US futures markets allow presidential race wagers

As if the US presidential contest wasn't enough like a horse race, web users all over the world can now bet on the outcome through online futures exchanges that treat politics like corn, cocoa or other commodities.

At websites like the Iowa Electronics Markets (http://www.biz.uiowa.edu/iem/) and Dublin-based Intrade (http://www.intrade. com), members can buy contracts predicting that President George W. Bush will win re-election on November 2 - or sell them off if they think Senator John Kerry will unseat him. Savvy traders can make money along the way as prices fluctuate with the candidates' fortunes.

On the Iowa exchange, traders gave the Republican Mr Bush a 59.8 per cent chance of winning. On Intrade, Mr Bush re-election contracts were trading at 59.5, meaning that traders believed Mr Bush had a 59.5 per cent chance of being re-elected.

Most national polls this week showed the candidates running at a dead heat or Mr Bush slightly ahead.

Democrat Mr Kerry fared better with a 55.7 price at the Presidential Market (http://presidentialmarket.org), where traders compete for a trip to Washington for the inauguration, but do not wager real money.

The Iowa markets have predicted the winner in all but one election since they were started as a teaching tool in 1988, said Joyce Berg, a University of Iowa accounting professor.

With 3,000 participants, the exchange's 1.4 per cent margin of error over that period is lower than the two per cent average of telephone polls, Prof. Berg said.

Markets like these can predict the outcome with a high degree of accuracy because traders examine the evidence critically before making a decision, said Intrade spokesman Mike Knesevitch.

"They're putting their money where their mouth is, and when people do that they typically do a lot of research and they come to a more studied opinion on these things," he said. Among Intrade's 40,000 traders, Mr Knesevitch said bets on financial exchanges are most popular, followed by politics.

"It's a clever use of the logic that's behind markets in general, that is the collectivity will come out with the right answer," said Gary Jacobsen, a political-science professor at the University of California in San Diego.

All three exchanges, which allow participants to wager on outcomes in specific states, can measure developments in the race that might not show up in polls.

During the second presidential debate on October 8, Mr Bush contracts on Intrade plunged from 58 to 52, then bounced back as pundits said Mr Bush did not get beaten too badly, he said. Smaller events show up in the markets as well. On October 11, Mr Knesevitch said: "Both candidates were in New Mexico today. New Mexico (Bush contracts) dropped two points today, so whatever Bush was doing wasn't working."

Futures exchanges emerged in the 19th century as a way to hedge risk in agricultural markets. A farmer might sell his corn on the exchange before it is grown to make sure he has a guaranteed profit. A breakfast-cereal maker might buy that contract to ensure a steady supply at a guaranteed price.