Vote of confidence: Why political betting is no longer a neglected niche for operators

When scandal-plagued Boris Johnson was forced to resign as the UK’s Prime Minister on 7 July, it triggered an election contest within the Conservative Party to determine its next leader and therefore the new occupant of No 10. Bookmakers and betting exchanges were rubbing their hands with glee at the prospect of numerous rounds of voting among Tory MPs to whittle the candidates down to a final two (Liz Truss and Rishi Sunak) before Johnson’s replacement is announced on 5 September.

The protracted process, coupled with high volatility in the odds, has been a boon for the industry. For instance, Truss has around a 95% chance of winning at the time of writing, yet she was an outsider at 8% when the race began.

Smarkets’ head of political markets, Matthew Shaddick, says: “If you wanted to design a market for betting purposes, you couldn’t come up with anything better […] the Tory Party did the betting industry a favour by setting up their selection process the way they did.”

A total of £2.5m has been traded on Smarkets for the next Tory leader, on top of the £900,000+ traded on the next Prime Minister market. It is shaping up to be the London-headquartered betting exchange’s second-largest UK political betting event in terms of volume traded. There was a time, though, when political betting was a niche or even a neglected opportunity among the industry, often lumped in with ‘novelty’ or ‘specials’ bets tabs on bookmakers’ sites and overseen by an odds compiler who specialised in sports. It was also usually a loss-leader to help with brand exposure such as a sound bite on TV or radio, or a few column-inches in a newspaper.

Shaddick, who made a name for himself as head of politics at Ladbrokes from the late 2000s, says: “When I was first doing it at Ladbrokes it was seen as being a PR-led exercise – nobody expected to make any money from it.”

Nowadays, most online bookmakers have a politics betting section on their website and app, although it is worth pointing out their odds will tend to follow movements on the exchanges. And it’s not just British politics; punters were able to recently bet on the presidential elections in Colombia and Kenya. The Brazilian elections to choose the country’s next leader taking place later this year are already pulling bettors’ attention, with previous leftist president Luiz Inacio Lula da Silva currently the 4/9 favourite to regain office.

William Kedjanyi, a political analyst at retail, online and on-course bookmaker Star Sports, says seismic political events in the UK specifically have fuelled interest in betting on politics. “We’ve been through a period in the last decade where we’ve had three Prime Ministers – and there’s about to be a fourth – in a short period of time and the last two General Elections were close together.

“People have more opportunities to bet on this stuff than they ever did before, plus people have been able to request markets. So, more opportunity is a big driver, as is the fact we are betting on more things, and more things are happening,” he adds.

A watershed moment

Arguably, the turning point for betting on political events rising to prominence and going mainstream was the 2014 Scottish independence referendum, which achieved a turnout of 84.6%, the highest for an election or referendum in the UK since 1910. The vote was a huge event on both sides of the border as people were given a choice of ‘yes’ or ‘no’ to the question: ‘Should Scotland be an independent country?’ Such was the interest in indyref, it led to bookmakers setting sky-high limits.

In fact, a man from Surrey strolled into a William Hill shop in south-west London, presented a banker’s draft for £400,000 and bet the lot at odds of 1/4 on Scotland voting no. At the time, William Hill’s Graham Sharpe told The Guardian newspaper it was “the biggest political bet ever struck”. The punter later collected £100,000, plus his original stake.

Two years later, there was the EU referendum in the UK, followed by Donald Trump’s successful bid to become the 45th President of the United States. “Trump and Brexit, especially, were topics people could have an opinion on,” says Shaddick. “There’s no need to be a political expert; these are clear binary choices with no complicated parliamentary math to worry about.”

Smarkets odds being advertised in January 2022

Both the 2016 US presidential election and the Brexit vote were mammoth betting events. And both produced shock results. In fact, Trump was 100/1 when he announced he was taking a run at the White House.

Meanwhile, the ‘remain’ side on the EU referendum market traded at 1.06 on Betfair, or an implied probability of 94.3%, at 10pm as the polling stations closed, and yet at precisely 2:04am the odds flipflopped as the biggest upset in political betting history began to materialise. Both events, as well as 200/1 outsider Jeremy Corbyn being selected as the leader of the Labour Party in 2018, called into question whether betting and prediction markets – not to mention pollsters – were ineffective at gauging public sentiment. However, Shaddick compares political betting to “an extended in-play sporting event” and says it is a mistake to say betting markets can’t be trusted whenever there is an upset.

“If something is priced up as a 25% chance, then it will happen 25% of the time and it would be weird if a favourite always won. This isn’t a crystal ball into the future, but it is, in my opinion, just about the best way of assessing the probabilities of things happening. And sometimes things that are seen as a 5% chance of happening do in fact happen.”

He also doesn’t believe pricing up politics has become “harder” in the past decade but points out that it is far easier to have data at your fingertips than when he started out at Ladbrokes. “There are people building models for some elections which are useful and valuable. That wouldn’t have happened in the past. And there is a lot more platforms offering prices on these things, including crypto exchange prediction markets. So, you now have that little bit of extra information to work with.”

A conspicuous indication of just how big political betting has become arrived in late 2020 and early 2021 with the quadrennial US presidential election. Trump refused to accept the result and made baseless claims of widespread vote-rigging and fraud. Betfair kept the market open long after 3 November election and eventually more than £2bn was matched – equivalent to a 10-fold increase on 2016.

Betfair spokesman Barry Orr triumphantly describes it as the “biggest betting market in the history of the world” in an email to EGR Intel. One Betfair user bet a cool £2m on Democrat presidential candidate Joe Biden to win, collecting £540,000 along with their stake.

Back in 2016, Betfair’s sister brand Paddy Power – a pioneer of novelty betting – laid more bets on the US presidential election than it did for any of golf’s Majors that year. It is perhaps why the Irish bookmaker soon after appointed a ‘head of Trump betting’ and dreamed up all kinds of wacky markets to tempt punters and generate headlines. This included odds on Trump opening Area 51 to the public, announcing he had undergone hair transplant surgery, or that Mexico would pay for ‘the wall’ along its border with the US.

Pent-up demand

Americans themselves aren’t allowed to bet on elections, though, which may seem perverse when US regulators have allowed licensed bookmakers to take bets on hot dog-eating contests. In fact, political betting is banned by statute in some states. In April 2020, FanDuel briefly offered odds on the US presidential election that year after the Flutter-owned operator said it had received approval from West Virginia Lottery. FanDuel yanked its markets just two hours later.

West Virginia Secretary of State, Mac Warner, pulled no punches in a statement the following day as he expressed his opposition to political betting. “Gambling on the outcome of an election has no place in American democracy,” he blasted. “Not today. Not tomorrow. Not ever. This is a terrible idea.”

And that opposition is commonplace across the pond despite the chances of being able to rig a presidential election for betting purposes being practically zero. Also, most of the US-facing offshore bookies situated in Central America and the Caribbean take all kinds of political bets from Americans. Prohibition very rarely works. Meanwhile, PredictIt, a real-money prediction market based out of New Zealand, just recently lost its legal authority to offer betting on the next president or who will next be elected to Congress.

Predict It has, since 2014, used the permission afforded to a New Zealand university for research purposes to allow Americans to wager on politics, and the site was regularly referenced by the media in the US. So, while states like New Jersey have allowed betting on the Oscars, that seems to be as far as any regulator is prepared to go with sanctioning gambling on non-sports betting events.

The price is right?

For UK operators, political betting offers the chance to attract a different type of customer who might be disinterested in sports. After all, politics affects all of us and so most people will have an opinion on a next party leader or the winning majority at a General Election. And because of all the money sloshing about in a market like the General Election or US presidential election, it attracts big-staking bettors who are able to exploit edges to find incorrect prices and still get their bets down.

Kedjanyi references when Biden was 4/6 (60% probability) to be the 46th US President and FiveThirtyEight, a US opinion poll analysis company, gave the septuagenarian a 77% chance of winning. “Some models were even higher than that,” he recalls. “There is no sport on the planet where that sort of rick can be accommodated. It would never happen in the Champions League final. It would never happen for the Super Bowl. So, there are those opportunities to have your own views and get some decent money on it.”

He also points out that finding an edge or mispriced markets in political betting doesn’t usually involve having to go to the “backbreaking lengths you have to with sports betting”. It could be compared in a way to identifying the person who is most likely to be popular with audiences on a TV reality show where a public vote decides the winner. But UK and US elections are highly liquid betting markets.

Geopolitical events and now macroeconomic concerns closer to home mean politicians are rarely off our screens and therefore both professional and recreational punters will look to back their opinion, even if the motivation is partly about bragging to their mates or work colleagues about being on Liz Truss at 12/1 at the start of the leadership contest when she’s now 1/20.

Political betting probably won’t challenge top sports in terms of turnover any time soon but it’s getting closer as the years pass by. And, while we are still likely to see representatives from bookmakers like Star Sports standing on College Green in Westminster with various parties’ odds chalked up on a blackboard to court publicity, political betting is no longer dismissed as mainly a PR exercise and a loss-leader.