Overview of 2010 Senate Elections, and First Look at the Intrade Contracts

In 2010, there will be 36 elections for the US Senate. Of these, 33 are the Class III seats that would normally be up, and 2 are special elections due to resignations of Senators Joe Biden and Hillary Clinton (should she be confirmed as Secretary of State as expected). Republicans currently control 19 of these, and Democrats control 17.

Of the 17 Democratic seats, 13 will have incumbents seeking re-election who were elected in 2004 and served full terms. In another 3, it is probable that an incumbent, who was/will be appointed this year, will seek re-election. These are Colorado (where it is likely that Michael Bennett will be seeking re-election when he is appointed to replace Ken Salazar when he is confirmed as Secretary of the Interior), Illinois (where recently-appointed Roland Burris will probably seek re-election), and New York (where Hillary Clinton’s successor will likely seek re-election). The remaining Democratic seat is Delaware, where Ted Kaufman has been appointed to serve the in place of Joe Biden, but has indicated that he will not seek re-election.

On the Republican side, it is likely that in 15 of the 19 seats, a full-term incumbent will seek re-election. The other 4 are occupied by incumbents who have announced their retirement at the end of their current terms (Mel Martinez in Florida, Sam Brownback in Kansas, Kit Bond in Missouri, and George Voinovich in Ohio).

So, of the 5 seats in which incumbents will not seek re-election, 4 are occupied by Republicans and 1 by a Democrat. This would seem to put the Democratic Party in good shape to maintain or add to their majority.

Intrade is a real money open market for futures contracts. They maintain markets for a large number of contracts on the outcome of upcoming elections. Individuals can buy contracts for prices (set by supply/demand) between 0 and 100 (corresponding to $0 - $10). If the outcome is realized, the payout is $10. If not, it is $0. The contracts are set as to the Political Party that will prevail. For example, right now you can put a contract on Chuck Schumer’s Senate seat for a Democrat to be elected (presumably Schumer) for 85 ($8.50). If he wins, the contract would pay $10. If he loses, the contract would pay $0.

Because the prices are set by supply and demand, the current price can be used as an estimate of the perceived likelihood that the event will occur. An observer can therefore use the current prices as predictors of the outcomes of the elections. In two recent posts, I looked at how well the Intrade contracts were at “predicting” the outcomes on Senate elections in 2006 and 2008. The last data I obtained before the respective Elections Days allowed correct prediction of every Senate election in these two cycles.

The contracts for the 2010 Senate elections were first made available last Friday (January 9, 2009). Today, I looked at the current bid/ask/last price data to get an early look at how the individuals participating in this market think the 2010 Senate elections will come out. If there was a bid or recent sale greater than 80, I concluded that the seat was “safe”. If a seat is not “safe”, then I just categorize them at this point as leaning toward the Party with the highest value for bid/ask (or last) price.

Here is the summary: of the 19 Republican seats, 14 are safe, 3 lean Republican (FL, KY, PA), and 2 lean Democratic (MO, LA). Of the 17 Democratic seats, 15 are safe and 2 lean Democratic (CO).

The current Intrade contract prices indicate a pick up of 2 seats for the Democrats: they would pick up David Vitter’s seat in Louisiana and Kit Bond’s seat in Missouri. Vitter is presumably running for re-election while Bond has announced his retirement. The data suggest that Arlen Specter will win Pennsylvania, Jim Bunning will be re-elected in Kentucky, and the Florida seat of Mel Martinez will be retained by the GOP. The Democratic seats not indicated as safe by these data are the Colorado seat currently occupied by Ken Salazar, which will likely become Michael Bennett’s when Salazar in confirmed to President-elect Barack Obama’s Cabinet, and Harry Reid’s seat in Nevada.

At regular intervals between now and Election Day next year, I’ll provide an update on what the Intrade contracts “predict” for the Senate races.