Traders betting on Obama, Huckabee wins in Iowa

By David Alexander

WASHINGTON (Reuters) - On the eve of the first nominating contest of the 2008 U.S. presidential race, traders on the political prediction markets were betting on Thursday on victories in Iowa by Illinois Sen. Barack Obama and former Arkansas Gov. Mike Huckabee.

Obama, seeking to become the first black U.S. president, was seen by the traders as the likely Democratic winner, with a 46.2 percent chance, compared with a 32.9 percent chance for former first lady Hillary Clinton, midday trading on the Intrade futures exchange showed. Former North Carolina Sen. John Edwards trailed at 21 percent.

Huckabee, a former Baptist preacher who appeals to Iowa's social conservatives, led the Republicans with 70 percent, compared with former Massachusetts Gov. Mitt Romney at 35.1 percent, Intrade trading showed.

Traders on the Dublin-based Intrade prediction market can buy and sell contracts based on which party they expect to win the U.S. election and which candidates they expect to win or lose the various state nominating contests.

Contracts are structured so that prices can be read as the percentage likelihood of the candidate winning the race. So traders buying and selling Huckabee contracts at 70 believe he has a 70 percent chance of winning.

Researchers involved in the Iowa Electronic Markets, a nonprofit real-money exchange run by professors at the University of Iowa, have found that political markets often forecast election results better than polls.

The Iowa market only offers contracts on which party is likely to win the U.S. general election and which candidates are likely to win the Republican and Democratic nominations.

Traders on both exchanges were forecasting a Democratic victory in the general election in November.

On the Iowa exchange, traders were betting Clinton had the best chance -- 61.5 percent -- of winning the Democratic nomination. Obama trailed at 25.8 percent and Edwards followed at 12.4 percent, trading showed.

Romney was predicted to have a 31 percent chance of winning the Republican nomination, followed by Arizona Sen. John McCain at 26.3 percent and former New York Mayor Rudy Giuliani at 21 percent, trading showed. Huckabee was seen as a long shot at 12.8 percent.

But Intrade traders were in turmoil over the ultimate Republican nominee, with Giuliani seen as having a 27.2 percent chance, versus 24 percent for Romney and 22.3 percent for McCain.

Clinton was viewed as the likely Democratic nominee, with a 64.7 percent chance, versus Obama at 26.1 percent.

The projections were a shift from late October, when Giuliani was seen as the likely Republican winner and Clinton a virtual shoo-in with a 70 percent shot at victory.

Traders on Intrade were predicting Clinton would win the New Hampshire primary January 8, giving her a 60 percent chance versus 42.4 percent for Obama and 2.1 percent for Edwards.

McCain led the Republican field in New Hampshire, with traders giving him a 59.9 percent chance of victory, versus 36.9 percent for Romney and 2 percent for Huckabee.