Early polls gauging the effect of the Foley scandal on the Republicans' ability to hold on to Congress are just beginning to trickle in, with murky results. But another indicator has reacted instinctively and decisively: political futures markets.
After news of the scandal broke last week, the likelihood that the GOP would keep the House spiked downward in two of the most popular online markets -- real-time exchange systems where traders buy and sell "contracts" based on their predictions of how the upcoming elections will result.
Traders at the Iowa Electronic Market, perhaps the oldest such project in the country, rushed to buy up contracts predicting the GOP would lose the House, pushing
the price of that commodity back above the 50-cent line, meaning the market gives a GOP loss more-than-even odds. "RH_lose06," as the contract is known, had been trading below 50 cents for most of the month of September. (Needless to say, the bottom has fallen out of the "RH_gain06" market.)
Meanwhile, members of the online market inTrade.com scrambled to shed their investments pegged to the GOP keeping the House, sending that price plummeting from the high 50s last week to the mid-40s at yesterday's close. Like IEM, inTrade's prices directly correlate to the percentage likelihood the market believes something will happen.
Both markets were more tentative on the scandal's effect on GOP hopes to keep the Senate. IEM prices on Republicans holding the upper chamber hover around 70 cents -- ; InTrade's price on the same slid from the 80s last week to around 70 yesterday.