US derivatives regulator the Commodity Futures Trading Commission (CFTC), has withdrawn New Zealand-based online prediction market PredictIt’s “no action” letter, and ordered that all positions should be closed down or liquidated by midnight 15 February 2023.
Despite a federal ban on online gambling on election results, the CFTC’s no action letter had granted PredictIt an effective licence to operate subject to certain conditions due to PredictIt’s status as a not-for-profit project ran by the Victoria University of Wellington, a New Zealand-based research institution. As a result, it was effectively the only regulated political betting site in the US, as well as the only cross-state betting exchange regulated in the US as others would be banned by the Wire Act.
As the CTFC stated when the originally issued the letter on 29 October 2014: “it took a no-action position with respect to the operation of a not-for-profit market for certain event contracts and the offering of such contracts to US persons by Victoria University of Wellington, New Zealand without registration as a designated contract market, foreign board of trade, or swap execution facility, and without registration of its operators.”
PredictIt allows users to place bets on the outcomes of non-sporting real-world events, such as elections, actions from central banks and other current events or news.
PredictIt’s market uses an exchange system in which every bet that an event will happen is matched by a bet that it will not. While the venture is a non-profit research project, the site charges 10% fee on earnings over the original stake and a 5% withdrawal fee to cover operating expenses.
PredictIt additionally has a data-sharing agreement with numerous academic institutions including Harvard and Yale universities, as well as the Massachusetts Institute of Technology.