The Los Angeles Times has a news report on Las Vegas bookmakers taking some bets on non-sporting events.
Let me explain why that’s important and why it should be encouraged.
And though bets on nonsporting events — such as the Academy Awards, the presidential election and reality TV shows — are not allowed in Nevada, they are permitted overseas, and interest in such betting provides a push for casinos to expand their portfolios beyond traditional wagering.
But regulators and casinos remain mindful of tampering or influence where voting, rather than scoring, decides an outcome. They have instituted safety measures, such as halting betting well before voting takes place and capping the amount that can be won — usually about $10,000. Most casinos require identification through a player’s card for bigger bets.
“We’re not going to take six-figure bets on these,” said Jay Kornegay, Westgate’s vice president of race and sports book operations. –LA Times
These “Prediction Markets” provide valuable information to the public
- Everything we know about these betting markets suggests they give us the best, unbiased forecasts of future outcomes
- To put it concretely, you cannot regularly beat the “line” in pro football bets unless you have valuable, non-public information, such as the extent of a player’s injury.
- If you actually have such information and can legally bet by using it, your bet will change the odds. That gives the public some real information, in the same way that price movements for milk or chicken at the supermarket give you information about shortages or surpluses.
- The deeper the betting pool, the more reliable the forecasts
- Are they more reliable than polls? Yes, because the bettors incorporate information from the polls in their betting.
- In fact, they incorporate information from every source and have powerful incentives to get more information and to distinguish signal from noise.
- There are such markets now in England, but Americans are restricted in using them; there are small markets (largely for academic purposes) in the US. Larger, deeper markets would be far more informative.
- Allowing legal betting on political events such as presidential or Congressional elections would make these markets much, much deeper–and give the public better information
- The only reason to block these bets (besides general opposition to gambling) is the possibility the events themselves could be corruptly influenced by bettors.
- The fact that many states have lotteries indicates there is no general opposition (though state legislatures may not want any competition)
- Corrupt influence is far more likely in sports, such as mobsters bribing fighters to throw a match
- It can also happen in financial markets, such as a major oil-producing country betting on the futures markets, using inside knowledge that the state itself will expand or cut its production
- The risks of bettors corruptly changing outcomes they bet on is remote and almost certainly less than in other markets were wagering is permitted.
- For these reasons, political wagering should be permitted in states that also permit sports wagering
Some examples where it would be valuable for the public to know the odds:
- Will the government of Venezuela be overthrown by Dec. 31, 2017
- Will Bashar al-Assad still be in office by December 31, 2017?
- Will Boris Johnson be Prime Minister of the United Kingdom on September 1, 2017?
- Will Pres. Donald Trump complete his full first term in office?
- Will the Democrats win control of the House of Representatives in 2018?
Lots of people are interested in these events and some would like more accurate forecasts about the outcome. For example, oil producers would like to know more about Venezuela as they plan their own production. By the same token, they may have good sources of information about the situation there so their bets would inform others by changing the odds.
Knowing the odds in political-prediction markets would be very informative to them and to policymakers.
On international events, for instance, it would give the National Security Council, CIA, Defense Department, and State Department additional information to incorporate in their policy planning.
For these prediction markets to work well, the outcomes would have to be well-defined before the events. To bet on the outcome in Venezuela, for instance, I need to know the exact definition of “overthrowing the government.”
That is obviously more complex than setting a 3.5 point spread for a football game, but it is already done in today’s thinner prediction markets. So, I don’t see any insurmountable technical reasons why political prediction markets cannot be expanded.
They would certainly be useful–to the public and to policymakers.
If the general topic interests you, I highly recommend a fascinating (and non-technical) book:
Surowiecki is not a cheerleader for all crowdsourcing.
The book explains, in clear, lucid prose, when it works well and when it does not.