On August 4, the CFTC revoked PredictIt’s no-action letter, which allowed PredictIt to offer election betting under certain conditions.
The CFTC did not specify which conditions PredictIt had violated. However, PredictIt is expected to liquidate its event contracts by February 15, 2023. So, bettors could lose a major election betting market after the 2022 midterms.
PredictIt is a research project conducted by Victoria University of Wellington in New Zealand. Its goal is to aggregate public opinion to see whether it can be more accurate than polls and pundits.
PredictIt first got its no-action letter in 2014. It was allowed to offer election betting as long as no market had more than 5,000 traders and no user could invest more than $850 on a trade. These conditions kept PredictIt’s scale small, ensuring that it couldn’t create a mass election betting market. It was a compromise between allowing potentially valuable wisdom-of-crowds research and financial law.
Political props, parlays, and futures could be further pushed to offshore sites with the looming end to one of the best available election betting outlets. Domestic demand for election betting could increase in the wake of PredictIt’s shutdown, too.
Where PredictIt Could’ve Gone Wrong
PredictIt may have lost its no-action letter in part because of the increased popularity of sports betting. States have paid greater attention to sports betting regulations as more of them legalized sportsbooks. In the wake of regulatory failures like Colorado, it would be surprising to see federal regulators remain neutral about sports betting and similar services.
This could be part of a greater sensitivity to the popularity of sports betting and, by extension, election betting. The United States has resisted legalizing election betting ever since scientific polls replaced sportsbook odds as preferred polling methods. So, this could be part of a larger crackdown on the potential gamification of something as serious and consequential as US elections.
However, the American electorate may not share this attitude for much longer.
Demand for a US Election Betting Market
Two states have attempted to legalize election betting. Nevada tried to legalize election betting markets in 2013 and failed. In 2020, a West Virginia lottery official allowed election betting before the governor shut it down. As sports betting expands, American voters have shown a desire for legal election betting.
Given the entertainment value of American elections, it’s unsurprising that many voters would like the option to bet on elections. Many Americans treat politics like sports anyway. One survey found that 41% of voters believed that winning was more important than policy, while 35% felt the opposite way.
Entrenched us-versus-them attitudes have already changed the way that Americans vote. Political polarization has reached dangerous levels after an American president made public health and the outcome of a fair election partisan issues. Partisan interpretations of the January 6 hearings show how voters will swallow what their parties tell them. Election betting can’t do anything to the voters that they haven’t done to themselves.
However, an argument that voters can’t handle election betting has merit. A legal election betting market may not lead to election tampering. But with Republican candidates claiming their losses will only be attributed to election fraud, a rise in election betting could exacerbate suspicions about illegitimate elections.
Election betting itself may not pose a threat to democracy. But voter reactions to lies and spin suggest that American voters may lack the capacity to separate entertainment from reality.