heightened U.S. presidential election scenario: Decree issues, corporate struggles intensify
Betting on political events has brought some public benefits, as data from these platforms provides useful information for journalists, scientists, and direct participants in the events. These platforms serve as a valuable addition to the results of polls, which have become a pre-election classic, and the use of various models.
However, regulatory bodies, such as the Commodity Futures Trading Commission (CFTC), have shown concern regarding the growth of prediction markets, platforms where users can trade contracts on the outcomes of political events like elections. This concern was heightened around the 2020 US elections, although the most recent regulatory actions and statements have referenced the 2024 US elections and beyond.
One of the most popular platforms for such bets, PredictIT, operates on the basis of Victoria University in Wellington, New Zealand, with its activities in the US overseen by the political consulting firm Aristotle. Currently, PredictIT is defending its right to operate in court, but continues to accept bets from Americans. The US elections are at the top of the company's site, and according to users, Donald Trump currently has the highest chances of winning.
However, not all platforms offer betting on the presidential election. For instance, Kalshi, another legal and well-known prediction exchange, does not accept bets on the presidential election. They cite respect for the commission's opinion. Although Kalshi has the closest prediction to the current topic - the number of debates Biden and Trump will have this year (quite innocuous!), the company still faces issues. Currently, it is also suing for the right to exist, as the mentioned ban applies not only to elections but also to many sensitive topics.
Polymarket, which, in theory, Americans should not have access to, doesn't seem too worried about its future. Operating in an offshore zone, it actively accepts bets on the elections, with the collective wisdom of users predicting Trump's victory.
According to Jeff Sommer, the Commission's decision (and any unthought-out ban) will lead to the entire prediction market moving offshore. However, journalists, sociologists, and other researchers will no longer benefit from this.
Interestingly, regulatory bodies have expressed concerns about their ability to oversee these markets, especially as they become more mainstream and influential. There is also worry about potential manipulation, fraud, or misinformation in prediction markets tied to sensitive events like elections that could undermine public confidence in the electoral process or be used for illicit purposes.
It is worth noting that the CFTC attempted to block Kalshi from offering election contracts, but a federal court ruled the agency overstepped its authority. This highlighted the lack of clear legal frameworks governing election-related prediction markets in the US, leading to a regulatory tug-of-war. Despite initial resistance, the CFTC has recently signaled that election contracts are likely to remain, with a growing recognition that prediction markets are here to stay, and the focus is shifting toward ensuring their integrity rather than outright prohibition.
- The Commodity Futures Trading Commission (CFTC) has shown concern about the growth of prediction markets, such as PredictIT, which operates in Wellington, New Zealand, and accommodates betting on political events like elections.
- PredictIT, a popular platform for political betting, is currently embroiled in a legal battle to continue its operations in the US, despite concerns from regulatory bodies like the CFTC.
- Kalshi, another prediction exchange, does not offer betting on the presidential election, citing respect for the commission's opinion, even though its prediction on the number of debates between Biden and Trump is generating attention.
- Polymarket, operating in an offshore zone, continues to accept bets on the elections, including the US elections, despite the regulatory concerns about potential manipulation and misinformation in these markets.
