Is the UK in or out?

Bookies have the odds of “remain” at 73%.

A MarketWatch article citing Citigroup claims bookies are “still enthusiastic” over remain prospects.

If someone at Citigropup actually made that statement, that person is totally clueless about how betting odds even work.

Please consider Bookies still deem Brexit unlikely — and for good reason, Citi says by MarketWatch reporter Sara Sjolin.

Recent Brexit polls have pointed to a poor showing for the “remain” campaign, but investors betting on a stay vote shouldn’t throw in the towel quite yet.

Bookies are still enthusiastic the vote on June 23 will come out overwhelmingly in favor of the U.K. staying in the EU — and for good reason, according to research from Citigroup.

Betting Barometer

Brexit Odds MW

Source: MarketWatch

Betting Companies Enthusiastic on Remain?

The notion betting companies are confident of something and lay odds based on their confidence is ridiculous. Bookies may or may not be confident, but the reality is they simply do not care.

Betting odds are not determined by the enthusiasm or confidence of bookies. Rather, bookies determine odds based on how people bet. As betting patterns change, so do the odds.

Bookies like to balance their books by adjusting the odds so they make money regardless of the outcome. Bookie confidence is irrelevant.

Heads Bookies Win, Tails Bookies Win

If the books balance, the only thing bookies are confident of is they will make money.

Brexit Betting

Can Betting Odds Predict the EU Referendum Outcome?

Brexit.Bet addresses the question: Can Betting Odds Predict the EU Referendum Outcome?

Opinion polls are the mainstay of election sentiment, but given they were so catastrophically wrong in the 2015 General Election, EU Referendum betting markets are being used as alternative barometer. But how accurate are the EU Referendum betting odds?

As of June 1st the averaged odds from seven leading bookmakers by implied a 75% chance of the In vote and 25% for the Out.

You can turn the EU Referendum odds into an implied probability – in other words the chance the odds are based on – by doing the simple sum (1/decimal odds)*100 i.e 1/4.0*100 = 25% chance.

Importantly these calculations are based on odds from bookmakers that add a margin, a cost to placing a bet so that they make a profit. If you do the calculation above with advertised odds at say Ladbrokes their current odds are 1.25 and 3.75 . The implied chances are therefore 80% and 27% which equals 107%. The 7% is their margin.

Why should we put faith in betting odds?

The question that anyone unfamiliar with betting will ask is ‘why should we put faith in betting odds?’ This question was answered by Sir Francis Galton back in the early 1900s when he uncovered the Wisdom of the Crowd phenomenon.

Galton was at a livestock fair watching a competition to guess the weight of a butchered ox. No-one guessed the exact weight but Galton calculated the median of guesses as being within 0.8% of the answer, commenting “the middlemost estimate expresses the vox populi, every other estimate being condemned as too low or too high by a majority of the voters.”

Caveats of betting odds as predictors

Though betting markets are very good indicators of underlying probability, they aren’t perfect, and going back to Galton’s experiment we can illustrate why in some circumstances they should be treated with caution.

The accuracy of guesses of the Ox’s weight would be proportional to the number of entrants in the competition. So the number of bets is important, but more so the volume of the money wagered.

Ten £5 bets on OUT are not the same as one £1,000 bet on IN. This can be summed by the phrase ‘Skin in the Game’ which means to incur monetary risk to achieve a goal.

More so, the value of that large bet will be augmented by the perceived experience of the person placing it. If it is an experienced political bettor it has much more weight that a wealthy casual fancying a large punt. Importantly, the volume of bets and the bettors behind them cannot be discerned just by looking at advertised odds, and are only known to bookmaker.


In the case of EU Referendum odds, there is no certainty that those betting are drawn from a wide audience representative of the electorate. The behaviour of bettors is not necessarily equal to that of voters, especially as we aren’t sure when people will make up their mind.

Because a Referendum is simply a measure of opinion, rather than something objective, the ‘undecided voters’ have a huge influence. The betting markets cannot know what the waverers may do, so if that group is large enough, the odds could be wrong.

This is exactly what happened in the 2015 UK General Election when a huge number of voters decided on the day, so their intent could not have been factored into the odds. The lack of information of this kind is a crucial drawback in betting markets that are solely measuring sentiment.


The idea of knowledge is crucial in the Galton example. If the crowd guessing were children not farmers, the outcome would have been very different. The point being that the value of betting markets is determined by the domain knowledge of those participating.

With the EU Referendum odds there is far less information to inform the betting for the following reasons:

  • Referendums happen infrequently so there is no meaningful ‘form’
  • Opinion polls can be flawed by sampling error/bias
  • Voters opinions are shaped by ongoing and fluid debates
  • Many voters won’t decide until the day

This doesn’t mean that EU Referendum betting odds cannot provide a useful indication of potential voter sentiment, it just means that they should be treated with caution.

Bookie Enthusiasm

Citibank may or may not have good reason to believe “remain” will win, but past elections and bookie enthusiasm should not be among those reasons.

Making assumptions based on the Scotland referendum (as Citigroup did) is more than a bit problematic. This is not the same vote. If anything, the fact that the polls have been so wrong in two recent votes should cause decreased confidence, not increased confidence.

Returning to the top, was it Citigroup who said “Bookies are still enthusiastic the vote on June 23 will come out overwhelmingly in favor of the U.K. staying in the EU” or was it Sara Sjolin?

At least one of them does not understand how bookies operate.

Mike “Mish” Shedlock