Predict it allows traders to buy and sell futures contracts ("bet") on political outcomes. Because the contracts pay off $1 if the event occurs, prices can be interpreted as probabilities. If something increases the probability that an event will occur, demand for the contracts will increase which drives up the price.
- Here are the current prices of two contracts:
- Probability of Joe Biden winning the Democratic Nomination is 36%
- Probability of Republican US Senate+House Control is 74%
- You can use the history of price movements to answer questions, like "what was the effect of the June 9, 2022 televised hearings on the Jan 6 Capitol riot?"
- In the graph below, on June 11, we see a very slight uptick in the probability of Buttigieg as the Democratic nominee, and slight downticks in the probabilities of Biden or Harris. This segues nicely into a discussion of how quickly market prices reflect changes.
- We do not see a similar change in the probability of house House or Senate control