Prediction markets now betting big on Obama

WASHINGTON (Reuters) - Traders betting on future events in the political prediction markets are overwhelmingly predicting a Barack Obama victory in the U.S. presidential election, giving the Illinois Democrat a better than 80 percent chance of winning.

The traders were betting on Wednesday that Republican presidential candidate John McCain had less than a 20 percent chance of victory, a big change from a month ago, when the Arizona senator was seen as having a 47 percent chance of capturing the White House.

The drop in McCain's fortunes in the predictions markets coincides with the global financial crisis and the U.S. presidential debates. Obama is seen by many as the stronger candidate on economic issues, and polls showed many believed he won the first two debates.

Opinion polling in the U.S. presidential race has shown a shift toward Obama during the same period.

On the Dublin-based Intrade predictions markets on Wednesday, traders in Obama contracts were giving him an 82 percent chance of winning the election. Traders in McCain contracts were giving him a 17 percent chance of victory.

On the Iowa Electronic Markets, run as a research tool by the University of Iowa business school, traders were giving the Democrat an 82 percent chance of winning and the Republican an 18 percent chance of winning.

On September 9, traders on Intrade were giving McCain a 47.4 percent chance of winning the election, compared with a 52.4 percent chance for Obama.

Contracts on the political prediction exchanges are structured so trading prices are expressed as a percent likelihood of an event occurring. Studies have show the predictive power of the markets is comparable to that of opinion polls.

(Writing by David Alexander; editing by David Wiessler)