Political junkies, traders and "emotional hedgers" interested in election-night betting action gathered at a presidential debate party on Tuesday night hosted by prediction market PredictIt in Washington D.C.
The mood was initially one of celebration, with party-goers dancing and singing along to acoustic covers of pop and rock songs by a local musician. However, with the majority of attendees in the Hillary Clinton camp, the mood shifted as the evening progressed and it became increasingly evident that Donald Trump was going to take the White House. In the wee hours of Wednesday morning Trump was elected president of the United States, a shocking conclusion to a polarizing campaign and one that turned the prediction market on its head.
Roberts Crist, a CFO of a small California-based financial holding company and a PredictIt bettor, argued that the result was very similar to the U.K.'s stunning vote to leave the European Union, a vote that also shocked the markets. "This is very similar to Brexit," Crist said. "Everyone was wrong on Brexit. Everyone was wrong on this."
And an informal poll of party-goers suggested that most bettors in attendance were surprised - even shocked -- and disappointed with the outcome.
"Trump? Trump? No!" said one trader as she watched network TV projecting Trump as the winner in another battleground state.
One bettor, watching the television set despondently as the reality of a Trump presidency sunk in, said he would lose $2000 because he bet on Clinton winning the presidency. "It looks like it's going to be a Republican sweep," he said, referring to GOP taking control of Congress and the White House.
Another bettor, Jake Lowery, a senior investigator at the Labor Department, said he bet $20 that Trump would win in an attempt to offset the "despair" of a Clinton loss. He called it an "emotional hedge" that would help "dampen the feeling of despair" with a Trump victory.
Lowery said he got the idea from a phenomenon where speculators bet against their favorite sports team in a really big game to help "drown their sorrows" if their team loses. "If my favorite team loses I'm very disappointed but I win the money and it helps drown my sorrows. And if they win I could care less that I lost my $20," Lowery said.
Lowery joined over 200 participants to watch the results pour in at PredictIt's D.C. headquarters, located a short walk from the U.S. Capitol. The election night gathering is PredictIt's fourth D.C. event of the election cycle-- it held similar parties for presidential debates.
How does the market work? If a trader believes Republicans weren't going to maintain a Senate majority they click the buy button and accumulate shares on that side of the bet. For example, if Trader A thinks an event has at least a 60 percent chance of taking place he or she offers 60 cents for a Yes share. PredictIt matches that offer with Trader B, who is willing to pay 40 cents for a No share. Each trader now owns a share in the market for this event on opposite sides. Once the event happens, the side that is correct gets $1 for every share.
However, some bettors weren't surprised with the results. Crist, the CFO and trader, said that over the past few weeks he consistently placed bets on Trump winning the presidency, even as the odds were against him. He said a Trump victory will net him about $3000 on his investment. As far as who Crist wanted to win the presidency? He said he was disappointed with both candidates and didn't vote in the election.
"I've been buying and selling during the past few weeks," he said. "When Clinton's email problems hit I thought 'this is great' and I sold. Then it popped up to 80 cents a share for Clinton again and I started I started buying Trump again."
He also bet that propositions seeking to legalize recreational adult-use of marijuana would pass -- voters OK'd recreational marijuana in four states and medical marijuana in three others. "That's was easy money," he said.
And the PredictIt market shifted dramatically late Tuesday and into the early hours of Wednesday as it became clearer that networks were about to call key battleground states for Trump, giving the Republican presidential nominee a widening path to 270.
Consider that early Tuesday, bettors on the Predictit market could pay 80 cents for a Clinton share and 20 cents for a Trump share on the question of who will win the election. By 10:30 p.m. the market had shifted significantly - bettors were paying 70 cents for a Trump share and 30 cents for Clinton.
A share backing the expectation that the GOP will keep the Senate went for 38 cents in the early hours of election day, while one going for Democrats taking control went for a corresponding 62 cents. By 10:30 p.m. a share backing a GOP Senate was going for 84 cents while one going for Democratic control dropped to 16 cents -- after Republicans Marco Rubio, Todd Young and Rob Portman were projected to win their Senate races in Florida, Indiana and Ohio, respectively. Democrat Tammy Duckworth was projected to win her race in Illinois.
Participants drank aptly named cocktails, including "Hillary's Blood, Sweat and Tears" (Blood orange juice, lime juice, tequila, simple syrup) and "Buy Low, Sell High" (Lime juice, mint leaves Bacardi Limon sugar, club soda, crème de menthe and lime). No Trump related drinks were available (Trumptinis, a popular vodka martini concoction, were available at a previous event).
Beyond gambling, traders and other debate-experience-seekers lined up to take snapshots next to life-size photo cutouts of Clinton or Trump set up for the event.
The crowd appeared to be made up mostly of Clinton supporters, many bearing Hillary buttons. A number of participants shouted "Virginia" loudly as Clinton took the state.
The party host, PredictIt has a number of predictable betting options beyond the most predictable: "who will win the 2016 election." These include whether the presidential election margin of victory will be more than 4-6% or 2-4% or if the GOP will keep control of the Senate. Voter turnout was another big gambling category, with the odds early on Tuesday favoring 135-140 million voters turning out to the polls vs 140 to 145 million.