Betting on politics: US mid-term election markets are increasing

The number of markets available to bet on the outcome of the US mid-term elections is increasing, but liquidity remains a problem.

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I've been following the betting on the US mid-term elections over the past few weeks, and I'm pleased to see the number of markets has been increasing. In addition to allowing you to bet on control of both the Senate and the House, as well as the individual Senate seats, Betfair (Betfair.com) is now running markets on the outcome of the race for the governorships of New York, Illinois and Georgia.

While this is pretty good, even this effort pales in comparison with its rival Smarkets (Smarkets.com), which is offering markets on all 36 gubernatorial contests (although the market on the Oregon election is currently halted). What's more, it is also offering markets on what it considers to be 50 key Congressional races in states ranging from California to Vermont. Finally, it is offering markets on the range of seats that both the Democrats and Republicans can expect to get.

Of course, the big downside to Smarkets' offerings (as well as many of Betfair's) is that many of these markets are very thinly traded. I don't have any hard and fast rule, but I wouldn't normally consider a market to be liquid enough until at least £500 has been traded or £100 is behind a price (both Betfair and Smarkets reveal how much money is behind a specific price). This rule is designed to prevent me making tips that are impossible to follow through on. Sadly, this eliminates most of Smarkets' bets for now. However, with the voting less than two months away, this may yet change.

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

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