Election betting
This photo illustration taken in Washington on November 1, 2023, shows a phone screen displaying PredictIt, one of two legal online prediction markets for US political gamblers. AFP

Like many American political watchers, a Nevada resident named Domer had an opinion about who would emerge from turmoil within the Republican Party to become the next speaker of the House of Representatives.

Unlike most of them, he made $13,000 when Mike Johnson was finally elected last month.

The fact that political gambling is illegal in the United States has not deterred Domer (a nickname he gave to AFP) or others like him from using online overseas markets to wager on American politics.

Domer, who says he earns about $500,000 a year betting on politics across the globe including in Italy and South Africa, is often active in chatrooms on Discord and other sites that buzz with debate among aficionados.

"There's a lot of trash talk -- it's similar to sports betting," he says. "It's combative and congenial at the same time."

Political betting was common -- and legal -- in the United States until the rise of relatively accurate polling in the 1930s.

Futures trading regulations passed in 1936, as well as crackdowns on sports betting and the perception of gambling as seedy all helped put an end to markets that once populated both Wall Street and the politics pages of newspapers.

Today, critics still worry gambling could fuel corruption or the gamification of the political system.

But, as the internet has made gambling easier, users like Domer use VPNs to skirt around government regulators that have closed down sites or halted the entry of platforms that try to offer political betting to Americans.

Only two have been able to stay alive, due to their affiliations with university research projects.

The government moved last year to shut down one of them, PredictIt, alleging it had exceeded its research-focused mandate. It was granted a lifeline by a July court decision in its favor that will keep its lights on as litigation continues.

Supporters say legal markets offer benefits to the public and traders alike, and the impact is negligible as bets are capped at a few hundred dollars.

"These markets encourage attention to political events, and they serve as an antidote to fake news," PredictIt CEO John Phillips told AFP.

"Prediction markets are not perfect," he says, but they're "better than polling."

There are studies backing him up, though it's a contention that not all political scientists agree with. For better or worse, journalists stick almost exclusively with polls -- which, traders note, also inform their bets.

PredictIt is currently offering shares in Biden being the nominee for 68 cents, meaning a trader who bought a share would earn 32 cents if he is the Democratic candidate in 2024, which is likely.

But bet big on California Governor Gavin Newsom, who hasn't even entered the race, and each share bought for 23 cents would earn 77 cents, minus fees.

Markets also deliver insights that polls don't always capture -- not just about politics, but also economics, says Tom Gruca, director of the Iowa Electronic Markets, a political betting operation run at the University of Iowa, where he also teaches.

"When you answer a poll, you tell people what you wish is going to happen," he tells AFP -- unlike a market, which captures "what you think is going to happen."

"Even a small amount of money changes the stakes for people," Gruca says, describing a class where, after giving students money to trade, saw them "ready to rip each other limb from limb over movements of 10 cents."

Political gambling expert Pratik Chougule, using PredictIt, also cashed in on a speaker of the House bet, cleaning up $130 after Jim Jordan lost, and has most recently put about $1,000 into Biden being the Democratic nominee.

Chougule cohosts a betting podcast, and started an advocacy group to push for legalization.

"I was a pretty true believer in the Iraq war... I had gotten that issue very wrong," Chougule told AFP. "I basically realized that bad prediction, bad forecasting in our policymaking is actually the norm, not the exception."

"Having skin in the game is at least an important consideration in doing better."

But for markets to work -- for academic insights to be gleaned, and riches to be won -- there must also be losers.

"I'm currently betting a lot of money that (Donald) Trump will not be the GOP nominee -- which was what I thought was a smart bet a year ago, and is now looking like the world's dumbest bet ever," says Domer.

Despite -- or perhaps, because of -- the court indictments stacking up against the former president, he looks almost certain to grab the 2024 Republican nomination.

So just how dumb was Domer's bet?

"Oh, I'm gonna lose a couple hundred thousand."

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