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Polls say Brexit is likely, but the betting markets say it isn't

On Friday, a poll for the Independent newspaper gave a massive 10-point lead to the British voting public that want to leave the European Union. Over the weekend, another poll for The Times newspaper gave leave vote a small lead. A Financial Times Poll of Polls gives leave a lead as well — 46 percent, versus stay at 44 percent.

And yet, the British pound is still above its 2016 lows, which were hit in late February shortly after David Cameron set the date for the in/out referendum at June 23 of this year.

Furthermore, while Great Britain's vibrant wagering markets have shown the momentum build on the leave side, they still show a significant preference for remain. The latest odds on Monday — 4-7 for stay vs. 7-4 for leave — imply a Brexit probability of 36 percent.

So the money is saying remain, while the latest polls are starting to say leave. The big question: Why?

A man leaves a shop in London, June 13, 2016.
Stefan Wermuth | Reuters
A man leaves a shop in London, June 13, 2016.

The main reason is that it's thought that there will be a swing on the day of the vote toward stay as some voters, who may only marginally favor Brexit, will lose faith due to all the uncertainty encompassed by a departure from the EU. Voting for the unknown takes higher conviction that voting for the status quo.

"The experience in referendums in Britain and around the world is that when you get these kind of constitutional, almost constitutional referendums, toward the very end, in the final days, or the fortnight, people who make up their mind late make a judgment as to which is the risky option and which is the safe option," Peter Kellner, a former president of UK polling company YouGov, told CNBC's "Worldwide Exchange" on Monday. "And there's a lot of talk about the economic risks of Brexit to jobs, to investments (and) to prosperity. If that pattern holds this time, then one would expect the remain votes to pick up in the last week or 10 days, but we can't be certain."

Kellner highlighted that the headline-grabbing poll on Friday that gave leave a 10-point lead was an online poll, and they "slightly overstate the Brexit position and understate the remain position."

Either way, the leave camp has been gaining momentum. "There has been a slight shift to leave, and I'll tell you one of the things that I think is happening, which is that in order for David Cameron, the Conservative Prime Minister to win the referendum, he needs the votes of a lot of non-Conservative voters: Labour, Green, Scottish National, Welsh Nationalists."

David Cameron is worried that the Labour vote will not turn out sufficiently in favor of stay — something that has not been helped by mixed messages from the Labour party leader, Jeremy Corbyn.

The other reason the leave camp has gained momentum in recent weeks is the issue of immigration. If that continues to get a lot of air time over the next 10 days, then betting odds may start to align with the latest polls. The tragic events in Orlando, Florida, over the weekend have increased the focus on immigration issues in the United States, but Kellner said he does not feel this weekend's terrible events make an immediate impact on the Brexit vote. "I think something bigger probably has to happen, but when you get these sudden horrible events, one can never be quite sure how people will react," he said.

The stay camp will continue to try to focus over the final 10 days on the economy, where they score the most points over the leave campaign. On Monday, Donald Tusk, the president of the European Council, said Britain could face seven years of uncertainty if it votes to leave the EU.

Tusk said that a renegotiation of relations between the United Kingdom and theEU following a Brexit "would take at least five years, and I'm afraid, without any guarantee of success." That kind of rhetoric helps the stay camp. Meanwhile John Longworth, Chairman of Vote Leave's Business Council, described Tusk's claims as "absolutely laughable", adding "greatest risk is actually staying in the European Union".