Taking All Bets, Prediction Markets Abuzz Assessing Georgia’s Future

Time to collect all the 3rd floor gossip under the Gold Dome, because prediction markets—more commonly and less accurately referred to as political gambling sites—are open for the 6th congressional districts upcoming special election and Former Georgia Governor Sonny Perdue’s Secretary of Agriculture confirmation process. Prediction markets have been shown, by some research, to be an accurate tool for aggregating public information about an event, and frequently correctly predict everything from Oscar winners to Supreme Court decisions.

PredictIt is a prediction market site, which is legal in Georgia and 47 other states, and was set up for academic research by Victorian University in New Zealand. It’s used by over 50 universities in the United States, including Yale University and Georgetown University, to research a variety of topics, including microeconomics, political behavior, computer science, and game theory.

In situations like a cabinet confirmation process or the start of a heated congressional race, polling is unavailable or too early to be useful, and prediction markets can provide a broad synopsis of the expert opinions on the subject. This can be more comprehensive than political commentary and more accurate, as those with insider or special knowledge are heavily financially incentivized to participate in the market.

PredictIt operates like a stock market, where each stock worth is between $0 and $1. Participants are given a binary option of “Yes” or “No” as to whether an event will occur. For example, say that you wanted to bet on whether President Donald Trump will be impeached by the end of 2017, which you actually can do. Currently the market prices shares of him being ousted at $0.20, meaning there’s an estimated 20% chance the House of Representatives passes articles of impeachment by years end. After buying that share, you can sell it whenever you want as information unfolds that changes the likelihood that he will be removed from office. Should he get impeached before the end of the year, you receive a full $1.00 for each share you own. If he doesn’t get impeached by years end, the value of your shares go to $0.

In Georgia’s 6th congressional district, PredictIt currently projects the odds of three declared candidates winning in the upcoming special election, Republicans Former Secretary of State Karen Handel (35%) and State Senator Judson Hill (20%), and Democrat Jon Ossoff (27%). A monstrous 18 candidates qualified in this race to replace Rep. Tom Price.

The relatively high odds of Karen Handel winning the seat is not unsurprising, given her previous success in the district during her 2010 Gubernatorial run and 2014 Senatorial run. Additionally, Sen. Judson Hill’s odds of success are not out of the usual scope for a sitting state senator, who represents a large portion of the 6th congressional district.

However, Ossoff’s chances are, especially for a previously unknown Democrat. Normally, most would view the odds of a Democrat winning the 6th congressional district as well below 27%. However based on the markets discussion section, those buying Ossoff’s shares are factoring in the chances Democrats try to make this race into a referendum on President Trump, as well as the unpredictability of special elections and the 2016 presidential election results, where President Trump only beat Hillary Clinton 48%-46% inside the district in comparison to the 61%-37% victory Romney had over President Obama in 2012, to give Ossoff a much higher than normal chance of coming away with a win.

As noted by GeorgiaPol’s Editor Jon Richards, there is ample evidence Democrats odds at winning the 6th congressional district may still be highly unlikely.

Regarding federal cabinet appointments, the prediction market puts the odds of Former Georgia Governor Sonny Perdue being confirmed as Secretary of Agriculture by the end of March at 79%. As shown in the graph below, the market grew worried about Perdue’s chances of being nominated after Department of Labor nominee Andrew Puzder was forced to withdrawal on February 15th and Politico released a unconfirmed report that Perdue was nervous about his own prospects, dropping a 96% likelihood Perdue would be confirmed in time to 79%.

 

Source: PredictIt.org

 

**Note: All share prices are updated as of February 19th, 2017 10:41 pm 

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