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Thread: Legalized political "betting" site PredictIt likely to go belly up in early 2023

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    Owner Dan Druff's Avatar
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    Legalized political "betting" site PredictIt likely to go belly up in early 2023

    Ever wonder about the legality of PredictIt, where is essentially political race gambling, done via "buy/sell" models like the stock market?

    They have existed untouched by the US government since 2014, thanks to a "No Action" letter from the CFTC (Commodities Futures Trading Commission). A No Action letter is essentially a promise from the CFTC that they're going to leave you alone. It means that, if you keep to certain terms, they won't interfere with your operations, while also not declaring your operation legal.

    PredictIt is run by Victoria University of Wellington, New Zealand. The fees are incredibly high. I've been profitable on there despite the fees because most political traders are morons, but it's the equivalent of playing in a good poker game with insanely high rake.

    On August 4, 2022, the CFTC has withdrawn the No Action letter from Victoria University/PredictIt, thus killing their legalized status. It is not clear exactly why, but apparently the CFTC thinks that PredictIt has violated the terms it agreed upon in 2014.

    DMO [CFTC Division of Market Oversight] 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that Victoria University has not operated its market in compliance with the terms of the letter and as a result has withdrawn it.



    However, things aren't as bad as they appear -- at least not yet. PredictIt has a grace period to continue operating until February 15, 2023. This means they can continue settling existing bets/markets, and you can continue to deposit and withdraw. However, they are not adding new bets/markets, and it is "unclear" how anything settling after 2/15/23 will be handled (uh oh!) This means, for example, you should NOT be betting on the 2024 Presidential election!

    Here's their statement about it: https://www.predictit.org/platform-announcements


    It is possible they will resolve the matter with the CFTC before February 2023. However, I find it more likely that the CFTC has found some sort of major violation of the spirit of their No Action agreement, and is tired of PredictIt's existence.

    I wouldn't say you have to withdraw right now, and there might still be money to be made in the November 2022 elections, but definitely hit the withdraw button after those are over.

    Or withdraw now if you want to be on the safe side, but be aware that withdrawal fees are high, so it's a mistake to withdraw and redeposit in November, and have to pay to withdraw a second time.

     
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      zealanddonk: NZ University rep

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    Owner Dan Druff's Avatar
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    I'm trying to figure out what might be the reason for the CFTC getting pissed off with PredictIt, to the point where they were told they have 6 months left to exist.

    My guess is that they figured out PredictIt isn't really "educational", and never really was, but is rather a profit center for a foreign University.

    PredictIt was given its No Action letter based upon a precedent set by a sort-of-similar system at University of Iowa in 1993. The Iowa one wasn't open to the public, and wasn't on the web, to my knowledge. (The web also just began in 1993, and barely anyone was on it!) It was utilized by people affiliated within University of Iowa, and the general concept was that by people "betting" real money markets connected to political events, University of Iowa was able to develop an accurate predictive model for elections. Each individual was allowed a maximum of $500 per market on the Iowa system.

    University of Victoria Wellington wanted something similar in 2014, except the $500 number updated for inflation ($850 in 2014, which explains the current limit per market), and they wanted people outside of the University to pahticipate.

    This was ultimately allowed by the CFTC, and here we are. However, an important caveat was that, like the Iowa system, the system was to be not-for-profit:

    There will be no additional fees other than those necessary to cover the basic expenses of running the market, including the cost of credit card processing of deposits and withdrawals, fulfillment of the know-your-customer (“KYC”) process, and all other associated regulatory compliance and operating costs.
    I have a feeling this is where the violations were perceived to have taken place. Given the absurd fees on PredictIt, it's hard to picture they aren't making bank.

    Furthermore, I have seen where their system has flaws which allow for more than $850 to be wagered on one market.

    If you want to read the 2014 No Action letter, it's here: https://www.cftc.gov/sites/default/f...ter/14-130.pdf

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    Diamond BCR's Avatar
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    I often wondered how it was considered a non-profit. Either they were subsidizing half the university, or paying charity executives a million a year like you’ll often see with American non-profits. I’d guess you’re right that they got pissed and figured if someone is going to roll Americans for huge profit, it’s going to be an American. The fees were always outrageous.

    We lose everything fun.

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    the equivalent of playing in a good poker game with insanely high rake.
    Excellent description of PredictIt. Sorry to see it going away. As professional handicapper Robert Frost said, "Nothing gold can stay."

    I'll gladly keep betting there through the November 2022 elections, then clear almost everything out with the possible exception of a couple end-of-calendar-year wagers. Then, that's it.

    More importantly, I'm curious what may emerge to replace PredictIt.

    It looks like Polymarket isn't taking U.S. players.

    I guess Kalshi is a possibility. They seem to be accepting U.S. players and have CFTC approval. Still, either of those would have to vastly expand their betting menu to even approach PredictIt.

    Any other potential candidates?

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    this sucks, was hoping it got bigger with larger limits, not be deleted.

    Whats up with Kalshi, anyone like that platform? Read about a guy who uses it to hedge against hurricane season. if a hurricane hits he wins his bet, no claims adjusters or insurance involved.
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    Im trying to figure out how the the hell the CFTC got involved to begin with. By any logic they have no business sticking their nose in this shit. It's not anything related to commodities or trading. It's essentially a political betting site WTF does that have anything to do with any remote regulatory authority the CFTC has? Just asking because Id argue there's a case to be made, they have zero authority over the site especially additionally when they are located in another country halfway around the world.

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