Why Vote When You Can Bet? Slate's guide to all the political markets

Illustration by
Robert Neubecker.
The idea behind political prediction markets is simple. Lots of people wager on the outcome of political campaigns — Who's going to win the Tennessee Senate race? Will the Democrats capture the House? — and when the votes are counted, the winning bettors collect. The thrill of prediction markets for political junkies is that they harness "the wisdom of crowds." A single person's bet on an election outcome isn't very good, but thousands of bets, with real stakes, are more likely to predict the correct result than even the best pundit. The Iowa Electronic Markets, the big daddy of the political prediction markets, is consistently better at forecasting winners than pre-election polls. (Read a 2003 Slate Explainer about prediction markets here.)

If a single prediction market is wiser than the pundits and the polls, imagine how wise all the prediction markets are together. That's the idea behind Slate's "Political Futures," which offers a comprehensive guide to all the big political prediction markets. From now until the polls close on Tuesday, we'll publish hourly updates on the key data from Iowa Electronic Markets, TradeSports.com, Newsfutures.com, and Casualobserver.net. We'll focus on control of the House and Senate and the most contested Senate races. After the midterm elections are over, Political Futures will track the bets placed on the 2008 presidential campaign.

The market numbers don't look like poll data, but don't let that confuse you. At the time of this writing, the Iowa Electronic Market for control of the House shows a price of 0.290 that Republicans keep control of the House and 0.727 that Republicans lose control of the House. What this means is that bettors are willing to pay:
• 29 cents for a contract that will return $1 if the Republicans keep the House, and
• 72.7 cents for a contract that will return $1 if the Republicans lose the House.

(In early September, by contrast, the same hold-the-House contract would have cost 52.4 cents, and the lose-the-House contract would have cost only 48.6 cents. This suggests that Iowa Electronic Markets participants have gotten increasingly confident that Democrats will capture the House.)

Two more things you should know. First, Newsfutures, Casualobserver and TradeSports don't use decimals, so their numbers look like "29" instead of "0.290." Second, in two of the markets we are covering, Iowa Electronic Markets and TradeSports, participants bet real money. At Newsfutures and Casualobserver, they wager with play money.