PredictIt is a bright light in the heavily regulated political betting space. It’s only legal in the US due to its affiliation with Australia’s Victoria University.
And it’s the platform the Tenguins, a scrappy group from Berkeley, CA, used to develop their proprietary technology. Let’s get into how they did it, but first a little bit of background.
Think of political betting as the “Wild West” of arbitrage. A last frontier similar in potential to cryptocurrency before regulation and people’s better nature took over. Very few institutional investors are involved in political betting and daily volume is largely driven by naive private citizens. It goes without saying that this has led to a wildly inefficient market.
The Tenguins are pioneers in the systematic political betting space. They use historical polling results and campaign contributions to build models that predict which candidates will win, by how much, and far before anyone has the same information.
The results speak for themselves. 99% training accuracy, 95% test accuracy! Ungodly performance! Truly amazing!