The Commodity Futures Trading Commission (CFTC) revoked election betting market PredictIt’s regulatory letter on August 4.
There was no mention of which code that PredictIt had violated, except that the platform had “not operated its market in compliance with the terms”. However, CFTC emphasized that the platform must liquidate its event contracts by February 15, 2023.
CFTC granted PredictIt a regulatory letter in 2014, enabling the platform to operate in the U.S in a small scale. PredictIt does not allow more than 5,000 traders per betting market. The maximum amount of bet to be placed is also limited to $850.
PredictIt responded to CFTC’s statement, saying that it “maintains that all active markets are not only within the terms of the no-action letter but are also consistent with commission interpretations conveyed to us over the past eight years.”
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
The platform also mentioned its plan to resume normal operations until the liquidation deadline. Thus, bettors can still participate in any betting market offered by PredictIt for now.
PredictIt is an online prediction market-based in New Zealand that enables Americans to participate in election gambling.
The idea is rooted in academia, with Victoria University of Wellington leading the research. It works together with tech company Aristotle, Inc. that provides technology for various political campaigns.
PredictIt focuses mainly on financial and law studies, providing data for academia, public media, and voters across the country.
Rajiv Sethi, Barnard College’s economic professor, was one of many people who found PredictIt’s data to be useful.
Sethi said, “For those who are interested in market based predictions of political outcomes, including journalists and researchers, there is really no close substitute.”
Christopher Gerlacher of Gaming Today argued that PredictIt might have lost their permit due to the increasing popularity in betting, particularly sports betting.
According to Gerlacher, U.S. states have become more attentive about betting regulations as more of them legalizing sports betting. Regulators might no longer take a neutral stance in this topic.
As sports betting becomes more popular, the interest in election betting has also increased. Gerlacher wrote that the government might want to prevent more people from “gamifying” U.S elections which are serious and consequential to people’s lives.
Issue in election betting legalization
There had been attempts in the past to legalize election betting. For example, Nevada attempted to legalize this market in 2013 but failed.
In 2020, West Virginia lottery officials approved election betting, promoted by the FanDuel group. However, the notion was quickly shut down by the governor.
A study conducted by the University of Kansas showed that Americans treated politics like sports. Another survey supported that finding, showing that 41 percent of participants believed that winning an election was more important than the policy offered by the candidates. 35 percent of the participants viewed the opposite.
Gerlacher brought up that the political polarization in the country has come to “dangerous levels” as voters might accept anything that their party told them.
The analyst thought that while it was not likely for election betting to tamper the election, there was a risk of conflict between supporters of two parties. The losing side might attribute their failure to election betting tampering.