The modern United States now cyclically turns into a poll-obsessed Nate-Silver-nation around elections, but those who study prediction markets say they have real advantages over traditional polling.
"Polls say who you're going to vote for. Markets say who you think is going to win," said Justin Wolfers, a professor of economics and public policy on leave from the University of Michigan. Forget the traditional post-debate focus group where five Republicans and five Democrats each think their candidate's sure to win, said Wolfers. "If instead you ask 10 people to bet on whose polling numbers are going to go up, they've got skin in the game and might actually tell you the truth," he said.
The University of Iowa has long run the Iowa Electronics Markets, a similar service. But PredictIt aims to bring electoral prediction markets to the masses by being especially user-friendly.
Another advantage over polling, say those behind the site, is that prediction markets weigh elicited information according to how much its source believes it to be true, based on how much money they're willing to put behind it. The Defense Department, has, controversially, experimented with a terrorism prediction market. Google has used the mechanism to tap its employees' wisdom on when new products are likely to ship.
"If you give someone a reward they will bring you whatever information they have," said Robert Quigley-McBride, who is working on the not-for-profit project under the auspices of the New Zealand's Victoria University of Wellington. Prediction markets, said Quigley-McBride, "can provide information that isn't available from any other source because it's been distributed widely across many people."
The D.C.-based political technology firm Aristotle is the Victoria University of Wellington's technology partner on PredictIt.
PredictIt only got sign-off from the U.S. Commodity Futures Trading Commission on Wednesday. In the 2012 election, election obsessives were obsessed with the Ireland-based prediction market site Intrade, but that service was never clearly legal in the United States. That site is now shuttered.
(PredictIt isn't, in practice, yet kosher across the full United States. Federal approval aside, the site isn't allowing participation from residents in 15 states with particularly strict laws on gaming and gambling: Alabama, Colorado, Hawaii, Illinois, Louisiana, Missouri, Montana, New York, New Jersey, Nevada, Oregon, South Carolina, Tennessee, Vermont, and Washington.)
PredictIt hasn't been around for long, but we'll have an early check on how well the site's working by late Tuesday, when election results start rolling in.
How are things looking? Landrieu, according to investors, has a 90 percent likelihood of losing her seat as Louisiana's senior senator. And things aren't looking so good either for Bruce Braley, running in that tight Iowa Senate race, or Rick Scott, running for the Florida governorship. At the moment, PredictIt predicts that the chances they'll be happy with Tuesday's election results are hovering around just 25 percent.
*Correction: This article originally misstated Senator Mary Landrieu's chances of winning her race, according to PredictIt. That has been fixed.