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Bettors put money on Obama to win re-election

- The Washington Times - Monday, November 5, 2012

Political-betting websites that allow wagers on Tuesday's election increasingly favor President Obama to be re-elected as the race — and the betting — head into their final hours.

Intrade, a top online prediction market where "investors" vote with their money, favors Mr. Obama to win an Electoral College victory over Republican challenger Mitt Romney, as his stock continued to tick up Monday.

As of about 7 p.m. Monday, more than two-thirds (68.5 percent) of Intrade bettors pick Mr. Obama to win over Mr. Romney, who garnered 31.4 percent of the vote. The president's stock rose 4.1 percent during Monday alone, while Mr. Romney's stock fell 8.7 percent.

In Betfair, which also measures the Electoral College, and the Iowa Electronic Markets, where gamblers pick who will win the popular vote, the president also had a considerable lead over Mr. Romney.

Proponents of these political gambling say these sites are more accurate than polls, because bettors vote with their money.

"The prices tell a lot," said Tom Rietz, a member of the steering committee for the Iowa Electronic Markets, which is run by the University of Iowa.

Mr. Obama has been the consistent favorite in these online betting markets during the general election campaign, although his "stock" fell sharply after his weak performance in the first debate against his Republican rival.

Mr. Romney made a strong push to catch the president in the last few weeks, but at this point there is little left he can do to change the outcome, Mr. Rietz said.

"It could simply be that nothing is changing and we're getting closer to the election," he explained. "There are no more debates that are going to happen, so no one's going to say anything really positive or negative. Very little campaigning to be done. No more storms. Neither candidate is going to run out of money. There are not as many things that could happen as could've happened a week or two weeks ago."

In the Iowa Electronic Markets, which takes bets on two popular vote questions, Mr. Obama peaked on Sept. 27 in the winner-take all market with 81.7 percent of gamblers expecting him to win, but his stock took a sharp hit and fell to 61.3 percent on Oct. 21. However, in the last week or so, the president enjoyed a steady increase as bettors realized there was less time for Mr. Romney to catch up.

"The fact that Obama's rising may just be that he's predicted to win and we're just getting closer to the election," Mr. Rietz said. "It could be the case that Romney was getting closer, but he's just run out of time."

In IEM's "winner-take-all" market, gamblers must pay a certain amount to get a dollar if they pick the correct winner of the popular vote. If they pick wrong, they get nothing, so the more a gambler must put up, the better the candidate's chances are perceived to be. In Monday's trading, it cost an average of 74.7 cents to buy a share of Mr. Obama that would pay off a dollar if he wins. A Romney share, by contrast, cost just 26.6 cents.

In IEM's vote-share market, gamblers must pick exactly how much of the popular vote either candidate will win. The average pick for Mr. Obama as of Monday is 50.9 percent, compared with Mr. Romney's 48.7 percent.

Betfair, the London-based website that is the world's largest Internet betting exchange, also puts the odds of Mr. Obama winning at 76.6 percent to 23.0 percent, according to PredictWise, a site that publishes research on these online betting websites surrounding the election.

Intrade and Betfair are the two most respected sites, according to PredictWise founder David Rothschild, because they predict the Electoral College, while IEM, based in Iowa, focuses on the popular vote. Intrade, based in Ireland, targets Americans, while Betfair is more popular with Europeans.

He said these betting markets are a great way to gauge the election, because people vote with their money, which reveals how much confidence they have in each candidate.  

However, while these political betting markets offer gamblers a financial incentive to vote with their money, that doesn't guarantee completely accurate results, he said. These markets can be manipulated by campaign supporters, for example, who choose to spend some of their money here rather than on advertisements, by voting for their preferred candidate, even if they think he will lose, simply to make his numbers look better. Mr. Rothschild warned this may be happening with the Intrade market in favor of Mr. Romney.

"We've seen evidence that Intrade can be manipulated downward in the direction of Romney, almost as cheap advertising for the campaign,” Mr. Rothschild explained. "There’s a chance there are investors who are intentionally moving Intrade further toward Romney than the general population trader believes."

Mr. Rothschild said this can be seen in Mr. Romney’s numbers shooting up directly after debates before leveling off. Mr. Rothschild was careful to point out that he believes neither campaign is behind these efforts, however, it may be coming from supporters.

Betfair is a larger market, so it is more difficult to manipulate. Furthermore, Intrade is more widely recognized in the U.S. "So if you wanted to move one market, you would move Intrade," he said. "Betfair is more obscure, so you would get less benefit from it."

Polling numbers on all of these sites are expected to fluctuate throughout the day. The numbers in this story were updated around 7 p.m. EST on Monday.

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