Prediction Markets Are Thriving On The Uncertainty Surrounding Canada’s Election

Manuel Pita
Sep 26 · 6 min read

We are witnessing tumultuous times in world politics. In different points of the globe, cultures and economies are undergoing huge shifts that will be decisive for the near future of their citizens.

At Guesser we like to go hand in hand with international news and try to make our site a reflection of what is happening out there. We’ve seen action around the protests in Hong Kong that have put their Chief Executive Carrie Lam on the spot; the FOMC deciding to lower the central bank’s benchmark rate for the first time in 11 years; and Boris Johnson succeeding Teresa May as Britain’s prime minister.

Volume on prediction markets is usually a faithful reflection of where most people’s eyeballs are at, and now the Canadian General Election is what’s grabbing all the attention. The Great White North is holding a presidential run these weeks that faces the well-known current prime minister Justin Trudeau against a series of candidates among which conservative Andrew Scheer stands out.

At the time of writing, participants in Will Justin Trudeau Be Re-Elected Prime Minister Of Canada In The 2019 Election? are giving a 65% chance to the Liberal Party’s leader of being victorious on October 21st. This means that if your prediction is that Trudeau will be re-elected, you can currently make 1.51x on your wager, and if you think he won’t, you can make over 2.6x. One month left for campaigns and, seeing the development of the latest news and what recent polls say, the current prime minister will not have an easy time to rule a second term.

Controversy Is Driving Early Predictions

Doubts about what may happen on General Election fly over Canada these days. Even more lately with the news that shocked supporters of the prime minister last week, when a photo of him wearing “Blackface” at a 2001 “Arabian Nights” themed party at West Point Academy were published by TIME Magazine. Two more instances of the Liberal’s leader wearing makeup to intentionally darken his face emerged as a result of this in the following hours.

Brownface and blackface, which involve white people painting their faces darker for supposed entertainment, has long been condemned as a racist caricature, and Trudeau had never mentioned taking part in it in the past. With this fresh scandal following closely on the heels of the explosive SNC-Lavalin controversy that has dogged the prime minister, there are those who start to think that Trudeau’s days in power could be numbered. The prime minister publicly apologized for these actions this previous week.

Trudeau has faced calls to resign, something that seems quite unlikely and has made the Canadian leader assert that “if everyone who is running for office needs to demonstrate that they’ve been perfect every step of their lives…there’s going to be a shortage of people running for office.” The Prime Minister’s popularity is deflating under the disillusionment that hampers many incumbents, particularly on the idealistic left. If 1–2% of Liberal-leaning voters in swing districts switch to the left-wing New Democrats, the election could tilt toward the Conservatives.

As it usually happens with this kind of news, the first reactions have been pronounced movements in the bookmakers’ odds and prediction markets. PredictIt, the well-known political-betting website that gained a lot of popularity during the 2016 US Election, saw how the daily volume wagered on the Canada’s Election grew almost 10x in just a couple of days right after Trudeau’s photos came to light on September 18th. A relevant part of the market thought the scandal could cost Trudeau the election.

As a no-limits betting platform for big bets, politics traders are placing their large forecasts for October 21st on the Augur market, accessible through Guesser and that has seen early predictions triggered by the surprising scandal as well. This market is open to anyone who has ether and really wants to put money on the line as we face one of the political events of the year. If you’re not an experienced trader and you are looking for a quick, fun experience, Guesser is your best option, offering a simple and intuitive interface where anyone can place a prediction in a couple of clicks.

If Not Trudeau, Then Who?

The Canadian Election is really a battle between Trudeau’s Liberal Party and the Conservatives, who are running with Andrew Scheer as leader.

We can find two possible advantages for Trudeau in this battle to remain in power. First, the Liberals hold a 15 point lead in Quebec and a 4 point lead in Ontario, both key territories where dozens of seat results will mostly decide the election. Second, there is the Canadian’s left division, where the Greens and the New Democratic Party are virtually tied, which means progressive voters have no clear alternative to Trudeau if they want to beat the Conservatives. Add to this voters’ preference of the Liberal Party over their main rival on issues such as health care, climate change, poverty or housing, as Abacus Data shows on its polls.

How about the Scheer’s party strongholds? Conservatives have more support than Trudeau on really important issues as taxes, economic growth or immigration, which has recently become a heated topic due to a spike in irregular border-crossings from the US, coupled with the creation of a fringe new right-wing populist party that wants to reduce Canada’s immigrant intake. But their main advantage and the real reason Liberals have to fear is the №1 issue for Canadian voters: the cost of living. Scheer sought to press this by announcing a new tax cut proposal that ensures average taxpayer to save hundreds of dollars a year.

As far as we know now, the two biggest parties in Canada are in a statistical dead heat four weeks from election day. An aggregate of polls that Abacus Data recently compiled puts Conservatives at 34 percent and Trudeau’s party at 32 percent, well within the margin of error, but already surprising some as the current Prime Minister has lost the polling lead. Two minority parties, New Democratic and the Green Party are showing signs of strength, and while they do not pose a threat to the main duel so far they could be key in forming a minority government if their support was needed.

While Trudeau appears determined to stay in power, Canadians may not give him the chance if they decide to vote him out of office on Monday October 21st. Although markets still favor the current Prime Minister, either outcome seems possible so far — uncertainty is high, and prediction markets are thriving on it.

Prediction markets are politics’ best friend. They provide market mechanisms for forecasts which would otherwise be solely accessible through polls or media sentiment. Anyone in these markets could be right and anyone could be wrong, so big rewards are waiting for those who have an edge into one of the biggest elections of 2019.

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Cowritten with Jose Garay

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Manuel Pita

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