Posted on: Aug 6, 2022 at 3:40 am.
Last updated on: August 6th 2022, 03:41 am.
Steve Bittebender
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The team behind PredictIt remains “committed to a future for political prediction markets,” a spokesman told Casino.org on Friday, a day after federal regulators overturned a decision that allowed the online exchange to operate in the United States for nearly eight years to operate.
A screenshot of PredictIt, an online exchange for political futures trading. On Thursday, the CFTC revoked its letter that allowed the exchange to operate in the United States for nearly eight years. (Image: PredictIt)
Late Thursday afternoon, the US Commodity Futures Trading Commission wrote to PredictIt organizers that the exchange was not operating in accordance with guidelines set out by the federal regulator in a “no-action” letter issued in October 2014. The letter was sent by the CFTC Vincent McGonagle, director of the Division of Market Oversight, said PredictIt should close or liquidate all outstanding futures markets by February 15.
PredictIt operates an exchange where traders can take positions on future political events such as elections and the passage of legislation. Traders buy shares for a possible outcome, and if their outcome is correct, they get $1 for each share.
But since it is an exchange, traders can buy or sell trades until the end of the event. This means that a trader could buy shares in an outcome, possibly sell them to make a profit, and then try to buy shares in a competing outcome in hopes of profiting more when the circumstances around change the event.
Since betting on political events is not allowed in US states that regulate gambling, PredictIt has become the go-to place for those looking to bet on elections, including the 2024 presidential election.
Over the past eight years, through good faith blood, sweat and tears, we have built what is now a thriving political trade community (and) have always strived to be a good player in an industry full of bad ones, and have been with ever since the CFTC cooperated early,” Spokeswoman Lindsey Singer told Casino.org on Friday.
Victoria University of Wellington, a New Zealand college, originated the exchange, which it established for research purposes. The CFTC laid down nine rules when giving its tacit consent to the exchange. These rules included operating as a small-scale, non-profit exchange solely for academic and research purposes, limiting each market opportunity to 5,000 traders, and limiting each investor to an investment limit of $850 per opportunity.
“Constant Communication”
Neither the CFTC’s letter nor a statement it released late Thursday afternoon provided a specific reason for the noncompliance finding. Donna Faulk-White, deputy director of the commission’s office of public affairs, told Casino.org on Friday that officials would not comment further beyond the letter or statement.
PredictIt officials have been in “constant communication” with the commission since launch, but “what the CFTC posted in their announcement is all we know,” Singer said.
“I can’t say anything about the internal negotiations with people in the commission or their motives,” added Singer. “What I can tell you is that we are committed to a future of political prediction markets.”
Singer defended the operation of the exchange, saying it adheres to the $850 investment and 5,000 trader limits for opportunities through coding programmed into the technology platform.
Singer added that in addition to exchange-registered traders, PredictIt also provides a valuable service to a number of key audiences.
Many reporters, bloggers, podcasts, other content channels, academics, politicians, and countless American voters are counting on this valuable segment of data that will simply disappear without us.” Singer to Casino.org.
Bloomberg reported on Saturday, citing unnamed sources, that PredictIt’s ties to Aristotle International — a DC-based political data, technology and consulting firm — led to concerns within the CFTC that the exchange might not operate as a for-profit corporation.
What’s next?
The CFTC’s letter said all new listings would not be covered by the “no-action” letter, a move that prompted PredictIt to stop adding new markets to the site.
Existing markets saw an increase in trading volume in the hours following the CFTC’s announcement, but that has since returned to normal, according to Singer.
Since PredictIt is an exchange, anyone who wants to cash out now needs a buyer to purchase their shares.
“We appreciate very much that the CFTC did not do this on the basis of an overthrow and allows us to continue to lead many markets to their natural end and we still hope to find a way to bring the markets to 2024 to lead to their natural end conclusions”, said singer.
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