26: How To Make Money By Betting On The U.K.’s Big Referendum

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Joe Weisenthal (0:27)

Hello, and welcome to another edition of the Odd Lots Podcast. I'm Joe Weisenthal, managing editor at Bloomberg Markets.

Tracy Alloway (0:33)

And I'm Tracy Alloway, executive editor at Bloomberg Markets.

Joe Weisenthal (0:36)

So Tracy, on our last episode, we talked a little bit about politics. And this episode is about another political event that's coming up, the upcoming Brexit vote.

Brexit, of course, refers to this possibility that on June 23rd, when the UK holds its referendum, that people might vote to leave the EU. And while the expectation and the polls suggest that probably the UK is going to stay in the EU, there is a significant enough debate and doubt about this question that there is a lot of excitement going into this vote. Have you been paying much attention to it?

Tracy Alloway (1:12)

You know, obviously, I'm in Markets. There's lots of people talking about the potential impact on the financial system, on currencies, on the unity of the EU.

I also used to live in the UK for about 10 years, so I do take a personal interest in this. So that's a long way of saying yes.

Joe Weisenthal (1:32)

Yeah, I'm really fascinated by this story, and I just love votes. Even if I don't have much of a stake in it, anytime I hear of some big votes somewhere, it's like, oh, Philippine election or Scottish referendum. I just love the tension of them because there's all this buildup, and then bam, it's over in a second. So it's very exciting.

Today, we're going to talk kind of about this Brexit referendum, but we're going to talk about it at a unique angle, which is the gambling side of it.

Tracy Alloway (2:00)

So people are betting on whether or not Brexit will take place?

Joe Weisenthal (2:03)

Right. So unlike in the US, we have this sort of weird relationship with gambling, where a lot of people like to bet on things, but it's also heavily restricted. There are only select locations or select states and select things you're allowed to bet on.

In the UK, they just love to bet on everything, and it's wide out in the open. So obviously, the soccer teams there are openly advertised that you can bet on them. It's just much more part of the culture, including betting on political outcomes.

Tracy Alloway (2:34)

So I remember this from personal experience. You could go to the bookies, you could bet on all sorts of sports games. Obviously, I did it for the World Cup in 2006 I remember you could bet on more esoteric things like...

Joe Weisenthal (2:46)

Right, like you could bet on who the next pope is going to be. Right. They set odds for stuff like that.

Tracy Alloway (2:51)

Or whether or not Harry Potter is going to die at the end of the Harry Potter series. All sorts of things.

Joe Weisenthal (2:56)

And so of course, you can bet on political outcomes in the UK. They've been doing it for a long time. And today we're going to talk about the expert in political betting. His name is Mike Smithson, a former politician. He now runs the website politicalbetting.com, and he wrote a book specifically about how to make money betting on politics.

Tracy Alloway (3:19)

Interesting. So has he used his political experience to become an expert on betting on politics?

Joe Weisenthal (3:26)

I guess we're going to find out. And I hope we get some tips on how we can make money betting on politics in the future. What are the tricks to use to beat the system?

Mike Smithson, you're the editor of politicalbetting.com. Thank you very much for joining us.

Mike Smithson (3:51)

Delighted to be on the program.

Tracy Alloway (3:52)

Thanks, Mike.

Joe Weisenthal (3:54)

So Mike, tell us about the gambling market in the UK and the upcoming Brexit referendum. How much money are people betting on this event?

Mike Smithson (4:04)

This has been the biggest political betting event of all time.

That I've certainly been doing this for about 15 years. And we're getting on the betting exchanges, which operates where buyers and sellers come together. We've been getting up to a million pounds a day being traded. And that's extraordinary for this to be happening eight weeks out, because the election, of course, takes place eight weeks today. And simply, it's not...

It's taken everybody by surprise, the sheer scale. Generally speaking, with elections, nobody really pays any attention on the betting markets till about four or five days beforehand. So this is absolutely massive.