The US Commodity Futures Trading Commission (CFTC) announced on 4 August that PredictIt, the website offering wagers on the outcome of political events, would no longer be able to operate in the country. The platform must completely withdraw from the USA by February 2023.
PredictIt Started as a University Research Project
The CFTC did not specify an exact reason in its press conference, only stating that PredictIt had failed to comply with the terms of its operating agreement.
Betting on US elections is usually forbidden, but PredictIt’s structure is unlike that of a standard gambling operator. The website is managed by the Victoria University of Wellington in New Zealand. The officially stated goal of the endeavor was to determine if public opinion polling would be an accurate way to predict certain political events. The CFTC’s 2014 No-Action letter declared that the university would operate a non-profit market and would be exempt from the usual regulations for derivative marketplaces.
Each of these variances is intended to promote the educational public interest purpose of the project while maintaining the market’s small-scale, not-for-profit nature.
CFTC No-Action letter to the Victoria University of Wellington, 2014
The Platform Quickly Gained Popularity and Momentum
Despite the project’s initial intentions, PredictIt quickly gained popularity. It lets gamblers bet on real-world political events by offering derivatives without any real regulatory oversight. Bets are limited to $850, and its odds often made their way into high-profile news outlets.
An argument can be made that PredictIt is now neither small-scale nor non-profit, which would explain the CFTC’s measures. The Victoria University of Wellington attracted voter data analysis company Aristotle Inc. to manage the project, which caused additional concerns.
Brandi Travis spoke on behalf of Aristotle for Bloomberg, explaining that the CFTC had been aware of the company’s involvement for years.
Over the past eight years, we have always strived to be a good actor in an industry rife with bad ones.
Brandi Travis, Aristotle spokesperson
Travis expressed a desire to keep working with the Trading Commission, adding that PredictIt was a valuable tool for academics, politicians, journalists, and voters. The Victoria University of Wellington also commented on the matter, clarifying that it retained control of the project, and Aristotle just managed its operations.
The Website Will Remain Open till the End
The CFTC gave PredictIt until 15 February 2023 to cease all operations in the USA but did not take any further measures. If it wishes to return, the platform would have to receive a derivatives exchange license from the CFTC, which can be a slow and arduous process.
PredictIt commented on the matter, expressing their disagreement with the regulator’s decision. They claimed that their US operations were still within the terms of the no-action letter. The PredictIt website will remain fully operational until the final deadline, but the management has not yet decided how to deal with contracts ending after 15 February.