Iowa Electronic Markets launch 2016 presidential, Congressional prediction markets

IOWA CITY - Money and politics are often viewed as enemies. But the Iowa Electronic Markets use the power of money to predict politics with surprising accuracy, treating politicians like stocks and letting the free market do the rest.

'We tie the payoff of the contracts to the outcome of the election,” said Professor Thomas Rietz, faculty director of the Finance Academy at the University of Iowa's Tippie College of Business.

A dollar or less lets you play this political betting game. For 2016 you can invest not just in who will win, but also on the percentage of votes a candidate will get, and which party will control Congress.

'The market we use to predict who's going to win either pays off a dollar if the candidate wins, or zero if they don't,” Rietz explained.

Investors can bet up to $500. How much you win depends on your political knowledge.

'It depends on the prices you buy at, how good a trader you are, and whether or not the contracts you have pay off,” Rietz said.

Any time money is involved, investors tend to be very knowledgeable. Take this past November's midterm elections, for example.

'Early in the market, we essentially predicted a status quo, which would mean the Democrats retain control of the Senate, and the Republicans retain control of the House. But over a year before the election, there were some shifts, and the net result was we were predicting a Republican sweep as the most likely outcome, for more than a year before the election,” Rietz said.

And that's exactly what happened. As for 2016, like any market, there will be ups and downs, but Professor Rietz said the market is where you'll find the smart money.

'We are closer to the eventual outcome about three quarters of the time than the polls,” Rietz said.

If you want to participate in the IEM, you can sign up at the official website: http://tippie.uiowa.edu/iem/markets/