Political Betting Platforms In Regulatory Crosshairs: What It Means – The Average Joe
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    Political Betting Platforms In Regulatory Crosshairs: What It Means

    Noah Weidner

    May 16, 2024

    Forget pennies for your thoughts — how about betting pennies on the next President instead? Turns out it’s possible. Started as an academic project in 2014, the political prediction market PredictIt has become a go-to platform for 80K+ users to bet on political outcomes — with over $150M wagered in the lead-up to the 2020 election alone. Its success has inspired new entrants like Polymarket and Kalshi, but it has also drawn scrutiny from regulators concerned about its potential to influence election outcomes.

    Bet the ballot box: Last week, the Commodity Futures Trading Commission (CFTC) voted 3-2 to propose a rule that could ultimately prohibit event contracts related to political elections, sports events, and even award ceremonies. The move would prevent prediction marketplaces like PredictIt from operating legally.

    • CFTC Chair Rostin Benham claims that event contracts “ultimately commoditize and degrade the integrity” of elections — and the ban is designed to avert their dangers (Politico).
    • Such a ban could disrupt markets popular among investors and the affluent, particularly for hedging against geopolitical risks or policy swings.

    Profiting on political betting’s very political future

    The CFTC’s vote is the latest and most dramatic effort to stop event derivatives. In 2022, the agency revoked PredictIt’s operating license — but an emergency injunction allowed it to continue operating. PredictIt anticipates its legal battle with the CFTC to outlast the 2024 election cycle, meaning you could still wager up to $850 on certain markets today.

    • Today, there are markets for the Republican VP nominee, the 2024 presidential winner, and even predictions on which party will win certain states in 2024.
    • As of May 16, Donald Trump and Joe Biden hold 92% and 86% chances of winning their respective party nominations — however, their odds of winning the election are nearly equal.

    Thiel’s political feel: Despite regulatory challenges, investors like Peter Thiel’s Founders Fund and Ethereum creator Vitalik Buterin are increasingly interested in betting platforms like Polymarket. They recently contributed to Polymarket’s $45M Series B investment, with partner Joey Krug saying that “the tangible benefits of using Polymarket as a complement to consuming news … was obvious.” But what isn’t as obvious is the financial impact on consumers, especially with numerous options to part ways with their money, like sports betting apps or meme stocks already available.

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