The online political prediction exchange PredictIt is facing an uncertain future after the federal authorities warned it to wind up all its futures markets by February 15, 2023. The feds issued a letter last week rescinding a previous “no action” decision which had meant that PredictIt could continue to offer its services, leaving the exchange looking for ways to maximize the markets it can offer between now and February.
The “no action” letter was issued in 2014 and advised the founder of the site that they could continue to offer services as long as it limited itself to operating within nine specific rules. These included operating as a non-profit for academic or research purposes, limiting each market opportunity to 5,000 traders, and limiting each opportunity to a maximum of $850 of investment.
PredictIt operates as an exchange, allowing investors to predict the outcome of political races including Presidential and Senate elections. If investors believe a certain outcome will take place, they may buy “shares” in that outcome, and will receive $1 for each share if that outcome arises. Because markets stay open until a race is decided, if the investor then sees that a race is turning against them, they can sell their shares to lock in some profit, and then buy shares in a competing outcome.
At the time of writing, it had not been made clear which of the rules in the “no action” decision was felt to have been breached. The federal body in charge of regulating such exchanges, the Commodity Futures Trading Commission, has warned PredictIt not to open any further futures markets, although any currently open can remain in place until the February wind-up date. This crucially allows room for PredictIt to continue to offer markets on races currently open, which include the Senate and House elections taking place this autumn and a number of referendum votes which will run alongside those.
Site spokesperson Lindsey Singer was non-committal as to whether there was any way the site could continue to operate beyond next February, but did hint that there were ongoing negotiations to find a way of keeping political prediction markets going without suggesting an end date for that statement. It was however made clear that the 2024 Presidential Election was a market that they hoped to maintain, and as of writing, markets for both the Democratic and Republican candidates remained open. Given that those markets will not mature until the summer of 2024, there is evidently some sign that PredictIt hopes to keep operating.
For the moment, Singer was keen to put on record her gratitude that the decision from the CFTC was not on a “drop-dead” basis and that the existing markets can continue to run in the meantime. There has been little in the way of acrimony as an outcome of this decision, and it may be that this is a signal for – or a tactic to achieve a better chance of – a positive outcome for PredictIt in the longer term.