One of the best things about American elections is that it is possible to bet on them legally. The prediction market Intrade matches punters and offers odds. It is a pity that election betting is illegal in India. The colourful multi-party landscape of Apna Desh offers so much more scope than the rather dull two-party system prevalent in the United States.
People do bet on Indian elections. But they do it illegally. Enormous sums are wagered in illegal markets. The illegal betting markets are lumpy and secretive, with minimum bet sizes of Rs 10,000 upwards. The odds-making is also opaque, and few types of bets are on offer.
The government could make a tidy sum by legalising and legitimising gambling centred on elections. Some financial institutions like the Securities and Exchange Board of India could be mandated to run the system. It would be easy enough to adapt the totaliser system of horse racing to service election betting. In a “tote”, people bet in fixed multiples of, say, Rs 10 on various participants in a race. A bet of Rs 100 equals 10 tickets of face value Rs 10 each. The service provider skims commission off and deducts taxes before splitting the cash received between winning tickets.
Apart from totes, election markets lend themselves to spreads, which were in fact invented precisely for election predictions. In a spread, the bookmaker asserts, for example, that X party will win between 120 and 130 seats. A punter can bet against the upper or lower margin of the spread, or both. A general election offers the space to create spreads on number of seats, vote share, state-by-state splits, etc. Calculating a spread or analysing spreads for imperfections is a fascinating game in itself — and being able to profit from it would be the icing on the cake.
A transparent, well-regulated political betting market would throw up a lot of interesting socio-economic data. The patterns would show us where the smart money thought the election was likely to go and also where the stupid money thought the election was likely to go. It would also offer useful leads to any aspiring crony capitalist looking to cultivate the right set of netas. Since the election process is not, in itself, random, winning money in such a market would require real skill rather than random luck.
In reality, anyone who backs an election candidate with money or other resources is also betting on it, of course — and that’s a mind-boggling large market. Going by rumour, election spending amounts to Rs 120-150 per voter averaged across India. That is, in a constituency with one million voters, the various candidates will, between them, spend Rs 12-15 crore. India has over 720 million voters — that translates into a lot of zeros.
The next general elections could be great grist for the gambling mill. It seems likely to throw up extremely fractionated results. In 2009, the Bharatiya Janata Party (116) and the Congress (206) won 322 seats between them. Neither of the two big parties looks to be in great shape, and they are unlikely to take such a large combined share of seats in 2014. Every seat that is not won by either the Congress or the BJP will have to go to a smaller regional party. This means any accurate analysis would have to be very granular to account for the vote shares of smaller parties and their chances of converting votes into seats.
In terms of technology, it is simple enough to put together a portal offering these services. It is also easy enough to create a payment structure for punters based on a virtual currency like the bitcoin or the Facebook Credit. It would be illegal, of course, for an Indian national resident in India to do such a thing. But it’s a fascinating theoretical exercise.