Steve Friess: Why Do Political 'Betting' Markets Still Back Trump?

State of Play is a column that focuses on the trending stories in the casino and gambling space with sharp and clever insight from senior staff writer Steve Friess. Over his 25-year career, Friess has contributed to publications such as Newsweek, Time, New York Times and more.

I was looking for some easy money, but I was looking at the data all wrong.

For the past couple of weeks, I had thought it would be an intriguing experiment to examine what impact the widely anticipated indictment of former President Donald Trump in Georgia would have on his “share price” on the political site PredictIt.

The site allows bettors to legally “invest” as much as $850 on the outcome of a wide range of political questions, from who will win the 2024 GOP nomination to whether progressive star Rep. Alexandria Ocasio-Cortez would challenge President Joe Biden.

This is not “gambling” in the sportsbook sense of the word, because it is not legal in the U.S. to wager on politics against the house on odds set by bookies the way we do in NFL betting. But it is lawful to bet against other people in PredictIt’s commodities market the same way people invest money on where the price of agricultural products will be six months from now.

In both cases — investing in the future of a presidential candidate or wheat — the prices rise and fall on the collective impression of how current events and publicly available information shape the future.

Surely, I thought, a fourth indictment of the former president would have some impact. This one, in state court, is different because neither Trump nor any Republican president can pardon him should the GOP retake the White House.

His legal peril is so severe now, with 13 new charges that include racketeering, it just had to dent the odds investors were giving Trump’s prospects, I thought. There was room to cash in on at least a brief shift in the markets by buying some shares of Trump to not be the GOP nominee, right?

Not right.

Indictments have little impact on markets

Trump began the week at 59 cents a share — or with the market giving him a 59 percent chance at willing the GOP nomination. By Friday, he was at 58 cents. It never went any lower, and he did bump up to 61 cents here and there.

Likewise, in the market asking whether he or Biden would win the general election, it might as well have been any other week. Biden-to-win costs 46 cents, where he was at the start of the week, and Trump-to-win is at 29 cents, a mere penny less than the 30 cents he was pre-Georgia indictment.

I didn’t understand. In the GOP nomination market, his shares had ranged from 41 to 45 cents on March 31, the day of his first indictment in New York related to alleged payments of hush money to the porn star Stormy Daniels. Then they started to surge, and they traded between 42 and 48 cents on April 4 when he appeared in court to enter his not-guilty pleas.

He was indicted again on June 9 by a federal grand jury in Florida that accuses him of hoarding classified documents and obstructing the government’s efforts to retrieve them. Again, there was at least a bit of a range — he bobbed between 48 and 53 cents that day.

After that, though, even as the charges became more serious and the indictments more sensational, they had increasingly little impact. His price stuck to between 51 and 53 cents on June 13, the day he pleaded not guilty to the documents charges. They stuck stubbornly between 58 and 60 cents on Aug. 1, when he was charged in Washington with crimes related to attempting to interfere with the certification of his 2020 loss to Biden. It was in the same range on Aug. 3 when he pleaded not guilty.

If anything, the indictments were firming up the market’s belief that he would win the nomination. They also were having a nominal impact on his prospects against Biden in the general election; Biden futures cost between 40 and 41 cents on March 31 and stayed in that range until late April when a wave of positive economic data pushed him into the 45-to-50 cent range. Trump’s odds of beating Biden head-to-head peaked at 30 cents on April 4 when he pleaded not guilty in New York; it sat at 29 cents yesterday.

But why?

Why hadn’t bettors shown much interest in this week’s historic events? Under normal circumstances, any one of these criminal charges would disqualify a candidate for mayor, senator or certainly president.

It’s more about DeSantis’ weak campaign

Obviously, these aren’t normal times and Trump is not a normal candidate. And it has been costly in the past to doubt his political resilience.

Pratik Chogule, host of the Star Spangled Gamblers podcast, tells me:

“In these betting markets, there’s probably some degree of PTSD among all the people who accepted the conventional wisdom that Trump was totally unelectable in 2016 and lost a lot of money. Then, in 2020, Trump significantly outperformed expectations in terms of where he was polling and what the conventional wisdom was. So, you’ve had now two rounds of people shorting Trump and losing money. A lot of people don’t want to be chumps a third time.”

The lack of reaction since the first two indictments, too, is a case of investors deciding that the market (like the rest of us) becoming strangely inured of the strangeness and shock of having an ex-president with so much legal baggage.

Also, even if the problems have accumulated and mounted — he’s at 93 charges in four jurisdictions — the markets are focusing on how it’s all being taken in by the Republican primary voters. And polling repeatedly indicates they are rallying around Trump, indignant about his prosecutions and determined to show their support by crowning him their 2024 nominee.

Ethan Rosen, a market analyst for PredictIt, says Trump’s price has much more to do with the collapse of the flailing campaign of Florida Gov. Ron DeSantis. DeSantis peaked at 47 cents in December 2022, before he announced he was a candidate, and went into a freefall since. Rosen says:

“The GOP primary voters actually like [Trump] more as a result of the indictments or at least they became more dug in on him. And again, there’s polling that shows us, and our markets look at polling and they interpret it, that was a close race until the fall of Ron DeSantis.”

‘Some of the most mispriced markets’

So, how is it I’ve been looking at the data all wrong? It’s not just that I expected Trump futures to fall more this week.

It’s also that I’m so impressed by the fact Trump is trading so high. Because, as Rosen and Chogule point out, Trump at 58 cents is kind of a bargain. He is, after all, the most-likely person to capture the GOP nomination. Rosen says:

“I think you would assume Trump has a better than 58% chance to win the nomination, right? I really do because the polls show him with an overwhelming lead. He’s basically vanquished the only person who’s emerged as an opponent. Well, why isn’t he at 75 cents? Maybe that’s the story. The market is fighting over right now is who would pick up the pieces if he collapsed and there’s no clear answer.”

Chogule says he sees the fact that neither Trump nor Biden (hovering around 70 cents to win the Democratic nomination) are trading higher is a big opportunity for smart investors.

“My own view is that that those are some of the most mispriced markets I’ve seen in a long time. Obviously, there are reasons why people think Biden might not be the nomination, but normally but I would say there’s a closer to 95% chance. … And Trump is the overwhelming favorite to be the nomination. His legal issues are not going to be the reason he doesn’t get it.”

How I’m going to play this

I see that now. Buy Trump at 59 cents and that should shoot up as the year progresses without any big drop in his polls. Same for Biden; he’s at 70 cents even though he has no serious primary competition? Sure, he’s 80 and could die or resign for health reasons. But is there anything in his public statements, medical data or history that suggests he will?

That’s why I’ve cashed out what I put against Trump in anticipation of the Georgia indictment and I am planning to buy some shares in Trump and Biden to win their nominations.

But I’m also going to put some short-term money down on two other candidates — entrepreneur Vivek Ramaswamy and ex-New Jersey Gov. Chris Christie.

The first has become a popular Fox News presence and is gaining traction (at 17 cents, he’s ticked slightly ahead of DeSantis) who, should he have a solid performance at the GOP’s first debate, would probably shoot up a bit. And Christie is so cheap right now at 6 cents a share that, should he land some solid zingers at the debate, he might move up. Even a two-cent rise, at that price, would be a 33 percent profit.

That’s the thing to remember about this form of wagering that’s very different than picking the Jets to win a game. At this point, a year before the parties hold their nominating conventions, it’s not necessarily about the final outcome. It’s about short- and medium-term expectations.

Chogule says:

“When we revisit the question a year from now, either the markets are going to look very prophetic in anticipating that the legal issues would not pose a serious electoral problem for Trump, that Trump would remain the driver of the Republican Party and that he would be a strong general election candidate. Or the markets are going to look like they were slow to recognize that Trump’s legal issues were indeed serious, that they would catch up with him and that he was nowhere near as strong of a front runner as it appears right now.”

Mark those words. We’ll come back to them next summer.