FT REPORT A finger on the political pulse

by Ross Tieman, Financial Times – Published: Dec 07, 2007

Mike Smithson is on a roll. Britain’s foremost political spread betting aficionado is profiting from the opportunity bonanza offered by political upsets in the UK and the US presidential race. “It’s been a great autumn,” he says. “I have got a hefty wadge that has been transferred into my bank account. Since October, I have done about £6,000 [of profits].”

You can’t make a living from political spread betting, says the author of The Political Punter- how to make money betting on politics , but you can certainly turn an interest into a nice little earner.

The end of Prime Minister Gordon Brown’s brief political honeymoon and the campaign-trail upsets of candidates for the Democrat and Republican nominations are meat and drink to Mr Smithson, a former political journalist.

He has been betting on politics since he was at school in 1964. But it was only in 2004 that his fascination with political betting led him to set up www.politicalbetting.com, a discussion platform and information service for political gamblers.

Feeding the development of political gambling is in his own interest. Mr Smithson estimates that there are as few as 1,500 regular political gamblers in the UK, although the number swells to millions on the eve of an election. US constraints on online gambling have impeded the development of a political gambling market there. But Britons are just as happy to bet on US elections as their own. Mr Smithson says British wagers on the 2004 presidential election totalled £35m, against maybe £25m of bets on the UK Parliamentary election the following year.

So what’s going to happen at the next UK general election? “I don’t know,” he says. “I am betting on what I think the market will think.” It is a vital distinction. The liveliest bets are currently on how many seats the Conservative party will win at the next general election, whenever it is held.

The Labour party needs to win 325 Parliamentary seats for a majority in the House of Commons. As Labour’s fortunes have waned, political gamblers, who seem in the majority to be Conservative supporters, have bet on the Conservatives winning an increasing number of seats. By anticipating that they would back their rising optimism with bets, Mr Smithson has made money.

Mr Smithson plays for modest stakes – typically £100 a seat, and closes his positions inside three weeks. In November, he bet on a rising market in Conservative seats at 291-293 and the spread rose to 295-302, giving him a five-point gain. He watches opinion polls closely. He tries to anticipate the political betting market. “For the next month I know where it is going,” he says. Does that apply to the US race too? “I am quite heavily committed at the moment,” says Mr Smithson. The market is moving fast as perceptions of candidates change rapidly in the run-up to the January 3 Iowa caucus. “I think Hillary Clinton is not going to do as well as people are expecting,” says Mr Smithson. “I am a Hillary seller at the moment.”

Among Republican candidates, Mr Smithson is a bull of Mike Huckabee, an old-fashioned conservative from Arkansas. “I think he is going to do quite well in Iowa.”

But is the political betting market any good at predicting real-life outcomes? “I think it is,” says Mr Smithson. But if you want to consistently profit from it, he says, you have to exit before the actual elections arrive.

The above has been reproduced in full from today’s Financial Times