Political betting site PredictIt to shut down after CFTC withdraws approval

This is a huge blow to political discourse. PredictIt has been operating since 2014 with the approval of the CFTC as the largest election betting platform in the US. Today they received notice from the CFTC instructing them to cease operations by February 15th without clear justification for the decision.<p>One year ago, YC backed betting market Kalshi launched with CFTC approval. They employ a former commissioner of the CFTC as Chief Regulatory Officer, and two weeks ago applied for CFTC approval to have election markets. And half a year ago, the popular unapproved blockchain betting market Polymarket was fined and shut down in the US by the CFTC.<p>Further reading:<p><a href="https:&#x2F;&#x2F;twitter.com&#x2F;NathanpmYoung&#x2F;status&#x2F;1555387422510264321" rel="nofollow">https:&#x2F;&#x2F;twitter.com&#x2F;NathanpmYoung&#x2F;status&#x2F;1555387422510264321</a><p><a href="https:&#x2F;&#x2F;www.cftc.gov&#x2F;csl&#x2F;22-08&#x2F;download" rel="nofollow">https:&#x2F;&#x2F;www.cftc.gov&#x2F;csl&#x2F;22-08&#x2F;download</a><p><a href="https:&#x2F;&#x2F;astralcodexten.substack.com&#x2F;p&#x2F;the-passage-of-polymarket" rel="nofollow">https:&#x2F;&#x2F;astralcodexten.substack.com&#x2F;p&#x2F;the-passage-of-polymar...</a>

Betting on PredictIt has been a side-hobby of mine for the last 5 years, in which time I turned my fun $10 deposit into (just) over $1000. For me, it&#x27;s a satisfying way of interacting with the news, motivating clear-headedness and accuracy over simplicity and filter bubbles.<p>The talk about &quot;rational markets&quot; in this thread is well-meaning, but I think it could better targeted toward BetFair and other uncapped foreign markets. PredictIt has a cap of $850 from any individual in any market, which means almost no market is dominated by &quot;sharps&quot; exploiting differences between prices and reality. Sure, PredictIt&#x27;s prices are often more accurate than the average person&#x27;s guess, but they still exhibit a lot of small and predictable biases:<p>- &quot;Yes&quot; positions are more popular<p>- Pro-Republican positions are more popular<p>- Cheap, improbable positions are more popular<p>- Positions confirming simple ideas are more popular<p>- Positions traders wish were true are more popular<p>- Things being discussed on the news are treated as more contentious than they are<p>Ultimately, almost all of my 100x growth just boiled down to finding these biases and maximizing my expected log(return) with them in mind.<p>I do believe PredictIt was good for discourse. Though it may have ultimately affected a small number of views, the &quot;put-up-or-shut-up&quot; mentality is much closer to the scientific method than media and its tendency to navel-gaze. The domain of PredictIt markets was small, but I often imagine a world which creates this kind of ecosystem for a broader array of scientific fields.<p>For me, though, this is the end of the line. The 2020 races (with Georgia runoffs) risk being unresolved by the 2&#x2F;15 deadline, and it&#x27;s impossible to predict what PredictIt will do then, much less if markets will properly price that in. It&#x27;s been a fun run, and I&#x27;m glad it lasted as long as it did.

I know many people strongly believe in rational market theories. For these people this sort of betting site isn&#x27;t just a betting site: it is the mechanism by which they engage in understanding politics and their primary means of political discourse. Beyond that, it is also an incentive for their own political engagement. They have several mathematical models that are strongly suggestive that they are right to have this belief.<p>From that framing the government should have no authority whatsoever to take action against PredictIt: doing so is a <i>gross</i> violation of natural rights. To me this seems like an error comparable to restricting freedom of religion, detaining someone so as to prevent them from voting, or the burning of an intellectuals book and the jailing of them so as to prevent the spread of their ideas. It seems an abomination.<p>What is the justification? Just that there was gambling or is there a deeper fundamental problem that I am missing? Gambling to me seems more fundamental to reality than breathing. Everyone engages in it all the time, but we just don&#x27;t call it that when we think it might be a gambling category which is of benefit to society.<p>If there is no justification - what paths can be pursued to permanently sunder the governments ability to take this sort of action in the future? I say all this with no sense of judgement for the CFTC; clearly this is within their mandate under reasonable interpretations. Rather, I think other mandates - more important ones - supersede theirs and should be restricting their authority.

From the official withdrawal letter [1]:<p>&gt; [Victoria University] has not operated its market in compliance with the terms of [the 2014 letter granting no-action relief].<p>Nowhere does the CFTC state exactly what the alleged violations where, so we can only speculate. It certainly lends support to the hypothesis that the no-action withdrawal is regulatory capture by a competing prediction market.<p>[1]: (Forced PDF download) <a href="https:&#x2F;&#x2F;www.cftc.gov&#x2F;csl&#x2F;22-08&#x2F;download" rel="nofollow">https:&#x2F;&#x2F;www.cftc.gov&#x2F;csl&#x2F;22-08&#x2F;download</a>

This headline is misleading. PredictIt was operating in reliance on a No Action Letter[1]. The CFTC has since withdrawn the No Action Letter. The CFTC _never_ granted “approval” and relying on a No Action Letter <i>always</i> involves the risk that the view of the staff&#x2F;Commission will change.<p>[1]<a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;No-action_letter" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;No-action_letter</a>

The gambling angle is straight up dumb, why are they framing it that way? Aggregating information (however true) provides a net benefit in any endeavor, and there has to be a financial incentive to do information arbitrage, that&#x27;s the whole point, because people would not even worry about it.<p>The whole thing is that, the media now cannot say that elective x has a 65 approval rate (based on a survey of 6 coworkers) when on Predictit is at 10%.

&quot;Get money out of politics&quot;<p>also<p>&quot;It is a shame that a financial incentive to manpiulate elections or to vote for a candidate for any reason except the voter&#x27;s confidence in that candidate got banned&quot;<p>I&#x27;m not saying I definitely want political bookies banned, but I don&#x27;t immediately see how it is anything but a detriment to honest decision making in choosing how to respond to issues. Maybe I&#x27;ll vote to take away some human rights if the election is close and I can make a few bucks?

They were definitely operating in an extreme legal grey area. Without a doubt it&#x27;s straight up gambling. Yet they issue you a normal 1099 at the end of the year. It felt really weird having to claim a &quot;political consulting&quot; business on my taxes instead of just claiming it as gambling income with a W-2G. Not sure how they were ever legally able to operate in the US honestly.

I wonder if some sort of cryptocoin&#x2F;blockchain alternative could be created, that would be harder to shut down.<p>It would probably have to be based on having an elected council (with an odd number of members) signing off on the outcome of a market. If people see a bias in their history (which of course should be public), they will factor that into their bids, hopefully discouraging people from getting on the council to make money on their own bids.<p>And of course the council should be elected with some kind of ranked-choice&#x2F;condorcet so you tend to elect centrists rather than extremists.

Okay crypto people. For better or worse, here&#x27;s your use case.

PredictIt provides useful information to the world, positive externalities. Lotteries are a tax on the poor and innumerate and the governments run them.

&gt; When DMO issued the letter on October 29, 2014, it took a no-action position with respect to the operation of a not-for-profit market for certain event contracts and the offering of such contracts to U.S. persons by Victoria University of Wellington, New Zealand without registration as a designated contract market, foreign board of trade, or swap execution facility, and without registration of its operators.<p>&gt; DMO has determined that Victoria University has not operated its market in compliance with the terms of the letter and as a result has withdrawn it.<p><a href="https:&#x2F;&#x2F;www.cftc.gov&#x2F;PressRoom&#x2F;PressReleases&#x2F;8567-22" rel="nofollow">https:&#x2F;&#x2F;www.cftc.gov&#x2F;PressRoom&#x2F;PressReleases&#x2F;8567-22</a><p>For the &quot;other side&quot;. They got a waiver to operate an unregistered securities market, as a non-profit University-based organization. They allegedly did not operate it as they said they would, so they are losing their waiver. If companies want to offer these services, they are entirely within their American rights to do so <i>legally</i>.

This has happened many times before. Why do governments close prediction markets? What sort of problems do they cause?

This is terrible. I wish things would go in the opposite direction, with the CFTC allowing futures exchanges such as the CME to trade presidential party election futures.

Time for <a href="https:&#x2F;&#x2F;pennywagers.com" rel="nofollow">https:&#x2F;&#x2F;pennywagers.com</a> to add political betting!<p><a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=30162767&amp;p=2#30163868" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=30162767&amp;p=2#30163868</a>

I don&#x27;t understand why they can&#x27;t just make them trades based on future political actors. Feels like that&#x27;s what the futures market is in general - risk betting.

Wow. I almost started working on a project 6 months ago based solely on the fact that PredictIt was able to get that no-action letter from the CFTC.

I&#x27;m mildly annoyed that I&#x27;ll have to pay the 5%.

We need prediction markets. It is evil that government kills prediction market companies. Prediction markets are needed to OUT establishment politicians that are far worse that challengers. (For both sides of the partisan spectrum) It is evil that government kills prediction market companies.

Seems to me they&#x27;ve got things branded incorrectly. Don&#x27;t make a prediction market. Make a PasteIt.<p>Think about it, you&#x27;re trying to get people to process and offer up unknown information, right? Focus on that.<p>It&#x27;s bounties for verifiable information. Not predicting, or a game of chance. You pay for information to be brought up that you would never have thought to look for.<p>If you do it that way, you&#x27;re completely sidestepping the issue of providing a gambling primitive. You&#x27;re just incentivizing data collection and dumping. The outcome becomes secondary, the context generated maintains primacy, and I wager what markets are really interested in is looking at highly accurate predictors and trying to infer what channels of information they&#x27;re privy to in order to expand data observation pipelines.<p>Unless these &quot;prediction markets&quot; really are just some high brow word for gambling parlors. Then again, I always figured that was all futures and derivatives trading were, yet there is a staunch refusal to classify them as such.