A few times a year in the US, the gambling market goes into overdrive during key events in the sporting calendar.
March Madness, which follows the annual NCAA basketball tournament from ‘Selection Sunday’ to the National Championship Game, is one such event. Bettors in their thousands log on to digital betting apps and turn up at high street bookmakers to lay bets on their favorite teams and players.
Sporting events like March Madness, the Kentucky Derby, the NFL Draft and the MLB All-Star Game have long been linked to a periodic rise in gambling activity across the country.
However, these days, bettors are getting excited about gambling on a different kind of competitive event. Could it be that gambling on election outcomes is the new sports betting industry?
America’s Gambling Market
The US gambling market is one of the largest and most diverse in the world. It is estimated that Americans wager hundreds of billions of dollars each year across a wide range of gaming activities, both legal and illegal.
In terms of legal gambling, the US market is primarily divided into two main categories: land-based casinos and online gambling.
Land-based casinos, which can be found in many states across the country, typically offer a wide range of games, including slot machines, table games, and poker. These casinos are heavily regulated by state gaming commissions and generate billions of dollars in revenue each year.
Online gambling is a relatively new segment in the US, although its origins can be traced to the rise of internet gaming in the late 1990s. Unlike other major Western markets, where gamers can access the full spectrum of gambling and casino gaming activities, digital gambling in the US is only legal in some states.
This means that any US resident who wants to play real money blackjack at a legitimate site either needs to reside in the handful of states that have legalized remote casinos (see below) or sign-up with an offshore provider.
Similarly, some states have only authorized online sports betting, while others have legalized poker and casino gaming. The availability and types of gambling options also vary from state to state.
As of early 2023, the following states have legalized online gambling practices:
- New Jersey
- West Virginia
- New Jersey
- West Virginia
- New Hampshire
- New Jersey
- New York
- Rhode Island
- Washington, DC
- West Virginia
The History of Gambling on Elections
While gambling on elections has been a hot topic in mainstream media since the 2022 mid-term elections, the pastime itself actually has a long tradition in the country.
Fascinatingly, even mainstream political reporting dedicated considerable space to the practice. As far back as the 1860s, US-based newspapers covered movements in betting markets related to Presidential contests, providing almost daily coverage during election run-ups.
Unlike modern sports betting, historical political betting largely took place on Wall Street and stock markets.
According to notable economists, gambling on political events peaked during 1916, when the equivalent of $270 million was wagered on the outcome of the Presidential race between Woodrow Wilson and Charles Evans Hughs – over twice what was spent on the election campaigns themselves.
By the mid-20th century, coinciding with the rise of scientific polling, political betting markets all but disappeared; a country-wide crackdown on gambling activities paired with the surging public interest in polling drove the markets underground. But that didn’t stop bettors in other countries from placing wagers on major US constitutional events.
Gamblers as widespread as Australia and the UK have continued the pastime, with many taking a more active interest in American politics than they do their own country’s.
The Current State of Election Gambling
One of the key advantages that betting on elections and political events has over traditional sports betting is that the pastime is carried out using betting exchanges. In traditional sports betting, sportsbooks set their own rates of return (the amount a punter wins), which are adjusted to ensure the company makes a profit.
Betting exchanges, on the other hand, allow gamblers to bet against each other, ensuring larger wins since they cut out the middle-man.
By using betting exchanges, players can also place bets against the likelihood of certain events taking place. This type of betting is referred to as a lay bet, which involves wagering against a particular outcome.
In the world of political gambling, seasoned players often engage with one another through these exchanges, paying a fee to take either side of any bet and switching between the roles of bookie and punter depending on their preference.
There’s even a consensus that betting markets could provide more accurate predictions than scientific polling since they’re notably sensitive to breaking news.
This was demonstrated during a televised debate between Republican candidate Mehmet Oz and Democrat John Fetterman, who was visibly struggling to speak due to a recent stroke. As a result, Oz’s odds of winning the US Senate seat in Pennsylvania shifted dramatically from 1.93 (52% likelihood of winning) to 1.53 (65% likelihood).
Political betting markets are more agile and representative of voters than even the swiftest of snap polls. There have even been several statistical analyses published that concluded that gambling markets are a more reliable predictor of outcomes.
Despite the enthusiasm of punters across the pond for gambling on elections and the accuracy of market predictions, there are very few betting opportunities on US land.
From a regulated market perspective, American punters have only a limited number of outlets on which to make their predictions, including real money sites like PredictIt and the Iowa Electronic Markets.
Even on these sites, gambling exposure is limited to $850, which is the most a bettor can invest to win on the outcome of an election.
Just as the tide turned in 2018 when the Supreme Court brought legalized sports betting back into play, there may well be a shift in US legislator attitudes towards election gambling as the 2024 election draws near.
Recently, a group of economists, business ‘titans’ and Washington insiders urged the Commodity Futures Trading Commission to allow more prediction markets related to political events. While the jury’s still out, there’s no denying the popularity of political gambling among bettors and how predicatively robust political betting markets are.