The interest in US election odds is rising as the U.S. draws nearer to a presidential election in 2024, and one of the limited legal sources for that action is busy throwing up new markets following a recent court victory.
PredictIt is currently fighting for its existence in the U.S. legal system, but an appeals court handed the political futures market operator a win in July that the site expects will help keep it in business at least through this coming election cycle.
The type of markets PredictIt has offered since its launch in 2014 include the outcome of the U.S. presidential election, which it is again providing for the 2024 campaign.
NEW MARKET: Which party will win in Georgia in 2024?https://t.co/M0gPR33ugM pic.twitter.com/FHAT5CgkK4
— PI (@PredictIt) August 25, 2023
As of Friday morning, for example, contracts for President Joe Biden to be re-elected were trading at 46 cents. If Biden wins next November, PredictIt would pay $1 for each Biden share, which will fluctuate in value between then and now.
It's not the kind of wagering you'd see at DraftKings or FanDuel. Moreover, the tricky legal situation has prompted PredictIt to be “careful” launching new futures markets “as a show of good faith,” according to Lindsey Singer, a spokesperson for the site.
However, with the U.S. Court of Appeals for the Fifth Circuit ordering an injunction that staves off a shutdown of the site for the foreseeable future, PredictIt has spent the past few weeks adding several new markets.
One is regarding the winner of the Republican Party primary contest in New Hampshire (with approximately 377,000 shares traded as of Friday morning).
“We got good news after good news from the Fifth Circuit,” Singer said. “And while the legal fight isn't over, and… we're still fighting on that track, that's definitely some good news for PredictIt and allows us to more freely operate.”
A sensitive subject
Indeed, the legal saga isn’t over, with Singer noting the CFTC has until next week to file a petition for a rehearing regarding the latest ruling, which would prolong the process. Singer expects a final resolution, barring a settlement between then and now, to come by the end of 2024. That would mean contracts connected to the current election cycle are likely safe.
“Any new markets we're putting up, we’re really careful about ensuring that they resolve within the rules put out by the preliminary injunction,” Singer said.
Political betting is a sensitive subject in the U.S., especially amid the ongoing expansion of legal sports betting in the country.
While wagering on politics in Canada and the United Kingdom is common, U.S. sports betting sites are typically barred from offering such markets over concerns such as undermining confidence in elections. Those concerns are facing a potential new rival for PredictIt, Kalshi, which is trying to earn approval for a similar platform, albeit with a lot more money involved.
But PredictIt is an exception to the rule in the U.S., partly because it is a research project belonging to the Victoria University of Wellington, in New Zealand. The site turns over data gleaned from the buying and selling of its contracts to academics around the world for free, which they can then use for their research purposes.
The unique nature of PredictIt extends to its regulation. The site operates under a so-called “No Action Letter” that the Commodity Futures Trading Commission (CFTC) rescinded in August 2022, claiming the university was not complying with the terms of the no-action letter and sparking the ongoing legal drama. The agency also ordered that all of PredictIt's outstanding contracts settle in six months or less.
Getting into the legal weeds
PredictIt-related parties fought the withdrawal of the no-action letter in federal court, arguing it was “arbitrary and capricious” because it didn’t explain the agency’s decision, the latest judgment notes. The PredictIt side was successful in getting an appeals court to grant a preliminary injunction of the letter's withdrawal in January 2023, but, in March, the CFTC withdrew its withdrawal and penned a new letter arguing the no-action letter was still void and should be pulled.
The CFTC's new letter did offer some explanation as to why the no-action letter was rescinded. Those reasons included that the site is operated by a for-profit company and that contracts are being offered beyond the scope of those initially envisioned, such as how many tweets Donald Trump would send out in a week. The CFTC then tried to dismiss the federal appeal as moot, as it had withdrawn its withdrawal.
That argument was shot down by the U.S. Court of Appeals for the Fifth Circuit. The July 21 decision concluded "that a preliminary injunction was warranted because the CFTC’s rescission of the no-action letter was likely arbitrary and capricious," and ordered the lower court to enter the preliminary injunction while it weighs the legal challenge.
“The CFTC has since raised a host of objections to our even hearing the appeal, arguing that it is moot, that there has been no final agency action, that revoking the no-action letter was within the agency’s discretion, and that Appellants lack standing,” the decision said. “These threshold objections are all meritless.”
Rethinking regulation
While the legal drama continues to grind on — and it could ultimately have consequences beyond just election-related wagering — PredictIt is still making markets and offering futures to political punters. Meanwhile, Singer said the site’s service provider, Aristotle, is seeking approval to offer markets that aren’t related to politics, which could expand PredictIt’s offerings.
The site has also been trying to get itself on more solid ground when it comes to the regulation of election-market predictions, which, for PredictIt, would ideally remain at the federal level.
PredictIt currently charges a 10% fee on profits made by buying and selling shares to cover the site's operating costs, and there is an $850 limit on how much of any one contract a person can hold. Others may not stick to such tight limits if no one is limiting them.
“If we don't regulate it, then it's going to go offshore,” Singer said. “And it's going to be out of the hands of the people who are worried about that kind of thing.”
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