One of the only places in America where it was more or less legal to place a wager on individual political elections is, apparently, not long for this world.
PredictIt.org – basically, an options market for elections – is based out of Victoria University of Wellington in New Zealand, and has been legally operating in America since 2014 under a “no-action” letter from the Commodity Futures Trading Division (CFTC), based out of Washington, D.C.
What that meant, essentially, is the CFTC allowed the university to run this betting market without fear of prosecution, provided individual wagers were limited to $850 and no more than 5,000 traders could engage in any single market.
For instance, currently, it costs 27 cents to bet on Donald Trump to win the 2024 presidential election. If he does, you win a buck for every 27 cents wagered. If he loses, you lose the money you spent. Or you can sell your investment for a partial profit or loss in the interim.
However, on Thursday, the CFTC’s Division of Market Oversight (DMO) withdrew the no-action letter.
Do you enjoy betting on the US elections?
If you live in the US, you can't bet more than $500 anymore.
I'll try to explain, please reply with any errors. https://t.co/grJ4LRw4Dy
— Nathan is in SF (@NathanpmYoung) August 5, 2022
“DMO has determined that Victoria University has not operated its market in compliance with the terms of the letter and as a result has withdrawn it,” read a release from the CFTC. “As stated in the withdrawal letter issued today, to the extent that Victoria University is operating any contract market in a manner consistent with each of the terms and conditions provided in CFTC Letter 14-130, all related and remaining listed contracts and positions comprising all associated open interest in such market should be closed out and/or liquidated no later than 11:59 p.m. (EDT) on February 15, 2023.”
A blow to understanding politics
“PredictIt has made a very engaged and sustained community in the use and study of prediction markets,” said David Rothschild, an economist at Microsoft Research who has written numerous papers on prediction markets. “Closing it down, mid-cycle, is devastating for those who use and trust the data from these markets to better understand the political world, a uniquely accurate and timely signal. And, of course, it is a blow to those of us who study prediction markets to better understand market design and its implications for traders and prices.”
Beyond the soon-to-be-shuttering of PredictIt, Rothschild also worries the future of legalized political prediction markets — which are, at best, cloudy — will suffer.
“Prediction markets are too interesting to traders and too powerful of signal to researchers to disappear with this type of setback,” Rothschild said. “I trust that new innovation with spring up, but PredictIt clearly invested heavily in their market engine and user-interface, and without clear guidance from the CFTC as to why they are doing this to PredictIt, it will be hard for a new company to make a similar investment if it could be taken away so unexpectedly.”
PredictIt asks for help
As for what it means for current users, current markets, and current bets placed on the site?
This, in its entirety, is what PredictIt has to say:
- The security of trader funds will not be affected by this action.
- We intend to continue operating existing markets for trading through Feb. 15, 2023 unless they resolve sooner under their respective market rules.
- In light of this decision, we are halting the addition of new markets.
- No determination has been made on how markets with end dates after Feb. 15 will be settled.
- PredictIt will continue to accept deposits and new signups.
- PredictIt will continue to honor all withdrawal requests.
Currently, the only other operation in America where one can legally place bets on political markets is run by the University of Iowa (The Iowa Electronic Markets), but it is nowhere near as robust as PredictIt’s offerings, and the interface is nowhere near as user-friendly.
The only other place in North America where it’s legal to bet on the outcome of U.S. elections is north of the border in Ontario, and DraftKings has taken advantage of this by posting odds for the 2024 United States presidential election.
There are other sites operating without the blessing of the CFTC, and most European sportsbooks allow wagering on U.S. — and other — elections.
Additionally, the CFTC has recently shown a more lenient approach to futures markets in general, granting the startup Kalshi the ability to offer markets in virtually everything (sans elections).