Incumbent GOP Congressman Bob Beauprez has retired to run for Governor, and the open seat he leaves behind in Colorado's 7th congressional district is one of the most hotly-contested seats in the nation. It has been on most analysts' lists as a "toss-up" from the start. Republican Rick O'Donnell has more money on hand, but both sides are looking for major help from outside. As we reported last week, House Minority Leader Nancy Pelosi was campaigning for Democratic nominee Ed Perlmutter.

The latest poll commissioned by KUSA-TV and conducted by SurveyUSA was released this week and shows a tie at 45-45. But Colorado political blogger Mile High Delphi has moved the race to "leans Democratic" - based on the gambling trend at Tradesports, according to his post at Political State Report:

Ed Perlmutter (D) a former State Senator won the Democratic primary and is now considered the favorite to win the district. GOP candidate Rick O'Donnell avoided a primary. No polls are available as of right now. A chart of the price for a futures contract for a Perlmutter victory is shown below: [NOTE: to view chart, follow link above]

Current odds on the GOP holding this seat are 2/11 or about 18% according to the Tradesports.com market.

This has caused us to move this race from a Toss-Up to Lean Democrat.

Read the whole post at link above.

Tradesports.com has been running these elections "futures markets" for years, but it amounts to something more akin to legalized gambling than a capital market. They have had a good track record of picking winners in the past, though.

If you visit, you will find that in almost all the competitive races they "trade" this year, Democratic candidates appear to have a dramatic edge. In a 50-50 contest, you would expect the contract prices to be in that range, but many Democratic candidates, like Perlmutter, are showing up as 75-25 favorites or better.

Why? I believe there are two reasons.

The people inclined to buy GOP candidates' futures are more skittish this year. They have heard all year the Democrats were going to win, and seen Bush's low popularity numbers. They have stayed away. More Democrats, on the other hand, are very confident and anxious to "put their money where their mouths are" this year.

But the second reason is the most important. Astute investors realize that the accuracy of markets is tied to their volume. The millions of shares of Microsoft, Pfizer, and Wal-Mart traded every day ensure their price is as close to fair as current knowledge permits. When dealing with a stock with low volume, one must be cautious, as the fewer traders in the issue, the less confidence investors can have that the price is truly reflective of value.

Now look at these Tradesports contracts on CO-7. Notice how few are changing hands. Delphi is mistaken if he places much confidence in their accuracy right now, in my opinion.

;-)