Predictable Insights - 7.16.21

2 years ago

Predictable Insights provides a unique, crowdsourced perspective at the intersection of politics and prediction markets.

Each edition includes an update on the politics driving the week that was as well as highlights from PredictIt’s market analysts.

It’s Friday and here are the market insights we’ve been collecting this week. The possibility of ending the federal prohibition on marijuana grew new legs this week as top Democrats unveiled an intra-party compromise draft bill addressing criminal reform along with legalization and banking reforms having to do with cannabis products. Still, the proposal has high hurdles to jump before it can be considered a real possibility, including opposition from President Joe Biden.

Then, we’ll look towards the House where Democrats announced July 27 as the date of the first hearing for the Jan. 6 Select Committee, putting House Minority Leader Kevin McCarthy (R-CA) on a time limit to decide whether he will endorse his party’s participation. Finally, we’ll delve into two special election primaries coming up in early August in Ohio that will test both parties ahead of the 2022 midterms.

We’ve also launched a market today on whom will the Senate next confirm as chair of the Federal Reserve.

This Week in the Markets

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Sen. Chuck Schumer (D-NY) announces an amendment to the Energy Policy and Modernization Act. Photo: Senate Democrats / Flickr / CC BY 2.0.

New Momentum On Federal Marijuana Legalization

White House Press Secretary Jen Psaki made clear once again this week that President Joe Biden still opposes federal marijuana legalization, despite newly proposed legislation by top Democratic senators. Senate Majority Leader Chuck Schumer (D-NY) and Sens. Ron Wyden (D-OR) and Cory Booker (D-NJ) unveiled a draft of the “Cannabis Administration and Opportunity Act” on Wednesday, which aims to end the federal prohibition on marijuana and other cannabis products.

In addition to legalizing marijuana, the proposal would expunge non-violent criminal records related to the drug and allow legal cannabis companies access to essential financial services. It would continue to allow states to make decisions on whether to legalize marijuana within their boundaries, and in states where it is legal, they would control the possession and distribution. While shipping into states that have not legalized will be prohibited, such states could not stop shipments going to other legalized regions through their borders.

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Market Data at 6 a.m. EDT: Will marijuana be rescheduled under the Controlled Substances Act by April 20?

Marijuana use is currently legal in 18 states, and allowed medically in 37 states, but remains illegal under US federal law as a Schedule 1 banned drug under the Controlled Substances Act, deterring banks and others from dealing with companies that sell marijuana or related products. An estimated 40,000 Americans are in jail because of cannabis-related offenses. A Pew Research Center survey earlier this year showed that over 90% of US adults think marijuana should be legal for medical and recreational use, or just for medical use.

Biden said during his presidential campaign that he supports marijuana decriminalization, but hasn’t gone so far as to support legalization. He was also a significant player in 1990’s criminal reform legislation that led to an increase in the number of marijuana-related charges while he served in the Senate. Psaki clarified during the press conference that she hasn’t spoken to Biden directly about this legislation, but still insisted that his feelings on the subject had not changed.

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Market Data at 6 a.m. EDT: What will President Joe Biden’s approval rating be next week?

Schumer called the legalization “one of the high priorities” for Democrats in an interview with NBC, though support within his own party isn’t a sure thing. Booker, who is the strongest advocate of the sponsors for the criminal reform aspects of the proposal, has said that he’s open to compromise, but won’t stand for a narrow banking-only legislation that would ignore issues of “restorative justice.” This puts him directly at odds with other Democrat-led legislation introduced earlier this year with a focus on shoring up the banking and financial issues and has a better chance of earning enough support to pass this Congress.

“It’s hard to see how this can pass, but nonetheless it is positive to see progress and momentum” – Greg Heyman, founder of cannabis investment firm Beehouse Partners

Marijuana legalization advocates have also raised some concerns about this draft, including a lack of clarity about how state and federal authorities will interact in key ways, and the 25% suggested tax rate which would be on top of state-level taxes. Feedback on the discussion draft can be provided until Sept. 1, at which time we will be able to see a better picture of what the final bill might look like.

Even with the announcement of the draft legislation, Bloomberg reported that cannabis stocks fell on Wednesday due to skepticism over the bill’s prospects.

Market Pulse: Likely for many of the same reasons we discussed above, traders are very ‘meh’ on the prospect that marijuana will be rescheduled from a Schedule 1 drug – or, legalized – at least not as soon as April 20 of next year. The market closed out Thursday at a market low of 22¢ after a mostly downward trajectory in the first 24-hours – except for a short spike on Wednesday that briefly brought the high to 43¢.

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House Minority Leader Kevin McCarthy (R-CA) at the Presidential Social Media Summit in the White House. Photo: Trump White House Archive / Flickr / Public Domain.

Jan. 6 Select Committee Assignments Test McCarthy

A few weeks ago we did a deep dive on how the House Select Committee to investigate the Jan. 6 Capitol riots was shaping up. This week, House Minority Leader Kevin McCarthy (R-CA) is still undecided (at least publicly) on how he will proceed on his appointees, or if he will even participate.

Some Republican lawmakers want him to refuse to name any members at all in protest of what they see as political maneuvering on the part of Speaker of the House Nancy Pelosi (D-CA) to frame the narrative around the Jan. 6 events leading into the 2022 midterm elections. This leaves open the possibility that Pelosi will appoint more Republican members like Reps. Liz Cheney (R-WY) and Adam Kinzinger (R-IL), who are outspoken critics of former President Donald Trump but would give her the ability to tout a bipartisan effort. Others in McCarthy’s party are lobbying for him to appoint the “Trumpiest” of the pro-Trump members of the caucus to make sure the former president has strong advocates in the room.

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Market Data at 6 a.m. EDT: Will Jim Jordan be appointed to the Jan. 6 Select Committee by Aug. 1?

McCarthy was put in a similar position in 2019 in appointing members to the House Intelligence Committee’s first impeachment hearing for Trump. In that case, he balanced the desire to appease the former president with a look toward the next election season and not repelling swing voters who would see the inclusion of only Trump diehards as a charade.

The top House Republican has the option of appointing five members of his choosing to the committee, though Pelosi has ultimate veto power over members. One option McCarthy has is to name a Republican who voted to impeach Trump, but voted against the creation of the special committee, but the problem here is that many members are facing tough re-election bids, and serving on the committee might harm their chances of winning back home. Another option is to choose a Republican who voted to certify the election, which would give them an air of independence. So far, sources are reporting that it’s been a tough sell to members and staff.

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Market Data at 6 a.m. EDT: Will Adam Kinzinger be appointed to the Jan. 6 Select Committee by Aug. 1?

There is widespread consensus that if he choses to participate in the appointments, he will need to go with a few pro-Trump firebrands like Rep. Jim Jordan (R-OH), who singlehandedly led the impeachment defense of the former president with McCarthy’s office. Reps. Matt Gaetz (R-FL), Marjorie Taylor Greene (R-GA) and Lauren Boebert (R-CO) are other names that have been thrown out from the far right wing of the GOP caucus.

McCarthy has a new, informal, deadline to announce his committee assignments as Democrats revealed this week that the first public hearing will take place on July 27 featuring testimony from police officers who defended the Capitol complex on Jan. 6. Democrats have made clear that the committee hearings will take place with or without additional Republican involvement.

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Market Data at 8 a.m. EDT: What will be the balance of power in Congress after the 2022 election?

Market Pulse: Jordan’s odds of being appointed to the Jan. 6 Select Committee are lower than some reporting might suggest, likely due to the total uncertainty about how McCarthy will proceed, but he did jump up 15¢ on Thursday to end the day at 36¢ — not far off from his market high of 41¢ on July 2 — but then saw an overnight drop to 29¢ this morning.

Traders have even less confidence that Kinzinger will be appointed. At just 6¢, he’s close to his near market low of 5¢, potentially showing traders lean towards believing that McCarthy will in fact participate by naming his own people. Initial trading on June 29 had Kinzinger as high as 77¢, but that quickly dropped down to single-digits to start off July.

In the background of every decision leadership makes in Congress is the 2022 midterm elections, and so it is with this select committee. So we have another opportunity to look at the numbers for 2022. For the balance of power, Republican control of both the House and Senate has started to break away once again, and has been the favorite for at least the last 90 days. On Thursday, Republicans controlling both chambers was at 43¢, Democrats keeping the Senate but not the House was at 33¢, and Democrats controlling both chambers at 25¢. The final option – Republicans flipping the Senate but not the House – has never been a popular option and was at just 9¢.

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Nina Turner at the People’s Rally, Washington, DC in 2016 with Sen. Bernie Sanders (I-VT). Photo: Lorie Shaull / Flickr / CC BY-SA 2.0.

Ohio Special Election Season Heats Up

Two Aug. 3 special election primaries in Ohio are garnering outsized national attention this week in the state’s 11th and 15th Congressional Districts.

First, in Ohio’s 11th District, where Nina Turner opened an early lead as the progressive heavyweight candidate, but new polling shows she might not have this one in the bag. Her top competitor, Cuyahoga County Democratic Chair Shontel Brown, seems to be closing in. The survey, conducted in early July, shows Turner with 43% support to Brown’s 36%. While Turner still appears to have a significant lead in the race, that seven-point gap is much closer than May polling, which showed Turner with a 35-point lead over Brown. But as the election has ramped up, so has interest in the race, and apparently that comes with increased support for Brown. The July poll included 400 likely Democratic voters with a margin of error of 4.9% and 14% of those surveyed were still undecided.

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Market Prices at 7 a.m. EDT: Who will win the Democratic nomination in the Ohio 11th District special election?

Turner, a former state senator and co-chair of Sen. Bernie Sanders’ (D-VT) presidential campaign, has locked down the progressive wing – with the support of Reps. Alexandria Ocasio-Cortez (D-NY), Cori Bush (D-MO) and Jamaal Bowman (D-NY), as well as Sanders and the Justice Democrats. Meanwhile, Brown has more of the “establishment” support, including House Majority Whip Jim Clyburn (SC), the political arm of the Congressional Black Caucus, Hillary Clinton and, even, Fudge’s mother.

The debate among Ohio Democrats who support the two candidates isn’t so much about policy, as the differences between their policy positions are minor, it’ll be about personality and tactical differences. Take these two outlooks, for example:

“It’s so important that we elect good Democrats like Shontel Brown who can sit at the table and bring people together around these important issues so that we can produce results. We don’t need anyone at the table that’s going to help further that divide.” – Akron City Council President Margo Sommerville, Brown supporter

“If we’ve learned nothing else from the pandemic and nothing else from the summer racial reckoning that this country found itself on the precipice of, we should learn that there’s an urgency of now, that we can no longer wait to deal with these pressing issues.” – Akron School Board President N.J. Akbar, Turner supporter

The winner of next month’s primary is poised to secure the seat in the Nov. 2 general election as the district is heavily Democratic thanks to gerrymandering. Fudge won re-election last year with 80% of the vote. But the type of Democrat that voters want to see in the office is still very much up for debate.

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Market Data at 7 a.m. EDT: Which party will win the House in the 2022 election?

A similar dynamic is taking shape for Republicans in Ohio’s 15 District, which is proving to be a referendum for the party much the way OH-11 will be for Democrats – with high-profile endorsements potentially being the deciding factor. In this case, the most high-profile endorser is former President Donald Trump in a race to replace former Rep. Steve Stivers (R-OH), who left Congress in May to lead the Ohio Chamber of Commerce.

Stivers himself is also weighing in on the election to replace him, endorsing state Rep. Jeff LaRe and so far contributing almost $300,000 from his re-election campaign account in support. Then Trump, last month, announced his support for former energy lobbyist Mike Carey. But the real drama comes from two high-profile, pro-Trump Republicans who have also come out with endorsements in the primary.

Sen. Rand Paul (R-KY) is supporting the campaign of former state Rep. Ron Hood in the GOP primary and Debbie Meadows, a prominent conservative activist in the state and wife of former White House chief of staff Mark Meadows is promoting church leader Ruth Edmonds. Trump advisers have publicly regarded the moves as acts of disloyalty that could lead to an embarrassing defeat for the former president, who put his name on the line when he made his endorsement of Carey.

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Market Prices at 7 a.m. EDT: Who will be the Republican nominee in the OH-15 special election?

Meadows and Paul insist that their intentions were not to undercut Trump by backing other candidates, but simply to show their support for their perspective candidates, rather than oppose Trump. Meadows, whose organization, Right Women PAC, endorses pro-Trump female candidates across the country, has said that her support is “certainly not an ‘us versus them,’ I totally support President Trump and always have.” It’s also worth noting that Meadows’ group endorsed Edmonds on June 4, four days before Trump announced his support for Carey, but that her PAC has continued to promote Edmonds.

Paul’s sin looks publicly to be more egregious, having announced his support for Hood in early July, several weeks after Trump came out for Carey. That said, Paul also endorsed primary candidates in opposition to Trump picks at least twice in 2020 and that didn’t stop the former president from endorsing Paul’s 2022 re-election bid earlier this year, saying he “has done a fantastic job of our Country, and for the incredible people of Kentucky.”

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Market Prices at 7 a.m. EDT: The current selection of Ohio markets.

Good intentions aside, it shows disunity among the pro-Trump segment of the GOP. With Trump setting up his picks in primaries and looking to shape the Republican Party ahead of a potential 2024 comeback bid, he’s forcing other Republicans to decide if they’re with him or against him by endorsing other primary candidates.

“Organizations that endorse candidates against the president’s endorsement do so at their own peril and, like the Democrats, will fail. But it will be remembered.” – former Trump campaign manager Corey Lewandowski, who is an informal adviser for Carey

Carey remains the strong favorite in the Ohio primary. A June poll conducted by the Carey campaign found him far ahead of the 10 other Republicans with 20% support, more than double LaRe at 9%, who was second. The campaign noted though that voter support in the survey increased to 52% when people were made aware of Trump’s endorsement. Understandably, Carey is capitalizing on Trump’s support in his effort to shore-up votes.

“I would not discount the importance of the Trump endorsement in the Republican Party.” – Kevin Spiker, a political science professor at Ohio University

Whoever comes out ahead in the Republican primary is expected to win the general in this district that Trump carried by 14% last year. But the way this primary fight plays out over the next several weeks could change the dynamic in Republican primaries between now and 2024.

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Market Prices at 7 a.m. EDT: Republican primaries schedule for 2022.

Market Pulse: In OH-11, the market for the Democratic nomination for the special election is mirroring polling, with the gap between Turner and Brown tightening. Turner was down to her 90-day low of 65¢ at the end of the day Thursday, and Brown hit her high of 36¢. The last time they neared prices this close was the beginning of July with a 73¢-27¢ gap. Turner, the longtime frontrunner, has just tapped the 90¢ mark a few times over the last three months, while Brown hadn’t closed above 28¢ before this week. Turner and Brown are the only two candidates in the race above 1¢.

On the Republican side, once Carey entered the market following Trump’s endorsement for the OH-15 primary, he basically cleared the field. State Sen. Bob Peterson started off as a market favorite, but has since dropped to just 8¢. LaRe was still holding on in second place with 12¢ Thursday, but dropped again to 7¢ this morning, after a 30¢ drop on June 9 when Carey entered the market with 79¢. Carey hit a high of 86¢ at the end of June and has been hanging out in the 70-80¢ range for most of July. The additions of Edmonds and Hood so far hadn’t attracted trader attention as of the end of Thursday, but high-profile reporting like this could lead to more movement there.

In Case You Missed It!

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Former President Donald Trump at a campaign rally. Photo: The Epoch Times / Flickr / CC BY-SA 2.0.

PredictIt markets making the news this week include:

Audible Insights

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PredictIt Meets Kevin

PredictIt CEO and co-Founder John Phillips sat down with California gubernatorial candidate Kevin “Meet Kevin” Paffrath this week in a LIVE YouTube segment.

They discussed the California recall election and the PredictIt market that has had Kevin in second place to sitting Gov. Gavin Newsom (D), who is up for a recall, and John answered questions that a lot of traders probably have about how PredictIt got started and how it works.

You can watch the full conversation here.

Recently Launched Markets

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Obama hands over presidency to Trump at 58th Presidential Inauguration. Photo: US Air Force Staff Sargent Marianique Santos / Public Domain.

New markets launched this week include, the winner of the Buffalo mayoral election; if marijuana will be rescheduled under the Controlled Substances Act by April 20, 2022; which party will win 2022 gubernatorial races in Maine, Georgia, Maryland and Nevada; if Texas will pass an elections bill by Aug. 9; and who will be elected president of the Philippines in 2022.

We also have weekly recurring markets on President Joe Biden’s job approval rating on RealClearPolitics and FiveThirtyEight.

Finally, we are always crowdsourcing new market ideas from traders. Send ideas to markets@predictit.org and be sure to include a legitimate resolution source.

Thanks for following the markets!

Team @PredictIt