Maxim Lott, founder of ElectionBettingOdds.comexplained to Washington Examiner why betting odds are more predictive than the polls and revealed the “tipping point” that fueled former President Donald Trump’s rise in election odds and polls.

“Betting odds are more reliable because people have to put their money where their mouth is,” Lott said. “It makes most people think twice and be more cautious before weighing in on who actually wins.”

ELECTION 2024 LIVE UPDATES: LATEST NEWS ON THE TRUMP-HARRIS PRESIDENTIAL RACE

Predicting the future: How hard is it?

Having tracked hundreds of races since 2015, Lott confirmed that “the betting odds have a good track record.” He explained that “Specifically, candidates who were given a certain percentage chance of winning actually won about that percentage of the time. For example, the graph below shows that candidates who were given a 70-80% chance actually won about 75% of the time.”

Between 2016 and 2022, ElectionBettingOdds tracked 807 different candidates’ chances over a number of elections. They found that if players gave a candidate between a 90% and 100% chance of winning, that candidate won 99.4% of the time. Candidates with between 80% and 90% chance won 93.8% of the time.

Between 70% and 80% it drops to 74.4%. Between 60% and 70% it is 68.8%. Between 50% and 60% it is 56%. Between 40% and 50% it is 44%. Between 30% and 40% it is 34.9%. Between 20% and 30% it is 23.8%. Between 10% and 20% it is 4.5% and between 0% and 10% it is 1%.

According to the data, odds are extremely effective in predicting the correct probability of a candidate winning. However, there is an “underdog bias” present in races where one candidate is heavily favored over the other. This bias provides a higher predicted risk of upsets in some races that are more or less decided before Election Day.

Lott’s research has also found that odds on election games have a slightly lean against Democratic candidates but less than FiveThirtyEights the model does. Both tend to be more “surprised” when a Republican wins.

In total, 88.9% of the candidates favored in the electoral odds of the 807 tracked won. Only three bets underdogs have won presidential elections since the 1940s, and two were only slight underdogs. JFK won at +110, Carter won at +100, but Trump won in 2016 despite +375 odds.

Why the punters get it right and likely voters get it wrong

Year 2020, voting data found that the most likely voters thought Trump would win the election until early October, when they slightly favored President Joe Biden. Still, Biden led in the polls by nearly 10 percentage points from July to Election Day. The players, on the other hand, were with Biden the whole time — and with a relatively high degree of certainty.

The likely voters who are asked in polls who they think will win the election, regardless of preference, have nothing to lose by being wrong. Players, on the contrary, “must put their money where their mouth is.”

Lott said, “Typically, voters polled on the phone are just giving their gut feelings, which can be based on anything. The players also have their gut feelings, but they also look at polls, trends, statistical models, early voting data and news events that can make a difference – as a candidate mistake or an escalation of the war in the Middle East.”

Players are sometimes wrong, most notably in 2016 when Trump shocked the world and defeated Hillary Clinton. Lott explained: “Even if the punters got it wrong, every other forecaster got it wrong too, and usually a lot more.”

“the punters gave Trump a 20% chance on election morning, while New York Times gave him 15%, the Daily Kos gave him 8%, the Huffington Post gave him only 2%, and the Princeton Election Consortium gave him less than 1%,” he said. “Partly from these embarrassments, all of these forecasters have since given up trying to statistically predict elections in advance.”

He explained that the punters “failed to predict his win” despite being “more bullish” on his chances than most pundits because “Trump was way down in the polls and Trump running for president was uncharted territory. This time they’re neglecting certainly not his chances.”

“After 2016,” Lott said, “players definitely became more open to the idea that outsiders, non-politicians and populists can win big elections.”

Statistically, “the underdog should win some of the time,” Lott added. “If players give a 20% chance of winning in 5 different picks, that means that out of those five, the underdog should win one.”

‘A tipping point’: Public appearances are changing the paradigm

Public appearances have coincided with many of the biggest swings in polling odds this election cycle. Biden’s campaign was essentially considered a lost cause by punters after his debate performance in June, prompting his suspension from the Democratic ticket. In fact, the players gave Vice President Kamala Harris a higher one probability to win before she was even promoted.

Asked if the election betting markets overreact after notable public appearances, Lott said, “I think they’re just as reactive as they should be” and pointed to three big “public appearances” he’s followed.

The first shift came after the June 27 Biden-Trump debate: “Biden’s odds dropped from 36% to 24% that night, a huge drop,” he said. “I felt it had to be too big. The players were right.”

The second shift came after the Sept. 10 Trump-Harris debate: “Harris was up about 5 points that night, from 47% to 52%,” Lott said. “Bettor’s predicted shift was reflected in a poll shift towards Harris in the following weeks, so I’d say that proved them right.”

The third shift came after the Oct. 1 vice presidential debate, which he says the players actually underreacted. “Setters gave Vance the edge and over the next day raised Trump’s odds to win by about 1 point,” he said. “They may have underestimated the impact of the debate, as it marked a turning point where Trump began winning in the polls and the odds (a trend that has continued to this day.)”

The Washington Examiner has reported on how other appearances have affected odds after the vice presidential debate, including when Harris’ odds trap with 3.1 points behind her 60 minutes the interview was released on October 7 and when her odds dropped another 2.6 points after her interview with Fox News on October 16. Both performances drew criticism from both Republicans and Democrats.

Still time for an “October surprise”

As it stands, the 2024 election odds paint an optimistic picture for Republicans if they are right. Players give Trump a 60% chance of winning presidencygiving Republicans a 51% chance House majorityand they give the GOP an 84% chance of one Senate majority.

“If the candidates continue to campaign like they are doing now, I (and the markets) expect Trump to benefit as they go into Election Day,” Lott predicted.

But he said “there is still time for an ‘October surprise’ or something shocking to happen.”

If there will be a surprise in October, it will likely come after a notable public appearance or major world event. Both Trump and Harris have a number of appearances on the docket over the next two weeks, while Israel is shifts up for a “deadly” retaliation against Iran for its October 1 missile attack.

Republicans are now predicted to have a 52-48 Senate majority by the odds — but three races where GOP underdogs have a realistic chance include Wisconsin, Michigan and Pennsylvania. All three Democratic frontrunners have seen their odds drop over the past week as the races have tightened.

The punters give Republican Dave McCormick a 30.8% chance of upsetting Sen. Bob Casey (D-PA), Republican Mike Rogers a 31.8% chance of beating Rep. Elissa Slotkin (D-MI) and Republican Eric Hovde 32.1% chance to unseat Sen. Tammy Baldwin (D-WI).

“Republicans really have a chance to turn them around,” Lott said. “If the election were held today, these odds, on average, suggest they would win one of those three.”

He also shared that House and Senate race betting odds are “almost as predictive” as presidential election betting odds. “There hasn’t been much of a difference,” he said. However, he noted that “gamers have been somewhat worse at predicting governors’ races” than anyone else.

‘Whale’ watch: Do splash bets shift the odds?

Reports on “choices” the players have appeared in the latter part of the election season, in particular, $43 million was bet in four Polymarket accounts on Trump and other Republican victory scenarios. According to Blockchain analyst Miguel Morel, these four accounts could be “same unit.”

Other significant contributions have also been made recently, including $500,000 bet on Harris to win the election last week on the first fully legal widespread election gaming platform in the US, Kalshi.

BREAKING: Over $500,000 Just Placed on Kamala Harris to WIN the Presidential Election pic.twitter.com/g5gkoA24AP

— Kalshi (@Kalshi) 18 October 2024

As for whether those big bets could affect the odds, Lott conceded that they “may have played some role in driving up Trump’s odds in general.” But he also said that the former president “has also won the odds, regardless of the big ‘election traders.’

CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER

He pointed to US-based exchange PredictIt, which only allows users to bet up to $850 on each candidate: “As a result, there are no ‘whales’ there, and little ability for anyone to ‘arbitrage’ and get it in line. with other markets. But PredictIt has still shifted to Trump and currently gives him between a 53% and 54% chance of winning.”

“So we know the players prefer Trump, whales or no whales,” Lott said.