four years, and Trump ran for President again. This time, however, his opponent is Joe Biden, former vice-president to one of the most generational talents the world had ever seen. A man who is liked. A man with charisma. Despite a historical bias against unseating incumbents, Biden won.
Trump refused to accept defeat, claiming fraud, and instigating one of the most notable coup-attempts in the western world. All court cases he lodged alleging fraud were dismissed, in every state – red or blue.
He endorsed candidates for the 2022 midterms, and most of them won their party primaries, but were soundly rejected by voters. They were weird. They were dumb. They were incendiary. They were Trump’s candidates, make no mistake, but they were also bad candidates, and were duly punished.
Contrast that to Joe Biden who has been quietly working away and had one of the most impactful legislative terms in recent memory. Among other things, he prioritised the environment, championed failing infrastructure, stood on the picket line with union members and tried his best to remove the burden of student loans.
Inflation has been Biden’s biggest nemesis, but he’s managed to bring it down from it’s post-COVID high of 10%+ to 2% without causing unemployment to spike – something thought to be near-impossible by many leading economists. The US economy is in the best shape it’s been in some time, despite what the media will tell you.
Much to the apparent chagrin of voters, 2024 will once again be Trump vs. Biden. You would think Trump would have learned lessons; softened rhetoric, been less aggressive, and promised to work to restore abortion rights.
You would be wrong.
The already disliked former president leant into the wind. He got more incendiary. He threatened to take abortion rights away at the federal level. He took the stuff that made him unpopular, and ran with it. He threatened prosecutors and bullied judges. You would think a guy with four pending criminal cases against him might be a tad more repentant.
Meanwhile, the current president had been taking notes. Joe (and the Democrats) have learned the lessons. They’re running on abortion, and they’re running on kitchen table issues. Biden is old, but according to leading GOP figures, still manages to run rings around them at the negotiating table. Sleepy Joe indeed.
To summarise: Donald Trump is one of the most unpopular presidents that country had ever seen, even before his election denying bullshit and pending criminal trials. He lost in 2020, and his pet candidates lost in 2022.
It would take a brave man to bet on him to win in 2024.
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Over 18s Only (21+ in some jurisdictions). If betting, please enjoy your betting responsibly. Never bet more than you can afford to lose, and do not chase a loss.