The initial surprise over Brexit led to an outbreak of political betting. Coming close on the heels of the landmark Britain’s Leave Campaign was a flurry of activity aimed at either conserving wealth or an attempt to create wealth over the outcome of this historical exit from the European Union (EU).
Betfair is an online sports betting and gaming products operator. In 2000, Betfair came up with their unique concept of a betting exchange, where customers bet against each other instead of lodging their bets with bookkeepers. By 2004, the Betfair Exchange was posting revenues well over £50 million, leveraging their physical addresses in Malta and Gibraltar. In 2010, Betfair was the largest dot-com IPO on the London Stock Exchange. Currently, it is the unchallenged leader of gaming in the UK and in Europe.
Betting on Brexit
Given the circumstances, Betfair was close enough to the action to reflect the panic over the Leave Campaign. Britons lined up to buy euros in exchange of pounds. The UK Post Office witnessed an increase of 74% in the number of people lining up to convert their pounds into euros. The pound came sliding down. While some stashed their money in anticipation of the financial markets taking a tumble, those with a more adventurous streak used money to place bets on the outcome of the EU referendum. Over £40.5 million traded on the Betfair Exchange prior to Brexit, with approximately 60% betting on remaining.
Betfair cut the odds against Britain remaining in the EU as the day of the referendum drew near. Clearly, there is a growing segment of the population willing to place bets on the biggest political gambling ever. The bookmaking industry saw £70 million staked on Brexit, with only £20 million traded through traditional bookmakers.
The betting industry considers the outcomes to be closer to ground reality as far as voting outcomes of political events are concerned. After all, here are countless people betting their own money based on their own individual judgment. The Betfair example illustrates how a broad minded approach to observing political events can provide essential information.
Most stock exchanges in the world are decades older than Betfair’s Betting Exchange and enjoy their position. However, such institutions are largely reactive and their players usually wait till after the political event has passed to display their reactions. The betting industry, in comparison, is a predictive one and offers an earlier slice of perception on which way outcomes might go. Investment comes in all guises and the availability of data from more non-conventional sources can provide insight equivalent to the public polls that are profusely published in the media. After all, it is one space where people can be believed to be putting their proverbial ‘money where their mouth is.’ If the financial analysts of the world sit up and take notice of this new source of data, there may be better predictions of human behavior and their impact on global markets.