PredictIt is a popular futures exchange that tracks political events. It has until February 15th to close all markets and shut down. This will end the legal availability of US bets on political events.
Violations of Terms
PredictIt was established in collaboration with Victoria University of Wellington in New Zealand. However, it is now facing the terrible reality of permanent closure according to The Washington Post.
“They grew up to a point when they violated the terms and the letter,” a spokesman from the Commodity Futures Trading Commission, the regulatory body that oversees such types of trading markets, told reporters in an email.
Although illegal in the US, the political betting exchange was allowed to continue to function as an exception for noncommercial purposes. The CFTC had sent Victoria University of Wellington a “no action” letter, stating the exchange should be kept as an “academic exercise” only and that no profit should be made.
“The Chairman met with representatives from Victoria University and other universities at their request to hear them,” the spokesperson continued, stating that “the truth is that the university didn’t operate its market in accordance with the terms of a No-Action Letter.”
John Phillips, PredictIt’s founder, sued the CFTC after the exchange was closed in August. He claimed that the regulator’s decision was “arbitrary, capricious, and the watchdog didn’t provide any feedback to support its actions to close down the site, which had been operating for many years. PredictIt was established in 2014.
Gamification in Politics
Phillips also claimed that public access to its data, which allows dozens of research institutions to use it for studies on microeconomics and political behaviour, is educational because it encourages people to pay more attention to politics.
Authorities are concerned about the gamification effect on politics that is exacerbated when gambling is allowed on the outcome of elections. Many people believe that gambling on elections could lead to corruption of democracy, as politicians may have access to inside information.
PredictIt’s shutdown will affect thousands of bets that are due to settle by the deadline of February 15, but it is possible to stop it if the US Fifth Court of Appeals, Louisiana issues an injunction to maintain all markets open.
PredictIt’s closure permanently will mean that the market for gambling on politics is forever closed. However, there are always alternatives. For example, an offshore crypto exchange, which only requires that users be located outside the US in order to place bets.
