Tavis Rendell — US Election Betting

In our latest interview in our Pro Punter series, we are speaking with political betting expert and US Election trader Tavis Rendell.

Every fortnight a new instalment of Rendell’s US Election analysis will be published, talking over all of the main topics from the previous two weeks and where the value lies in the current US election betting markets.

The 2020 Presidential Market is on track to be the biggest of all time. Check out the odds and follow the market on the Exchange.

Check out our Politics Hub, where we’ll have all the expertise and betting insights you need as we head into one of the biggest elections the US has had.



In a presidential election year that could not get any more otherworldly, the 2020 campaign was rocked in the early hours of Friday morning with news of President Donald Trump and First Lady Melania Trump testing positive for COVID-19.

The ripple effects across Washington were immediate and impactful, affecting all three branches of US government. In the days since, numerous members of the Trump campaign, White House officials, and Republican Senators have also tested positive for the virus as cases continue to mount.

The political implications of such an event are difficult to overstate. While the hospitalization of any US President would be newsworthy, this is occurring against the backdrop of a presidential campaign in full sprint with one month to go and the worst pandemic in a century.


State of the Race

Before we get into the political and electoral implications of Trump’s health, it’s worth reflecting for a moment on the overall trajectory of the race, and how historically unique it has been. And to do that, it’s helpful to step back from the daily horse race of polling and instead focus on the larger, macro trends of American politics in the Trump Era.

Most presidential campaigns bear similar dynamics to closely fought sporting events. They have their own peaks and valleys, their own swings of momentum in polls that cause optimism in one campaign, and set off five-alarm panic in the opposing campaign.

What stands out most in this race is, for the most part, that hasn’t happened. On the contrary, what’s been remarkable is the near glacial stability for more than a year and a half in polling a general election matchup of Trump vs. Biden. This stability has held firm since Joe Biden became the Democratic nominee, and even before he became the Democratic nominee.

Case in point: One year ago, in polling a hypothetical general election matchup of Trump vs. Biden on October 2, 2019, Biden’s lead in the Real Clear Politics polling average was 7.6 points. One year later on October 2, 2020, his lead was… 7.8 points.

Consider also this stability has held firm amidst the most volatile political environment imaginable for the first term of any presidential administration, with new scandals developing almost weekly.

You could even ignore the first three years of Trump’s term and consider what’s happened in 2020 alone. Since January the Trump Administration has had to navigate: impeachment, a global pandemic that has taken the lives of more than 200,000 Americans, a haphazard, decentralized response to that pandemic, and the worst recession since the Great Depression.

In a normal political climate, any one of these events could be expected to significantly affect public opinion. And yet… the numbers… Have. Not. Moved.

At this point it’s worth asking – If all those variables don’t move the polls, if they don’t even affect Trump’s job approval, if tsunami-like political events don’t appear to be changing voters’ minds, is it possible anything will?

The answer may be no. And, while this poses deeply concerning, fundamental troubles for any functioning democracy, that is the position in which we find ourselves.

Throughout the summer, many pundits (myself included) and veteran Democratic and Republican strategists expected the race to eventually tighten and held firm in this belief, a near-unshakable assumption that right-leaning voters who had abandoned Trump would eventually come home. States where Biden held a surprise lead would surely revert to form as voters really began to tune in to the race.

Yet one month out, Joe Biden remains highly competitive in Ohio, Iowa, and Georgia, even leading in many polls. If Trump is to win reelection, these are states he should win comfortably.

There’s still time for another “October Surprise” that could finally shift the race. But it’s hard to imagine what it could take.

The only unknown remaining on the table, of course, is Trump’s health.


Outlook

For now, Trump’s prognosis is good. While this virus can be lethal, particularly among those in Trump’s age and weight groups, the most likely course of events by far is that he is discharged from the hospital after a 3-4 day stay. He can then be expected to resume campaigning virtually from the White House as he completes his quarantine. He may even be back on his feet fast enough to participate in another presidential debate.

In a typical political environment, especially in a presidential election, the specter of a sitting US President being hospitalized would be a seismic national event, expected to garner widespread sympathy among the American public that would transcend political, social, and racial divides.

In the Trump era, however, due to the seemingly immovable dynamics noted above, this is highly unlikely.

We won’t know this for certain until we begin to see polling evidence. For now, as stated by the New York Times, the “polls are falling behind the news”. We know Biden’s 7-8 point average national lead has held steady, if not increased by a point since the debate. But we won’t know the effect of Trump’s health scare on the electorate for a week or more.

Observers would be wise to not put too much stock in any polls released in the coming days, especially those taken before Trump tested positive.

What could all this mean for the election?

Upon his release, Trump will face a decision presenting his last opportunity to meaningfully alter the race. The first option is an upfront act of transparency with the American public, a candid omission he made mistakes in underestimating the seriousness of the pandemic from the outset and that his experience was, above all, a learning experience in the gravity of the threat. He could follow up by offering compassion to those affected by the virus and a renewed pledge to protect the nation, adopting a radically different, solemn tone.

Essentially, he would be asking the public for forgiveness without explicitly saying so. While jarringly out of character, it could gain him a fresh look and perhaps even some sympathy from the small portion of the electorate that remains undecided.

The second option would be to revert to his standard script in typical fashion, especially if he has a rapid recovery and quickly gets back on the campaign trail. If he chooses this option, it’s easy to imagine him picking up where he left off and staying entirely on-brand, claiming he “beat the virus” because he’s a “winner” and further playing it down as no big deal.

Making a mistake is one thing. But admitting he made a mistake is an altogether different proposition, one that would be wildly off-brand for him and even disappointing to his most loyal supporters, which is why I fully expect him to stick with the script.


Implications of Candidate Withdrawal

The only way this dynamic could be truly tested would be if either candidate (Remember: Biden was exposed to Trump from a 12 foot distance for over 90 minutes during the debate) were forced to withdraw from the race (either from passing away or incapacitation). Again, this is extremely unlikely due to Trump’s current diagnosis.

At this late stage of the race, the ramifications of a candidate dropping out of the race comprise a legal minefield of constitutional law wide enough to fill several libraries. The Electoral College, the process by which American Presidents are elected, is an arcane system laid out in the US Constitution, clarified by several Amendments, but one that does not account for all possibilities. Some eventualities are simply not addressed at all.

Bear in mind the election is already underway. Ballots have been printed, mailed and cast. Early voting is occurring at this very moment. Most states have no processes in place to replace a candidate’s name on the ballot at this point, though some do have laws allowing early voters to cancel their existing ballot and cast another.

It is widely assumed that if either candidate were forced to drop out, their running mate would simply ascend to their position at the top of the ticket. This does not necessarily have to be the case. Either party could name a replacement if they wish. They would have to do so as fast as possible to inform voters specifically for whom they would be voting, even if that’s not the actual name printed on the ballot. The party would then have to coordinate its presidential electors to cast their votes for the replacement candidate when the Electoral College convenes on December 14th.

Should this unfortunate event occur, it is highly likely both parties would opt for the simplest route, and announce that their vice presidential candidate (in this case Mike Pence or Kamala Harris), will be their presidential candidate. This is because early votes that have already been cast for president (and cannot be canceled) would at least have the running mate’s name on them. Votes would still be going to the party’s designated replacement.

One outcome where the Constitution is clear: The Twentieth Amendment provides that if the president-elect passes away after the Electoral College convenes on December 14th, the vice president-elect is sworn into office on Inauguration Day, January 20, 2021.


The Road Ahead

Regardless of whether another October Surprise lies in store, the debate over what the chief issue would be in this campaign can be put to bed. It will be a referendum on the pandemic, and the American public’s choice as to whom they would prefer to lead a national response. Trump can still win. He remains within striking distance, but he’s running out of runway. He needs to start making up ground, and soon.

Reelection campaigns are almost always a referendum on the incumbent. This time is no different, but the surrounding circumstances most certainly are.


The past month of the 2020 US Presidential Election has marked one of the most volatile and stunning shifts in the history of political prediction markets.

In a short space of time, Donald Trump has narrowed the gap from being a $3.00+ underdog to near even money to win reelection. Notably, this move has been consistent and supported with high volume across multiple global and respected political prediction markets, demonstrating a clear trend of support for Trump winning reelection.

Given the consistency of the trend and total volume involved; we are not witnessing a random trading anomaly. This is a real market move of over +/- 100 percent that currently shows little sign of abating.

What’s behind this market shift and is it justified? Answering this question, and examining the evidence (or lack thereof) to support it, can help bettors find the most value for their money.


News Events

The US news cycle has been mixed for both candidates over the month of August:

Civil and social unrest continues in the US with the shooting of Jacob Blake in Wisconsin, as support for/opposition to the Black Lives Matter movement begins to sharpen and divide across partisan lines. The Trump Administration’s continued efforts to interfere with the US Postal Service in a possible attempt to hinder mail-in voting in swing states is also an ongoing, developing story.

Both stories could impact the election, perhaps substantially. But we cannot know for certain whether these issues will remain salient let alone decisive on Election Day.


Polls

What about polls? Thus far there has been no concrete polling evidence to justify such a massive move in favour of Trump in prediction markets.

Both political parties staged their conventions at the end of August, with mixed polling results showing little to no national effect:

Biden gained an uptick in his favorable/unfavorable rating, a polling metric where he was already well-positioned.

Trump gained a slight increase in two national polls, one from Morning Consult showing Biden with a six-point national lead (a shift of +4 points for Trump since prior poll), and one from YouGov, also showing Biden with a six-point national lead (a shift of +3 points for Trump since prior poll).

The release of these two polls and the ongoing social unrest roughly overlapped Trump’s increase of support in prediction markets. But this is also what makes the massive shift towards Trump so stunning.

Remember, these are two polls. Yes, they do show a slight increase in support for Trump and for that reason they were deemed headline-worthy during an otherwise slow news cycle. But they could also be outliers or mere statistical noise. After all, a six-point national lead is still a sizeable advantage. One could just as easily cherry pick two or three swing state polls showing Biden with an increasing lead, or several national polls showing him maintaining a high single-digit to double-digit national lead.


Market disparity

Most veterans of politics — campaign managers, pollsters, and professional traders alike — all expected this race to tighten eventually, but a market move of this magnitude at this stage of the race is simply premature.

National polls still say Biden has a clear lead. Dozens of battleground state polls still say Biden has a clear lead. And yet, Trump continues to rise in prediction markets.

What this means is we are witnessing a remarkable divergence between what the prediction markets say and what the polls say, probably the greatest in modern history. Prediction markets and polls can and do often differ, but are almost never disconnected to this extent.

Case in point — many academic and statistical models show Biden with anywhere from a 70-90 percent chance of winning the election. Yet most prediction markets have the race near even money – an astounding differential.

This is not to say Trump won’t win, or that he can’t win. He absolutely could, and, in fact, has a much better chance of winning than most pundits currently realize. It just means he’s currently mispriced to do so.

The markets have simply overreacted. And overreaction creates opportunity. With that in mind, let’s take a look at some of the markets that offer the most value for Trump bettors and Biden bettors.


The Road to 270

To find the most value for your candidate, it’s helpful to start out by mapping how you think they will piece together enough states to reach the magic number of 270 electoral votes to win. In doing so, it’s important to remember the outcome is essentially a foregone conclusion and will be uncontested by the campaigns in 38-40 of the 50 US states. What’s left are the battleground states (or swing states) – the markets that will offer the most volume and liquidity for bettors.

All traders will have their own forecasts, but let’s take a quick look at how our map currently stands. We will continue to update this in each webcast and article. It remains essentially unchanged from our July projections. Here’s where we project the race as of today:

We have Joe Biden with 268 electoral votes leaning or solidly in the Democratic column, just shy of the magic number of 270 he needs to win. Trump stands at 204 electoral votes leaning or solidly in the Republican column. Trump is obviously in a challenging position, with the Biden campaign on offense, expanding the map to compete in long-standing Republican territory (North Carolina, Georgia, Texas).

To win, much like in 2016, Trump will need to run the table and win states where he’s a clear underdog, and draw an inside straight to pull it off.


If you think Trump will win

If you think Trump will win the election, that train may have left the station in the overall presidential market. You’ve already lost much of the value on that trade after it doubled. It would be equivalent to backing a sports team with a -7 point listed handicap, but not jumping on board until they become a -14 point favourite. It doesn’t mean the bet won’t win. It just means you aren’t getting the most value for your bet.

So to find value for Trump now, it’s best to take a look at the states he needs to win, or is most likely to win in reelection.

FLORIDA

While Trump is near even money to win reelection, he remains a slight underdog in Florida. And given Florida’s treasure trove of electoral votes (29), it’s incredibly unlikely Trump could map out any road back to the White House without it.

Far-fetched scenarios aside in the current US electoral landscape, a Democrat can win the White House without Florida, whereas a Republican simply cannot. So even if Trump falls short on Election Day, Florida could still be an excellent trade because he could still win Florida while losing nationally, making this an excellent opportunity to hedge your bet.

The Republican Party has an excellent grassroots operation in Florida, and one of the best track records of voter turnout in the country. Biden may still have a slight polling lead but if Trump is going to pull off the win, it all starts here.

BACK — Republicans to win Florida (can be used as hedge with Next President market)

OHIO

Ohio was the quintessential swing state in US Presidential elections not so long ago. Barack Obama won it in 2008 and 2012, but things have changed drastically in eight short years. Trump won Ohio comfortably in 2016, and while many states in the country are undergoing demographic shifts in favour of Democrats, Ohio is moving in the opposite direction.

You’re laying a bit more here with Trump favoured and you won’t be getting in at the lowest price, but barring an absolute electoral landslide for Biden, it’s incredibly difficult to see Trump losing Ohio even if he underperforms on Election Day. Trump has also shown an increase in the latest Ohio polls. This is among the absolute safest investments not only for Trump backers, but for election bettors in general. Even in a presidential loss, Ohio remains a state Trump is likely to win.

BACK — Republicans to win Ohio


If you think Biden will win

Conversely, if you’re a trader who thinks Biden will win, you’re now able to get him at his best ever price at near even money. So, your first stop should be straightforward — head straight to the Next President market and get him at his best price in the general election to date.

For a candidate with a high single-digit average national lead, and a resilient lead in most swing states, you’d be hard pressed to find better current value for your investment.

What about Biden’s road to 270? Two states stand out as market opportunities:

PENNSYLVANIA

There is almost no road to the White House for Joe Biden without Pennsylvania and its 20 electoral votes. Thankfully for him, he’s entering the contest with built-in advantages.

First, it’s his home state. Biden was born and raised in the Scranton, PA area. Second, Democrats are trending very well in the Philadelphia suburbs. Which is a critical part of the state that often decides elections (Trump’s unfavorable numbers continue to increase here as well). Democrats performed exceptionally well in the Philadelphia suburbs in the midterm elections of 2018 and given current polling, are expected to overperform here again this year.

Keep in mind, Hillary Clinton only lost Pennsylvania by less than a point in 2016. It’s difficult to see how Biden underperforms those numbers in a state that should be friendly terrain. Biden could also win here while still losing the election. He’s a slight favorite, but this market is worth the attention of any Biden backer.

What Florida is to Republicans, Pennsylvania is to the Democrats. It’s the foundation for any road to victory.

BACK — Democrats to win Pennsylvania

ARIZONA

Arizona has been one of the more interesting battleground state markets. It is one of the fastest Democratic trending states in the country, polls are continuing to show Biden with a consistent advantage, but markets have been reluctant to place him as anything more than a slight favourite.

This is partially understandable for historical reasons. No Democrat has won the state in a Presidential election since Bill Clinton. And it has been reliably Republican to the point where it has not been seriously contested as a presidential battleground state for over two decades.

That’s about to come to an end. Arizona is changing fast, with demographics and a large influx of college-educated transplants all creating a more favorable electorate for Democrats. They won a hotly contested Senate seat here in 2018, and are favoured to do so again this year.

Democrats have proven they can win statewide in Arizona. Biden has led consistently in polling all summer, and recently polled as high as a nine-point lead. The market is simply underestimating his chances here out of historical reflex. Win or lose the presidency, Biden stands an excellent chance of winning Arizona and should be far more favoured than currently reflected.

BACK — Democrats to win Arizona


Summary

The debate over whether polls or prediction markets are more accurate forecasters of election outcomes has passionate, well-informed supporters on both sides in academia and among professional traders. This debate will continue long after this election. But the ongoing disconnect between them is one of the remarkable stories of this election.

Prediction markets and polls may converge by Election Day but if they don’t, two things are certain: One will have long-term bragging rights, and one is will be awfully embarrassed.


The US Presidential race had recently entered a mid-summer lull, but the Biden campaign rocked the betting markets Tuesday with an announcement their campaign will soon select a Vice Presidential nominee.

Joe Biden did not name a specific date for an announcement, stating only “I’m going to have a choice in the first week in August”. Several days later, sources reported the announcement would take place the week of August 10th prior to the Democratic National Convention. While still vague, it certainly narrows things down and is arguably the most vital piece of news for political bettors since Biden clinched the nomination. For political bettors, knowing when an announcement is going to be made can be just as important, if not more so, than the content of the announcement itself.

In all likelihood, we are days away from the announcement of Joe Biden’s running mate. And in a year when both parties will be holding dramatically downsized conventions during the pandemic, this announcement will likely be the most important event in the campaign until the presidential debates this fall.

Biden’s choice could have major ramifications on the overall Presidential and Individual State betting markets. Veteran political bettors will anticipate those likely market moves based on the political and geographic strengths and weaknesses of each prospective VP candidate, and invest accordingly.

As we review the final contenders, it’s important to note there are actually very few. Politically speaking, the Biden campaign is boxed in for two reasons. First, Biden pledged to select a female as his running mate earlier this year. Second, upon bowing out of the race, Minnesota Senator Amy Klobuchar, widely considered a VP favourite herself, stated she believed Biden should select a woman of color. While Biden has not specifically pledged to choose a woman of color, Klobuchar’s statement adds political pressure on him to do so.

With that in mind, let’s take a final look at one of the most exciting political markets until the election:


The Favourites

Kamala Harris

Harris has been the deserved favourite wire-to-wire. That said, her price is inflated as a result of US political website Politico posting a July 28th article on declaring Harris as the choice. The article was quickly removed. Not surprisingly, this did not prevent the ensuing avalanche of speculation in political media.

Did Politico really have the story? It’s possible. It’s also possible they had a draft “in the can”, ready for publication the moment Harris was (or is) announced. That said, the article contained a direct quote attributed to Biden, lending more mystery (and possible credibility) to the story. It could also have been a piece of disinformation leaked by the Biden campaign to throw the media off the trail, as prior campaigns have done this before during VP searches.

Harris has rocketed to the status of heavy favourite for other reasons as well. She would be a typical “do no harm” choice and would not significantly aggravate large portions of the Democratic base.

Biden is an old-school politician, reliant on personal relationships and chemistry above all. If that dynamic between the two of them is strong enough, she’s the choice.

Susan Rice

After months of speculation and credible press appearances, Rice has risen in stature and credibility to the position of runner-up. Her strengths and weaknesses are clear.

Biden has known Rice for years and established a strong, trustworthy relationship with her in the White House when she served as President Obama’s National Security Adviser. He would highly value her loyalty as a confidant and powerful governing partner. On personal chemistry, she would likely be his first choice.

Her political negatives are clear, however. Rice has never run for public office. While this could prove helpful in that she may never seek the presidency herself and overshadow a Biden first term, it also makes her a riskier choice to throw into the fray of what is likely to be a volatile, highly negative campaign. Selecting Rice would also feed into the frenzy of right-wing media on the subject of Benghazi, and divert attention from Biden’s core messaging on the pandemic and economy.

It’s understandable why Biden might opt for comfort with this choice, but as he holds such a sizeable polling lead, Rice’s negatives appear to outweigh her positives.


In the Running

Elizabeth Warren

The lone non-woman of color on the list, Warren remains in the running. Biden is said to be privately very impressed with Warren’s deep knowledge of fiscal policy and her political acumen, viewing her as highly capable of stepping into the Presidency on day one.

Her selection would undoubtedly invigorate the liberal base of the Democratic party. One other item of note: It’s not all about race. Warren could also, perhaps surprisingly, boost African American turnout for the ticket. She has polled very well among this demographic, even more so than other African American candidates.

On the downside, Warren is viewed as liberal enough that she could add even more polarization to an already polarized campaign, and endanger Biden’s strength among suburban moderates who will decide this election. There is also the issue of her Senate seat in Massachusetts. If elevated to the Vice Presidency, Democrats would have to defend this seat in a special election which could prove to be a needless (and costly) seat to defend in the early months of a Biden presidency, especially if control of the Senate hinged on the outcome.

Val Demings

A probable future Democratic star, Demings’ price reached runner-up at the peak of the Black Lives Matter and law enforcement reform protests in the US. It has fallen the past month through no fault of her own. Law enforcement reform will still play a role in shaping the dynamics of the election but given the continuing pandemic in the US, it may not be as prominent an issue come November.

There is also the issue of Demings’ background as a former Chief of Police. With continuing debate over police brutality, it’s unlikely Biden would opt for someone with such a heavy background in law enforcement that could strike some portions of the Democratic base as tone-deaf. Her political future remains bright, but it’s likely a case of bad fortune and poor timing for Demings. This probably isn’t her year.

Tammy Duckworth

Duckworth is the most likely choice of those “in the running”, and offers the fewest negatives.  A two-term senator from Illinois and double amputee who served as a Lieutenant Colonel in Iraq, she has an inspiring life story. Politically speaking, she possesses a near untouchable resume and would be the most difficult choice for the Trump campaign to attack, by some margin.

Duckworth enjoyed a rise in the markets several weeks ago, but has fallen considerably for no identifiable reason or apparent bad news, making her a real value bet here. Like Harris, this will all come down to personal chemistry for Biden. She would be the ultimate do no harm choice with no discernable weaknesses.


The Long Shots

Karen Bass

A veteran congresswoman from Los Angeles with little national name ID, Bass had a near inexplicable rise in the betting markets over the past two weeks. This was perhaps due to a recent string of press appearances where she performed well and, notably, declared she would not run for President in 2024.

Like Susan Rice, the notion that a campaign to become his successor would not immediately kick off on Inauguration Day could be appealing to Biden. The problem here is Bass, despite being a very well-respected legislator and a safe pick, ultimately brings nothing extra to the table that is not surpassed by any of the aforementioned candidates.

Michele Lujan Grisham

An Hispanic governor of New Mexico, Grisham is the most plausible and most intriguing of all long shots in the market.

There’s been a clear drop in her price over recent weeks, and that’s simply down to a lack of buzz in the press. But even as a long shot, it’s easy to develop a rationale for selecting her. Biden struggled somewhat with Hispanic support throughout the primary, and has not yet consolidated this voting bloc. Grisham could offer help there and as the lone governor on this list, presents a credible choice with executive experience to step into the presidency if needed.


The Pick

The Biden campaign is on offense in traditionally Republican states and has been operating smoothly throughout the summer. With a double-digit lead in national polls and a consistent lead in swing states, there’s no need to make a choice that could rock the boat.

For these reasons, Duckworth deserves to be priced among the top three contenders. She offers a clear choice for Biden consistent with his polling lead and existing dynamics of the campaign and is the safest pick for him of all contenders. A price like this is a clearly underpriced play offering maximum value for your investment.

BETTING STRATEGY

BACK (WIN) – Tammy Duckworth





The 2020 US Election will be the biggest betting market in history. Back and Lay Trump and Biden on Betfair.


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