Inside The World Of Political Prediction Markets – Alex Keeney (Star Spangled Gamblers)

Alex Keeney:

There's a small group of people who are so good at this that they can make as much money as well healed lobbyists downtown. Who do you want to take advice from?

Eric Wilson:

I'm Eric Wilson, Managing Partner of Startup Caucus, the home of campaign tech Innovation on the right. Welcome to the Business of Politics Show. On this podcast, you are joining in on a conversation with entrepreneurs, operatives, and experts who make professional politics happen. Our guest today is Alex Keeney, founder of Star Spangled Gamblers, a podcast and website about the world of political prediction markets founded in 2018. It's the hub for the political gambling community online. In today's episode, you'll learn about this controversial world of betting on politics, how predictors make their decisions, and how political professionals might derive insights from these markets. Before we dive in, I wanna make something very obvious. We usually offer a lot of professional advice on this show, but not today. Political prediction markets involve real risk, and none of what we discuss today should be considered financial advice. Alex, give us the crash course on political betting markets. You know, is it legal and, and where do people go to do it?

Alex Keeney:

Right now there are a number of places on the internet in varying regulatory standing with the Commodities Futures Trading Commission. The biggest, which probably most of your audience is already aware of, is called Predict It. They have been operating, I think, since about 2014, and that's where your traditional election betting happens. If the audience wants to go a little bit deeper, there's a company out of New York City that has a bunch of Silicon Valley funny money that's trying to break into the space called khi. They're a little bit different, and then the ones who are kind of woke to crypto have some other options, but they're in a more, you know, nefarious regulatory environment. If they want to predict on those exchanges,

Eric Wilson:

What are the kind of things that people are betting on or making predictions on?

Alex Keeney:

Sure. So you know, sports betting is, and, and stocks are kind of what most people know. So elections are the obvious thing this time of year they're pretty liquid, millions and millions and millions and millions of dollars washed through those marketplaces. But for example, like I started my career on the Hill. So what I like to bet on is will such and such very boring title of very boring bill be included in Chuck Schumer's final draft? Or, you know, will Joe Biden talk about this specific policy during the State of the Union? So there are hundreds of different opportunities there are constantly being updated. It's, it's really up to you. It's, it's in the artist's eye, my friend.

Eric Wilson:

Yeah, and you know, one of the reasons that it is controversial, I think it's, it's, it's fair to say is because it is under this regulatory framework where people are like, is it a, is an an equity like stocks or is it a commodity? And, you know, I think you made this point on your podcast at some point. But if, if we are able to speculate on the price of pork belly whatever that is for six, 12 months from now, then we ought to be able to put money down for predictions on what's gonna happen in in politics.

Alex Keeney:

Yeah. So I mean, what is sars Al Gamblers, like, we're kind of the lobby bar for the people who are really good at this and the people who are trying to figure it out. And there's inherent value to sort of understanding who the world's premier political predictors are, because they tend to be ahead of like, what's in your inbox in the morning from Jake Sherman or Playbook or whatever it may be. Now like as for the business of betting itself, this country has kind of a fraud relationship with that historically. But if you look at, like the UK for example I don't think anyone's accusing Degens who are, you know, laying a hundred pounds of risk on list trust of swinging elections. So I, I, I sort of rule

Eric Wilson:

That out. Listeners might know that I've done a lot of work in Australia and political gambling as, as with all forms of gambling is, is very much alive and well there. And there was a market, I think in I guess it would've been the 2016 federal elections where there's you know, the, the, the sort of top political commentator, what color tie is he going to wear? And he became aware of this market and proceeded to wear every single tie color through the Knight's coverage. So he really messed up that, that market, and I think they had to pay out. So it, it is happening all over the world. So let's dig into how is you, you mentioned sort of some political pundits that people might be reading coverage from every morning. How is political gambling different from, from punditry and other types of political analysis?

Alex Keeney:

Well, there's a built in accountability device, right? So like, I think a lot of cable news media, a lot of print media at this point is kind of people seeing what they wanna see in the world. And you know, reporting to reinforce a a point of view, I mean, it's like a good marketing strategy, right? Like everyone wants to hear Tucker or whoever the new Rachel Maow is, kind of reassure them at night. But the punditry of markets is, it's no different from like the Wall Street Journal of Bloomberg. I mean, it's like, if you're wrong, you sort of pay a price. So batting markets do two things, in my opinion that maybe aren't as obvious. One, they're a great detector for the urgency of a story. You know, every election, every regulatory action is sort of sold as being urgent because how else would it happen if it wasn't urgent? But like, if you look at bat markets, they'll give you a pretty good gauge of, of what is actually happening. But they're also a great accountability device. I mean, the, the hacky term is bullshit detectors because if you are wrong you will pay a price. And of course, the incentives are there to be, be right, because you can gain from, you know, being ahead of the press, being ahead of the marketplace and, and really keeping your eye on the ball the way that the incentive structure for traditional media doesn't really reward.

Eric Wilson:

Yeah, it would be like if the, the talking heads on TV had to have some sort of almost like baseball level stats of, of <laugh>, how many times they've been wrong, how many times they've been right. Even real accountability like that.

Alex Keeney:

Yeah. I, I mean, and by the way, that might not be for everyone. You know, like some people wanna watch homework, movies, some people, you know, some people wanna be reassured that they're right and the world is wrong. Some people wanna know what's true, you know, so it's not for everybody. If you wanna know, it's true, it's probably for you. If, if you don't care, you know, then that's fine.

Eric Wilson:

So what are some of the public signals or, or data points that better might look at to inform his or her positions? I mean, there, I'm sure there's some obvious ones to our listeners, but, but I'd, I'd like to hear about those as well as some that may not be so obvious.

Alex Keeney:

Yeah, I mean, I think that you know, the really, really elite strata of political predictors, political betters are paying attention to all the same stuff people downtown are paying attention to. They care about polls, they care about how much money, where it's been spent, What is this super PAC that just appeared on paper? But they're also pretty dialed into qualitative signals like body language, tone of voice. We at Star Spangled Gamblers philosophically believe it's very important to pay attention to pop culture and technology too. Contrary to what a lot of people, for example, in Washington DC might think America like politics is responsive to culture and markets and technology. So spotting signals in those places first and to try and decide how they might inform our politics is a valuable batting strategy. But I think it's just more, it, it's the information, but it's also what are people doing with this information? Because at the end of the day, like for us to be legitimate with our users we have to find insights that our market beating it and that information versus, again, sort of producing boring copy that reiterates why our side might win or lose because it makes us feel good. So it's, it's what you, you know, it's, we don't suffer for lack of information in the modern world. We suffer for what to do with it. So we're just doing something different with it and actually making projections that we're financially accountable for.

Eric Wilson:

You sort of already alluded to this about like being a good, good filter for urgency. How are different events like from something macro like the economy and inflation to something micro like a, a campaign scandal? How do those events impact the betting markets

Alex Keeney:

In a diversity of ways, Eric? Okay, so first of all, who, everyone listening to this podcast probably watched John Federman somewhat disastrous interview last week on NBC last week as of recording

Eric Wilson:

Date. Is that, Yeah. How could you fair to

Alex Keeney:

Say, <laugh>? Right. So, so that would be like one micro-example of a small event that had a profound, profound effect on betting markets. So once that thing aired, first of all Betterman's odds of winning his race crashed, you know, below 50% for the first time. Like, damn pricing globally, small g globally went down across exchanges. So, so that would be like a small event that people interpreted to have sort of profound consequences. But there are other indicators out there, you know, gas prices Ds odds for Ds to hold the Senate tend to move with gas prices. That seems to be kind of a sticky metric for, you know, when voters get triggered enough to, to turn, you know, on opinion polls and such. So there's you know, there are a lot of little sticks and stones out there. But that's what comes to mind quickly.

Eric Wilson:

Yeah, that's a, that raises another really interesting point about, about this data that we're seeing in the, the political prediction markets, which is polling <laugh> is a lagging indicator, right? So when you see a poll, it was out in the field maybe a week ago for five days. And so something like a prediction Mark is able to price in that NBC news federman interview instantly, right? I, I think it would be helpful to our listeners to give us a context of, of who, not, not who, but when you're talking about like the top of the top in political gamblers, what, what kind of volume are we looking at? How much money is involved there?

Alex Keeney:

I would say that your top echelon is making a hundred to $300,000 a year just beating markets on what's next,

Eric Wilson:

<Laugh>. So it, it, it's, it's, I mean, conceivably people could make it a, a, a full-time job if they were, they were really good and successful at

Alex Keeney:

It. Yeah. And, and there's a number of people who do. So, like, again, if you think about it in like Washington DC context, there's a small group of people who are so good at this that they can make as much money as kind of a well-healed lobbyist downtown. So who do you wanna take advice from? You know,

Eric Wilson:

I, I'm, I'm just really fascinated by this culture and I, I wanna give our listeners a better sense of it. Tell us, can give us a sense of like who, who your, your listeners are, who your, your fans are. Are these people who are like, Oh, I, you know, I've worked on campaigns and now I'm, I'm doing this. Or is it people who just, you know, kind of like politics and like following the news?

Alex Keeney:

I would say the vast majority of successful traders that I know have almost no experience in the field of politics and like truly come from places and occupations that you would not expect. One of the greatest traders out there is a high school vice principal in the Midwest. I know a guy who probably makes $50,000 a year trading polling averages, who is a retired Broadway lighting guy, You know, a gaffer from Broadway, academia, pharmaceuticals, you name it. I'm like, I started on dc I'm like a Hollywood guy. I mean, it's just not, it's not a politicals insider's bu business, which I think is, is ultimately the value is it's, it's the outsiders who have the insights that the insiders sort of lag on. Just maybe cuz they're not in the DC bubble.

Eric Wilson:

Yeah. Is is it because they, I mean, we all have the, the access to the same data, but do you think it's the, the insiders are more emotional about it?

Alex Keeney:

I think there's a few reasons why people in Washington miss, I think anywhere, what's the right way to say this? There's a risk at for being different, right? And whether we agree to agree on this or not, like, like Washington is not a town that wants to hear kind of contrarian takes and <laugh>, Right? Have creative ideas introduced like you kind of do well by fitting in here.

Eric Wilson:

Well, they do. Well, conventional wisdom is the, the bread and butter of, of, of Washington,

Alex Keeney:

Right? Right. Like being likable, understanding how things work, you know, not rocking the boat under promise, over deliver. Like these are sort of tropes of, of success in Washington, but a betting market rewards the opposite, right? Like it rewards finding the thing that everyone else is missing. It rewards rocking the boat. So I I, you know, there is cultural value I think in that.

Eric Wilson:

So give us a quick snapshot. We're recording this on, on Tuesday, October 18th. What what are the betting markets saying about the, the, the elections in a few weeks?

Alex Keeney:

Oh, they're very confused. They are very confused, just like anyone else. They still rate Dems as the favorites, and I think we all understand what we're talking about, the Senate, but by a significantly more narrow margin than Nate Silver or even real col clear politics, very, very narrow favorites. I think that they're assuming that at this point, Blake Masters is done. They really like Adam Laxalt. But you know, ironically not really sensing danger for JD Vance in Ohio, even though polls maybe say that that's not the case. So but advantage Democrats

Eric Wilson:

Got it. And, but, but just slightly, maybe, maybe more like 55, 45 rather than 70 30.

Alex Keeney:

Actually, you know what I'm checking predicted odds right now. And just this morning the Republicans snowed above 50%. So they're definitely pricing in some more favorable motions for Republicans as we speak right now.

Eric Wilson:

Got it. You're listening to the Business of Politics Show. I'm speaking with Alex Keeney, co-founder of Star Spangled Gamblers. Alex, I wanna shift gears now away from political gambling as a, as a space and more to what you're working on with SSG Star Spangled Gamblers. There's a saying that goes, when a gold rush is on, you want to be the person selling shovels, right? Right. And I think that's exactly what you're doing in this political prediction market space. Talk to us a little bit about how you're capitalizing on this, this expanding market.

Alex Keeney:

Well I mean, like philosophically, I'm a person who believes in doing things for the sake of doing them. So like, that's my first, you know, thing is like, let's just be here, let's be here before other people are, and like, the doors that will open will please us. And to date that's been the case. But from, you know, like if we're talking about a vc, an investor stack or something yes, we have relationships, we have affiliate relationships with all the major exchanges so that, you know, as they grow we can grow with them mm-hmm. <Affirmative>. but you know, the real, the real value is in the relationships. I mean, content is such a good magnet for relationships that you can monetize subscriptions, all of that type of stuff. So we're formally tethered to the industry through affiliate partnerships, but I think the real upside is kind of in what we're building in the soft and squishy space with content relationships and partnerships that come through that trellis.

Eric Wilson:

So you, you, you have a very robust and thriving community and, and one of the ways that you're tapping into that is through, through Patreon, which offers crowdfunding. And I, I really think that this, we're gonna see a reckoning in in political fundraising after this cycle because we just saw the bottom dropout on, on email fundraising, on Facebook advertising. The, the methods that we used pretty reliably for the last six or eight years are, are pretty much gone. So I want to get some insights from you on, on what political campaigns could learn from your business model, which is giving fans what they want and, and how do you, how do you listen to that? How do you respond to that?

Alex Keeney:

Yeah. So obviously cliche alert people crave authenticity.

Eric Wilson:

What does that mean? What does authenticity mean in this case?

Alex Keeney:

Well, you know, people have more or less the same problems. And what the internet does is, one, it gives them a way to solve problems that they couldn't before. So first rule, like content that can solve a problem will make money, content that can't solve a problem, it starts to get harder. But like I said, information's not hard to find and people tend to want to get information from people they like. So if you can just sort of present yourself as the guy in the high school cafeteria full of lots of different types of people and you can just be that guy that people say like, Oh my gosh, like, he's just like me. He thinks about the same things, he has the same problems, he talks the same way. That's a good first step. So that's maybe a more mechanical definition of authenticity is sort of speaking and representing yourself in the same way that your target audience speaks and represents itself. I don't know, does that sell as far as you're concerned?

Eric Wilson:

Yeah. That, that makes sense. I, I think the core of being authentic is listening one Yes. Which is what you, what you pointed out and two, updating what you are saying or doing based on what you're hearing. Yeah. and those are the, those are the two hallmarks of, of authenticity. It's not it's just sort of bandi about as a, you gotta be authentic, but when it comes to how do I actually do that, the, those are the two things, and I think you described it perfectly.

Alex Keeney:

Yeah. Content's a great feedback device mm-hmm. <Affirmative> because the instant you post it, you'll start getting feedback and you'll sort of be able to anticipate when you have to duck a rotten tomato and you know, when the crowd will applaud. And then ultimately the question you have to answer is just like, how do I get more people into the auditorium? Because at some point you have to make money and, you know, giving stuff away for free is, is a hard business to be in. But what

Eric Wilson:

Are you talking about? Are these <laugh>?

Alex Keeney:

Yeah, yeah. Right. but it's getting easier and easier to turn that into actual money. So that's the, that's the thing people should see as the upside, I think.

Eric Wilson:

So I think the, the model for campaigns, if I can just put a dot on the end of this sentence, which is, you know, campaigns have for a long time have just had this kind of monopoly of like, there's gonna be election every two years. You gotta pick a Republican or a Democrat. And increasingly we're seeing people say, Well, look, there, there are other ways I can get my political fix. I I can donate to other candidates across the country, right? Like, I don't have to just support my, my local candidates. We see a lot of surrogate seeking behavior. And, and so if, if, you know, I think candidates and campaigners know that authenticity is, is important, but it, it, it really is this mindset shift of listening to what supporters want and reacting appropriately and right. And that, those are the two pieces that I just see missing. You know, people are saying, you know, I'm, I'm running for office and I'm not taking any, any feedback, any questions or, or, or, it's very clear that it's, it's it's lip service. So I think if we can get more candidates and campaigns in that mindset, they can tap into more of this what's loosely referred to as the creator economy revenue streams.

Alex Keeney:

Well, okay, so I, but I think it's important to draw distinction cuz there's what a really savvy content presence can do, and there's what a really savvy content presence can't do. So like here's what a great content presence can do. Create an audience, own an audience, market to audience, and you can do it forever because they just like you and you give them things that help them solve problems, help them understand the world and give them, you know, unique insights that no one else is providing them. Okay, that's great, but here's what it can't do. And I think this is why a lot of campaign for professionals are fairly skeptical of, you know, why should I take the risk of letting my candidates speak off the cuff and not say stupid hacky things that everyone knows are phony and made up and designed to sort of avoid risk is a, a savvy content presence, can't guarantee votes on November 8th.

You know, like if, if you invest in it consistently over the course of months and years, it can guarantee votes forever. But I can't tell you, you know, it's just impossible to promise that you will have, you know, 50% plus one on November 8th, you know, from zero to one. Can't make that promise. But the investment, you know, if you look at the people who have made the investment you know, the AOCs, the Trumps, the Dan Crenshaw Ted Cruzs had done a good job of it. He's not even that interesting of a person I don't think. You know, if you make the investment you know, the benefits hang around forever.

Eric Wilson:

I, I totally agree with that. And I think one thing that campaigners and decision makers have not factored into their decision making is that the infrastructure of the internet of modern campaigning has to be always on, right? So there's this idea of like, okay, well I dust off my campaign every four or six or two years depending on what office you're seeking. And, you know, I can buy TV ads, I can pay for mail, but when you try and go digital, the doors are getting shut in your face in terms of, of paid options the ability to micro target. And so I, I think it, it, the writing is on the wall that you need to have this organic audience and, and content development and it, it's gonna take a little bit of work recalibrating our campaigns to that,

Alex Keeney:

Right? Right. And, you know, you can apply a certain amount of money to that to help, you know, to accelerate it, but there's really just no replacing persistence and kind of honesty with the people. Like I, if I was my dream, I don't wanna climb Mount Everest I don't wanna surf that a hundred foot wave in Portugal. I wish, I wish that I could find three politicians with like a political death wish to start. Are you familiar with the Breakfast Club, you know podcast?

Eric Wilson:

The

Alex Keeney:

Movie? No, no, no. Like the hip hop podcast, it's like a morning, it's you know, Charma and the God Obama. Yeah. There should like, there should be the Breakfast Club of young Republican members of Congress talking about everything that they're not allowed to talk about. I mean, could you imagine how much audiences would want to know, like, why were the corn growers in town? Right? Why does a member from Texas and a member from Pennsylvania from the same party have completely the opposite views on this issue that, you know, like all the stuff that bores people and triggers them and pisses them off. Like they crave an explanation for that. That is what people want. Now, can you survive the political consequences of it? I don't know. But the person, you know, who d like much just rambling here. Is this, is this me sounding like a crazy person? I, I mean usually when I say this to people in Washington, I can just see them getting triggered. Like, why, how would I do that? You know, like, well

Eric Wilson:

What I tell people all the time is like, Oh, well what if the, the Congressman says something stupid? And I'm like, Well, you don't have a content or a social media problem, Right? I'm like, that's an issue with your member or your candidate.

Alex Keeney:

Well, but it is a real thing. I, I mean, cuz you are gonna say something stupid. It, but there's some amount of sloppiness that the internet likes but there's some amount of sloppiness that, you know, in politics can, Well, I mean, maybe it doesn't quite end you anymore. I mean, think about all the, you know, politicians who have hung around through, you know, scandals and think, you know, it's, I think the world is just more forgiving of sloppiness because of the internet in some ways. Yeah.

Eric Wilson:

I think there's, there is there's certainly more forgiveness and there's a clear path for how to do that. It's just a matter of who, who's willing to step out and, and, and take that risk. I wanna go back to the political prediction markets. And obviously, you know, folks have, have listened this show and, and are in general even if they're not gambling on politics themselves, are aware that these prediction markets are out there. What are some ways that they can factor in that data to their decision making or, or strategy? And maybe give us a like, confidence level?

Alex Keeney:

I I mean it's probably a good barometer. I if you're thinking about allocating money. I mean, I think most people in Washington are professional political gamblers in some way. I mean, they're just, you know, moving money through packs and super pacs and stuff, but

Eric Wilson:

Without the consequences, right? Like no one, no one keeps tracks of, of like a consultant's win loss re record,

Alex Keeney:

Right? Right. But like, in a way that's not really even the service that they're in, you know, it's, you know, the market has its own perverse incentives. I mean, I, I think if you're trying to figure out where to allocate money, it's probably a good, you know, indication of where sharp people think races are actually competitive. Mm-Hmm. <affirmative>, I mean, I might start there, but again, I think it's a good detector for urgency in anything, whether you're following regulatory processes or legislative processes the markets will move and sometimes it's helpful just to see what people who have money invested in the outcomes thinks. Like what do they think is dispositive? What do they think puts their position at risk or, or gives them opportunity. And we sort of make all that clear and we kind of make it fun. You know, that's what we do at Star Bank Gamblers is right, is our mission is to make this relatable to kind of casual political observers and, and you know, make it fun and, and bring in information that other people discount.

Eric Wilson:

I think one thing that is particularly useful that you mentioned earlier was, was filtering out signal versus noise, right? So when you're following a campaign, when you're working on a campaign, you are living and breathing it every minute of the day. And so, oh, you know, so and so who is the former mayor of this town and is a democrat has endorsed the Republican, this is huge, right? Like, if you're just following the, the, the Twitter or even even political reporting, the, you do get this sort of breathless this changes everything reporting and, and and narrative building. Whereas if you take a step back and look at the, the gambling markets, you know, people are seeing that, but it's not, not impacting things. I think it can be a really helpful counterweight to getting some distance on the campaign and not getting caught up in the hype.

Alex Keeney:

Yeah, yeah, yeah. I mean it, like, I, I'm not gonna sit here and lie to you and tell you that the, you know, betting markets are crystal clear and vision and always on the nose. Sometimes they're not. But I, I think it's an important source of information to kind of build your own internal image of what's going on in the country. Cuz they are pricing in things that polls in, you know, PAC data don't, you know, they are populated by people. From my own experience, for example, I made a fair amount of money in 2021 batting against build pack, better passing. Now, eventually it did pass, that was a thing, but I, it was just, it was just looking at an inflation reports, right? Like as long as like as long as this, you know, CPI is doing this, Joe Mansion is not, you know, so there's just so many things happening in America that polls and conventional political intelligence don't measure, but betting markets are a barometer of how people are thinking about, again, finance, culture and technology. And what they're bearing is on politics. And as I've said, it is my betting philosophy that politics rides in the fourth car rides behind all of those engines that, that drag it along.

Eric Wilson:

Well, Alex, you keep track of a lot of campaigns. Is there another opportunity you see in the this space that, that would make for a good startup?

Alex Keeney:

Well I am a content person, so I sort of see everything as a content problem. So take this with a grain of salt. I just think like if I was running a public affairs firm if I was running a trade association or something like that, I think that audiences require a certain amount of subversion to be persuaded. And to me that means there's a huge business case for just building practices in digital media and podcasting and building them across causes, you know, building them people, you know, people who are aligned on certain issues and to just become the go-to source of information for those issues in, in an authentic way. So wow, how many cliches can you pile up at once? Yeah. but, but I think if, like, if you're already, if you're at a public affairs firm and you already have a book of business, you know, getting people mentions in the Washington Times or on Fox News or something, there's really no reason not to be booking them on podcasts because this whole thing that we call media bias is actually like a huge blessing to Republicans because it means that there are enormous underserved markets that you can't reach on tv.

And basically all you have to do is perform at a minimum standard on digital media and you can build an audience because like for some reason, Hollywood and, you know, New York media executives think that it's morally unpalatable to market to men and conservatives. So, you know, the opportunity is wide open. If you wanna just start today, so, Right. I don't, I don't know if that's the type of answer

Eric Wilson:

You Yeah, no, I, that that, that is, that is incredibly helpful. I think it's a, it's a great space that, that people should, should look at. The startup component of that could be how do you build the platforms or the tools to help people get there,

Alex Keeney:

Right, Right, right. Yeah, I don't know that I would wanna run around this town with a camera and a microphone shooting, you know, 52 different Senate podcasts, but there's, there's gotta be an automated way to, to make that happen.

Eric Wilson:

Well, thanks Alex for joining us today. This was a, a great conversation. You can learn more about him at star spangled gamblers.com and Star Spangled Gamblers wherever you get your podcast. Go ahead and give them a subscribe for, for some fascinating conversations about the world of political gambling. If this episode made you a little bit smarter or gave you something to think about, all that we ask you to do is share it with a friend or colleague and you look smarter in that process as well. Remember to subscribe to the Business of Politics Show wherever you listen to podcasts, and that way you'll never miss an episode if you prefer, you can also sign up on our website, business of politics podcast.com to get email updates, another information about the show. With that, say thanks for listening, we'll see you next time.

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