Betfair is a sports betting site that has been around for awhile, but lately, its exchange has recently taken off. Unfortunately off limits to US customers, Betfair has stepped up and filled the void of the now-defunct Intrade. Even if you have no interest in trading the contracts, Betfair is a great place to look at where real people, with real dollars on the line, are pricing not just sporting events, but real-world events as well.
A pertinent example is the US Presidential election. These days, my friends are always asking me, “Who do you think is going to win?” or “What do you think Trump’s chances are?” And I just look at Betfair and answer the question according to where their exchange’s market is. The exchange lists “contracts” for all the possible victors of any outcome. In this case, the exchange lists contracts on all of the presidential candidates. These can be held until the event is over and the outcome known, or traded back and forth anytime before the event actually takes place, and/or liquidated for any profit/loss minus fees prior to the event. Using this example, think of the candidates’ contracts as stocks, and their current prices their odds of victory or defeat. A current snapshot of that market is below:
Now, we all know that Hillary Clinton is the odds-on favorite to win the election at this point in time. But these odds look extremely confusing, if you don’t understand how they work. Betfair’s exchange uses a “digital odds” calculator, which is different from where you would expect fractional or percentage odds to look. Basically, all the contracts can settle at 1 (win) or 1001 (loss), and the number just reflects where the better wants to lay odds. Essentially, all the odds are fractions with a full 1 added to them and put in decimal form. Betfair explains its own system here if you want further elaboration, or if you’re still confused. For viewing purposes, if you want to make it easy, you can just put your cursor over whoever’s odds you want to see fractionally, as I did in the below example of Trump:
So, at this very moment, if you wanted to bet on Trump, you could get him at 3/1 odds (25% chance of victory), and you would be placing a wager on the “Back All” column. You would want him to go to 1, which would be a win. If you wanted to bet against Trump, you would place a wager in the “Lay All” column, and be betting against him at slightly higher than 3/1, or 24.3% (where Trump is “bid” by other betters), and you would want him to go 1001, which would be your win. Two outcomes both priced at 2 would be equivalent to a coin flip, with both having the equivalent percentage of 50%.
Of course, none of that matters if you just want to look at where the odds of an event are. This could be something such as a sporting event, the oscars, or any other event that Betfair has a listed contract on. The odds are much tighter than the spreads you would see at your typical Las Vegas casinos, as the “betters” are competing directly against each other in a live “exchange”. This also allows odds to move in real-time, very quickly, to reflect any change in the possible outcome. For instance, if a team scores a goal in soccer, their odds will immediately change to reflect the new chance of that team winning the game, which will obviously be better. This was extremely pertinent in the example of Brexit. All the pundits were saying that Britain had no chance of leaving the EU… and then, they left. Betfair, as well as other bookies, had constantly flip-flopping odds, even all throughout the night of the Brexit results being published in the US.
Shortly after Brexit, on June 29th, Nate Silver wrote about how “Donald Trump has a 20% chance of becoming President”. At that exact moment, Trump was available on Betfair slightly below the 3 level, or around 65%. So why did Nate cite that betting markets have Trump’s chances at 20-25%? Honestly, I have no idea, since he directly cites another website that also uses Betfair’s odds. If he liked Hillary’s odds at 80%, he should have loved them at 65%, and been prepared to bet on it, right?
No matter the circumstances, if Nate had any real conviction in his own predictions, he would back them up by taking the gamblers on. To be fair, the current odds are just below his published range, but he should still love Hillary at 72%. I’m sure Trump’s odds will flip-flop plenty before the election, so be sure to contact/tweet Nate and ask him if he’s prepared to back up his prior predictions with real dollars, especially if Trump’s odds go above 40%.
Stop listening to pundits like Nate Silver and plenty of others who make ridiculous calls without putting any of their own money on the line. Just look at Betfair and see where people who have a real financial interest in the outcome are pricing the odds.
Disclaimer: I have no financial interest whatsoever in Betfair. I am not a Betfair customer, and as far as I know, am not eligible to become a Betfair customer anyway.