Why Scottish Referendum Odds are Beating Polls

News about Betfair paying out on Scottish ‘no’ vote is all over the internet today. Did a bookmaker just decide on Scottish independence referendum 48 hours earlier? No silly, it’s the betting market that is deciding and we can all see that at the Scottish referendum odds’ charts!

Obviously this is a strong move by the betting exchange, most probably done for advertising. Paying out on a hot political topic can easily propel your business to headlines as demonstrated here by the fine example of Betfair. Kudos to the marketing team! I’m assuming they would have spent a hefty amount of British pounds for the same publicity and exposure.

Now, given the Scottish referendum’s popularity, it was inevitable for many readers to restrain from commenting on the story. Even journalists, totally ignorant of the gambling mechanisms and betting markets’ efficiency and inefficiency, didn’t just report on the story but shared their own views. And most of them are false I’m afraid.

Unsurprisingly, most are comparing recent polls’ results with Betfair’s decision. How on earth can a betting operator decide on the winner so soon, while polls speak of a close battle between ‘yes’ and ‘no’? First, it’s for advertising as I mentioned. And second, it’s bettors’ money that is deciding. 9 million pounds of them!

Here are the betting odds’ charts of ‘yes’ and ‘no’ vote on the independence referendum in Scotland.

See? People have been betting on the referendum’s result for quite some time. As interest is picking up, betting volume is steadily increasing as indicated by the grey area at the charts’ bottom. In simple words, more people are betting on the outcome, submitting even bigger bets.

Did you notice the £75,000 bet on ‘no’ vote?

Yet, Scottish referendum odds are little affected the past few days. Even the polls release didn’t affect the odds, which are currently at 1.27 and 4.50. Didn’t all those bettors hear of the poll results?

Of course they have. Some were influenced by them, some were not. The betting market though is keeping a balance between them, like free market keeping a balance between supply and demand. And when it comes to market’s efficiency, I strongly believe money is a decisive factor.

Answering to a poll costs nothing. But putting their money where their mouth is, makes a stronger point.

Betfair themselves talked about the confidence that political betting markets inspire. They even brought up the 2012 US elections as an example. Funny, I wrote about them 2 years ago as well. And even then, polls again contradicted the bettors’ judgment.

Guess what: Betfair US election markets were correct again! Here’s how I myself didn’t believe US polls and explained why Obama was still a big favorite to win the US Presidential election, despite Romney’s lead in polls.

Is the ‘no’ vote decided? Well, no. But it’s not because we are still 2 days before the referendum. It’s because the ‘no’ vote is currently trading at 1.27 odds. And until it drops down to 1.01, there’s a small chance the ‘yes’ vote to come out in front. However, as long as the Scottish referendum odds do not reverse their trend and the ‘no’ vote does not trade above 1.50, Betfair bought themselves free publicity by paying out a little earlier.

Image by Kyoshi Masamune