Why do the betting odds favor Trump in a close election in 2024?

“One of the big misnomers is that betting lines are a predictor of outcomes, but that's not the case,” says Harry Levant, director of gambling policy at Northeastern's Public Health Advocacy Institute.

According to betting platforms, former President Donald Trump appears to be a strong favorite. Photo by VCG/VCG via Getty Images

The polls consistently describe the 2024 presidential election as a dead heat. Real Clear Politics' summary of national polls gives Kamala Harris a slim 0.2% lead over Donald Trump. At Fivethirtyeight, Trump won 51 times per 100 simulations. The Economist simulations favor Trump 53% of the time.

All of these analyzes are within a statistical margin of error.

“This election is a coin toss,” says Matan Harel, an assistant professor of mathematics at Northeastern University.

So why is Trump listed as a relatively strong favorite at 61.7% on crypto platform Polymarket? The British stock exchange Betfair predicts a “likely victory” for Trump.

The answer, says a Northeast gambling expert, has to do with the economics of sports betting.

“One of the gambling industry's big misnomers is that betting lines are a predictor of outcomes, but that's not what they are,” says Harry Levant, director of gambling policy at Northeastern's Public Health Advocacy Institute. “They are supposed to be a predictor of human behavior.”

It's all about the money, says Levant. The betting companies manage the odds with the aim of keeping 10% or more of the money staked (so-called vigorish). The companies establish and maintain a betting line that allows them to protect their strength.

“Gambling operators try to attract a certain amount of money on both sides of a bet,” says Levant, pointing out that the ultimate goal is for winnings and losses to offset each other – so that betting operators come away with their profits intact.

It's about public perception

A common misconception, says Levant, is that gambling companies bring money into the betting game and are therefore more likely to be correct in their assessment. The truth, he says, is that companies are focused on how the betting public feels about the race.

“All these odds and point ranges are actually predictors of human behavior rather than gaming behavior,” Levant says. “If they can put money on Donald Trump as the 60 percent favorite, and they are committed to making the odds on Vice President Harris cheaper for bettors to encourage them to bet on her, then the companies will adjust those odds accordingly .” human perception. It’s not a prediction of the outcome, but a prediction of what they need to do to make the equation work and make their profit.”

The end result?

“I place no value on how the betting public responds to a gambling opportunity marketed by gambling companies both in the United States and abroad,” Levant says. “This is not a political issue. It’s a gambling problem.”

The action is taking place overseas because U.S. law traditionally prohibits betting on elections – a stance that was undermined by an Oct. 2 federal appeals court ruling that cleared the way for prediction exchange Kalshi to allow betting on congressional elections.

“We live in a time where we educate people to bet on everything. We’re normalizing an addictive product,” Levant says. “Regardless of your politics, this is a presidential election of historic proportions and it will have implications not just for this country but for the entire world. The idea that gambling companies are trying to capitalize on the public interest is a further normalization of the addictive nature of gambling.

“In this case, the betting public is interested in Donald Trump, so the companies make it more expensive to bet on Donald Trump and they give you a little more incentive to bet on Vice President Harris. But that is absolutely not an indicator of a political outcome. All of this shows that gambling companies will take action wherever they are allowed.”

Too close to predict

From Harel's perspective as a mathematician, the polls are too close to make a reliable prediction – even if the polls leading up to the 2020 presidential election turned out to be the least accurate in 40 years.

“I am convinced that the experts are doing their damn best,” Harel says of the election’s credible pollsters and analysts. “I prefer to take the information they provide at face value, and given that information, I have yet to meet a single person who thinks they know what will happen in two weeks.”

The betting market's confidence in Trump appears to be based on his slight lead in the seven swing states that could decide the election. According to Real Clear Politics, Trump has a 48.4 to 47.5 lead over Harris in the top battlegrounds.

However, Harel points out that the accuracy of polls depends on a representative random sample of the population – something that has become increasingly difficult in the country's polarized environment.

“As mathematicians, we tend to ask relatively simple questions because even the simple questions are difficult,” says Harel, whose work focuses on probability. “There are so many factors in this case. People are really complicated. Elections are incredibly complicated.

“That’s why I’m deeply skeptical,” Harel says of Trump’s betting advantage. “I am deeply skeptical that there is a 60-40 split. It’s a coin toss.”

Is Wall Street betting on a candidate?

The US financial markets are also expected to bet on the outcome of the election.

“The market and the inside of the market strongly believe that Trump will win,” said billionaire investor and former hedge fund manager Stanley Druckenmiller in an interview with Bloomberg. “You can see it in bank stocks, you can see it in cryptocurrencies, you can even see it in Trump Media & Technology Group Corp., his social media company.”

But Robert Triest, a Northeastern economics professor who served as a vice president and economist at the Federal Reserve Bank of Boston, says companies may be taking steps to position themselves in the event of a Trump victory.

“It is very difficult to interpret asset price movements as signs that investors believe one candidate will win over the other,” says Triest. “The connection between the winner of the election and the companies that benefit from it is pretty tenuous.

“There are certain things in Trump's policy views that suggest some sectors would benefit compared to others, but it depends a lot on what he can accomplish with executive action versus what can be done through Congress “And then if it has to go through Congress, it will depend a lot on which party controls the House of Representatives and the Senate.”

Trieste added: “I don’t think we can draw much conclusion about the elections from what is happening in the financial markets.”