Intrade, Where Politics Meets the Market

On Feb. 15, Mitt Romney’s campaign held a conference call with political reporters to discuss the candidate’s prospects in the upcoming Michigan primary. Rick Santorum, who had just won contests in Colorado, Minnesota, and Missouri, was leading by as much as 15 percent in state polls. So how did Romney’s advisers reassure the media he was still the GOP candidate to beat? By pointing to Intrade, an online exchange where investors buy shares in a market that bets on political outcomes. The exchange predicted that Romney had a 73.8 percent chance of winning the Republican nomination.

Launched in 2001 for betting on sports and the Dow Jones industrial average, Intrade opened its political markets in 2004. The site has become a go-to source for the news media since the 2008 Presidential race, when it predicted Barack Obama would win 364 electoral college votes. Obama ended up with 365. Unlike traditional polls that come out at regular intervals before a political event, Intrade odds change constantly as traders hunt for every last scrap of information churned out in the 24-hour news cycle that could sway public opinion leading up to an election. This year the market correctly forecast that Newt Gingrich would win the South Carolina primary and that Romney would win New Hampshire, Florida, Nevada, and Maine. (It wrongly predicted that Romney would best Santorum in Iowa and Colorado.)