538: INTRADE Betting is Suspicious

[mod mom]

Wednesday, September 24, 2008
Intrade Betting is Suspicious

There's something funny going on over at Intrade with respect to the pricing of the Obama and McCain contracts.

Right now, Obama is trading at 52.3 points. That is, Intrade implies that he has a 52.3 percent chance to become the next President.

Now, I happen to think that is a patently absurd price. But you don't have to take my word for it. Over at BetFair, another large UK-based gambling and futures site, you can also buy an Obama contract. But the price there is 1.62, which implies a 61.7 percent chance that Obama will become the next President.

That is a huge spread, 51.5 points versus 61.7 points. This is the equivalent of the Giants being 3-point favorites at the Bellagio Sportsbook, and 7-point favorites at the Mirage down the block. Those things just don't happen in efficient, sufficiently liquid markets, because they create arbitrage opportunities: you'd lay $10,000 on the Giants at the Bellagio and $10,000 on their opponents at the Mirage. Any time the Giants win by fewer than 3 points or more than 7 points, you lose nothing, since your two bets cancel out. But any time they win by fewer than 7 points but more than 3, you win both bets, and take home $20,000 (less the casino's vigorish) for absolutely no risk. Pretty good deal, right? That's exactly what's happening with these futures contracts.

It does seem to be Intrade specifically that's out of line, rather than Betfair. At Iowa Electronic Markets, yet another political futures exchange, the probability of the Democrats winning the popular vote is about 61 percent. They don't have an electoral vote contract, but if they did, presumably that number would be a little higher because of the structural advantages Obama has in the electoral college this year that we've discussed here at length.

-snip

http://www.fivethirtyeight.com/

[NightWatcher]

1. maybe intrade is figuring in the possibility that the repukes will steal it

and there's a 52% chance that Obama will "WIN" free and clear without monkeybusiness from the piggies

[grannie4peace]

2. that's what i'd guess!!!

they are not worried enough.....

[mod mom]

3. A 10.2 factor for election fraud? Maybe some illustrious reporter would like to

ask them how they came up with the factor. :mad: