In the final stages of the UK election on May 7, 2015 the polls showed Labour in the lead for seats. It is reasonable to say it was a statistical dead heat. Despite the polling, prediction markets had the Conservative party over 65% to get more seats than Labour every day from March 10, 2015 onward.

To be clear, Labour never had a majority of the seats in the polling (neither party did) and, with several parties and the prospect of a coalition, determining who would take power was non-trivial. So, FiveThirtyEight, YouGov, and others created complicated models and determined possible coalitions. I cannot determine from their sites a direct probability of government for each party, but prediction markets certainly provided that for me. Prediction markets gave the Conservatives 55% to hold the government (coming from both Betfair and HyperMind markets) on the eve of the election, despite polling showing them not even getting a plurality of the vote.

I do not have the time to build models for every: political, entertainment, sports, and economic outcome, and prediction markets consistently do as well or better than the best modelers (even mine). To be clear, I am a huge fan of the modeling that FiveThirtyEight, YouGov, and others do to translate polling into predictions. I do it myself for USA elections, Oscars, and few other events. But, prediction markets crowd source many models, from many people, who are willing to bet real money on their information.

Prediction market-based forecasts are scalable because in exchange for expected winnings users do a lot of work aggregating information. Prediction market-based forecasts are timely because in exchange for expected winnings users do a lot of work in getting information into the market quickly. Prediction market-based forecasts are flexible because in exchange for expected winnings users do a lot of work in answering all types of questions and on all types of outcomes. Prediction market-based forecasts are accurate because in exchange for expected winnings users do a lot of work in ensuring that they incorporate all of the most accurate information available, and then some more …