US regulators order closure of New Zealand-based political betting site
Commodity Futures Trading Commission revokes prior permission to offer political bets for research purposes
PredictIt, a New Zealand-based website which allows quasi-wagering on political events, has been ordered to cease operation in the US by the Commodity Futures Trading Commission (CTFC).
The site offers Americans the chance to browse a variety of political markets and bet on whether an event will or will not happen by purchasing a ‘share’ in that event. It also allows trading on shares in different events between users with all purchases/bets capped at $850.
PredictIt operates on a prior CTFC permission first given in 2014 which has been allocated to the Victoria University of Wellington, with all betting supposed to take place on a non-profit basis purely for research purposes.
“PredictIt’s market data offers researchers a wealth of information that can be used to further our understanding of a wide array of subjects in fields of study as diverse as microeconomics, political behavior, computer science and game theory,” PredictIt’s site states.
The site lists a number of academic partners from universities across the US and internationally.
The permission states that the CTFC will not take any action against the site as long as this stance continues, with the regulator citing a prior permission given to US-based site Iowa Electronic Markets (IEM) operated by the University of Iowa, which operates on an almost identical basis.
PredictIt’s operational conditions include limiting them to 5,000 traders per contract, not charging any commissions or offering brokerage services, usage of a third-party entity to perform KYC on all participants, and limiting advertising to those individuals “interested” in the subject matter.
The site must also disclose its unregulated status and the fact that it is in operation for purely research purposes in order to comply with the “no action” order.
In addition, PredictIt must only offer event contracts consisting of two submarkets for binary option contracts concerning political election outcomes and economic indicators.
Despite its status as an academic project, PredictIt has built up a cult following in the US, with many broadcasters featuring PredictIt odds during recent elections.
However, the site has provoked the ire of the CTFC, which suggested it had breached its conditions of operation.
“The University has not operated its market in compliance with the terms of Letter 14-130, as a result, Letter 14-130 is hereby withdrawn and, as such, is not available for the listing or operation of any new or related contracts,” the CTFC letter stated.
Following the withdrawal, the University has been ordered to close and liquidate all positions by no later than 11:59pm eastern time on February 15, 2023. Social media users were mixed in their thoughts about the closure order, with some welcoming its demise.
Let's salute the CFTC's decision to scrap PredictIt.PredictIt is not deserving of support, when it has blocked non-US bettors to use the platform. CFTC made a good decision. There shall be no platforms excluding non-US citizens.
— Lars Brovold (@LarsBrovold) August 7, 2022
The Biden administration is shutting down PredictIt. If I was conspiratorially minded I would say the party that worships fake expertise wants to destroy prediction markets. But the federal government is pretty much always this bad on every issue. https://t.co/ojopjDOZYx
— Richard Hanania (@RichardHanania) August 5, 2022
The CFTC is effectively shutting PredictIt down.
Is this the end of an era for prediction markets in the U.S.?
Or does it harken the start of a new, more compliant one?https://t.co/qRN95kSkif
— Will Green (@wfcgreen) August 4, 2022
For its part and in response to the order, PredictIt has stated that existing funds will remain secure and that it expects to continue to operate right up until the deadline day.
PredictIt has committed to halting the addition of new political markets but has said it will continue to accept deposit and new sign-ups and will honor all withdrawal requests.
However, the University has said it has made no determination in how to settle those political markets which end after February 15, 2023 which includes markets on the US presidential election in 2024.
“PredictIt maintains that all open markets are within the terms of the No-Action letter,” an update on the site geared toward traders stated.
“We know our PredictIt community is incredibly strong and committed to this project,” the update adds.
Other than unlicensed offshore betting sites, Americans have no legal means of betting on politics.