PredictIt, an online platform that offers wagering options on U.S. political results like the elections, will no longer be able to legally operate in the country, by decision of the Commodity Futures Trading Commission (CFTC).
On Thursday, the CFTC revoked the regulatory letter and reversed its previous issuance of allowance, arguing the site was no longer "a small-scale, not-for-profit, online market for event contracts in the U.S. for educational purposes." PredictIt, which caps bets at $850, refuted the claim.
Since 2014, PredictIt has used the permission granted for research purposes to Victoria University of Wellington in New Zealand to let Americans bet on US elections, something that’s generally forbidden. The focus on politics thrust PredictIt into the forefront of an emerging asset class that easily lets people wager on the outcomes of real-world events using derivatives, Bloomberg reports. PredictIt is operated by Aristotle Inc., which provides technology, data and other services to political campaigns.
The CFTC said that PredictIt trading in contracts listed under the 2014 legal interpretation must end by February 15, 2023. The regulator’s move didn’t involve an enforcement action.
As of Friday afternoon in Washington, traders still could use PredictIt to bet on everything from whether former President Donald Trump or Florida Governor Ron DeSantis would win the 2024 presidential election to whether New York’s Alexandria Ocasio-Cortez will file to run for president before 2024, as reported by Bloomberg.
The website included a disclaimer that read: “Predictit.org is an experimental project operated for academic purposes under permission from the CFTC.”
The letter gave the university the ability to list the products for research and academic purposes. Because of PredictIt’s relationship with the university, the platform never registered with the CFTC as a derivatives exchange, an onerous process that involves intense scrutiny from the regulator.
PredictIt stated it disagreed with the agency’s decision and “maintains that all active markets are not only within the terms of the no-action letter but are also consistent with commission interpretations conveyed to us over the past eight years.” It added that it intends to continue normal operations until the Feb. 15 deadline.
The platform hasn’t yet decided how contracts with end dates after Feb. 15 will be settled, Margaret Hyland, a Vice-Provost at Victoria University of Wellington, said in a separate statement.
For its part, Aristotle stated that American voters, politicians, journalists and academics rely on PredictIt for the valuable data it provides. “Over the past eight years we have always strived to be a good actor in an industry rife with bad ones and have worked with the CFTC since the beginning and would like to continue working with them,” Aristotle spokeswoman Brandi Travis told Bloomberg. “The CFTC has known for years about the extent to which Aristotle was involved with PredictIt day to day, as this was disclosed to them by us many years ago,” Travis said.
Victoria University of Wellington said in a statement that the PredictIt platform “remains a project of the university, operated by Aristotle. There has been no sale by the university to Aristotle.”
In April 2020, The West Virginia Lottery, which oversees betting in the state, initially approved a plan to become the first state in the U.S. to allow gambling on politics and let FanDuel and other sportsbooks offer political wagers, but needed time “to fully work through the implications and research it further.” Earlier in the day, FanDuel had gone ahead and begun offering bets on the 2020 presidential election, thinking it already had the approval it needed. But it halted the wagers after about 40 minutes and refunded customers’ money.