First things first: It’s a big deal that Donald Trump lost to Ted Cruz in Iowa. Cruz outperformed the pollsters and delivered the first serious, if far from fatal, setback to the Trump campaign. But there is a second story simmering under the first: Rubio’s better-than-expected finish — third place and just a percentage point back of Trump. The reason this is significant: Rubio far outpaced every other not-Cruz, not-Trump candidate, making him arguably the viable alternative to those who want neither. And the gamblers took notice.

A website that tracks overseas betting on the presidential race saw Cruz’s numbers improve modestly this week, but it saw Rubio’s number shoot up more than 20 points. Election Betting Odds, from Fox News’s John Stossel and his producer, Maxim Lott, now has Rubio at 53 percent, a 23 percent jump from last week.

Understand, these aren’t the odds Stossel and Lott have given based on their private guesses or preferences. Stossel is a libertarian and so may personally prefer someone like Rand Paul. These are the odds drawn from  a crowd-sourced algorithm based on wagers placed by people overseas betting on the U.S. presidential election.

Such markets can get things wrong, of course, but the dramatic leap in Rubio’s numbers urges the question: Why such an impressive jump from a third-place finish?

One likely reason: Political analysts now expect to see more mainstream support coalescing around Rubio. His path to the nomination just got a lot clearer, and the pressure will be on the establishment favorites — Bush, Christie and Kasich — to bow out and let Rubio take it from here.

Rubio also tends to poll better than Trump or Cruz in one-on-one matchups with Hillary Clinton. The gamblers may be betting that Rubio’s strong third-place finish in Iowa, combined with the conventional wisdom that he is the most electable Republican candidate, will prove irresistible to a large voting bloc of Republicans at just the moment when the field is being winnowed and many voters are shifting from their first choice to a second choice candidate.

And that may be why Election Betting Odds now has Rubio as the heavy favorite to win the Republican primary, even well ahead of poll-leading Trump. Similarly, PredictWise, a project led by Microsoft economist David Rothschild, now has Rubio’s chances at the nomination at 54 percent, giving Trump 26 percent and Cruz 13 percent.

Election Betting Markets: How Do They Work?

So are the gamblers onto something — or at least, is the wisdom of this gambling crowd on to something? According to John Stossel, “Betting odds at ElectionBettingOdds.com are the best predictor of who will win any election.”

Of course, as one of the founders of ElectionBettingOdds.com, he would say that. But he’s not far off. Markets tend to be reliable forecasts because they rely on the wisdom of the crowd. Political betting markets like Stossel’s work by having computers average bets made on “prediction markets,” where traders buy and sell shares — like stocks — on each candidate. Like the stock market, it is by its nature speculative.

“The odds come about from the wisdom of the crowds: essentially the odds come about in a way so there is equal amount of investor sentiment on each side,” explains Koleman Strumpf, a University of Kansas economics professor who tracks betting trends.

Polls rely on asking the public whom they would vote for. Stossel gives the example of the last election cycle:

In 2011, Rick Perry led the polls for the GOP nomination with Trump-like 31 percent support. By October, Herman Cain was ahead. By December, Newt Gingrich.

But people who bet knew better. They picked Romney.

Opinion polls are a snapshot. Betting markets are a forecast. Political gamblers aren’t telling you who they want: they’re giving you who they think will win.

What Does This Mean for the 2016 Election?

Betting markets tend to be relatively more accurate than many other predictors, but that doesn’t mean they’re infallible, and they’re certainly not fixed. A week ago they had Trump as the odds-on-favorite. The wisdom of the crowd this week is telling the wisdom of last week’s crowd they were wrong. What will the the wisdom of the crowd a week or month from now say?

The gambling markets now predict both Rubio and Hillary to win the primaries, and for Hillary to win the general election. But there are still nine months of primaries, caucuses, confrontations, debates, missteps and possible subpoenas. In other words, there is nine months’ worth of information that these markets have yet to respond to. But if you’re looking for forecasters, the betting market is one to watch. And in the GOP’s horse race for the White House, keep an eye on number three.