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Political betting site PredictIt to shut down after CFTC withdraws approval

186 points by akelly 4y ago

akelly 4y ago
This is a huge blow to political discourse. PredictIt has been operating since 2014 with the approval of the CFTC as the largest election betting platform in the US. Today they received notice from the CFTC instructing them to cease operations by February 15th without clear justification for the decision. One year ago, YC backed betting market Kalshi launched with CFTC approval. They employ a former commissioner of the CFTC as Chief Regulatory Officer, and two weeks ago applied for CFTC approval to have election markets. And half a year ago, the popular unapproved blockchain betting market Polymarket was fined and shut down in the US by the CFTC. Further reading: https://twitter.com/NathanpmYoung/status/1555387422510264321 https://twitter.com/NathanpmYoung/status/1555387422510264321 https://www.cftc.gov/csl/22-08/download https://www.cftc.gov/csl/22-08/download https://astralcodexten.substack.com/p/the-passage-of-polymarket https://astralcodexten.substack.com/p/the-passage-of-polymar...
- belorn 4y ago
  In term of political discourse it is/was a good source to verify the validity of some of the more up voted stuff on HN. One top comment a few years ago predicted that the US would abolish election and be a monarchy by 2020. An other that there would be a full scale nuclear third world war in 2019. There were one saying that the US would enter a new civil war by 2021. In each case I checked betting sites to see if such views held enough popular support, but alas I could not find any to bet against. If people who hold conspiracy theories put down money and lost, maybe that would do more to change how people think than any political debate ever could.
  - pessimizer 4y ago
    As far as I can tell from hanging out on Predictit for years, it's actually pretty shit at predicting things. That some event isn't something that you can gamble on, or that a particular outcome of an event isn't an option until five minutes before it actually happens, doesn't tell you anything. > If people who hold conspiracy theories put down money and lost If people who say that the government claim on X is true had to put money behind it, we'd see a massive wealth transfer from smirking status quo guys to little groups of conspiracy theorists. Half the time (like for example the missile strike on that family of saints as we left Afghanistan), the government line has been disproved before the press release even gets out; easy money. edit: if anything, Predictit acts as a summary of current media coverage/sentiment.
    - bombcar 4y ago
      > edit: if anything, Predictit acts as a summary of current media coverage/sentiment. This is exactly it; you have some small percentage of people "putting their money where their mouth is" but most of it is people trying to second guess and game everyone else (you could reliably make money trading shares on the news cycle, for example).
    - pfisch 4y ago
      If you spent time on predictit you would know the conspiracy people aren't rational and lose all their money. They bet in ways that reflect their disjointed understanding of the world. Not understanding the odds of their bets in general, and getting wrecked on stupid, improbable maga bets about Hillary getting locked up. Conspiracy people tend to be ultra partisan and believe things with no real evidence beyond they want these things to be true. That doesn't work when they start betting actual money. There was tons of money to be made long after the 2020 election on whether or not trump would magically become president again.
      - aaaaaaaaata 4y ago
        Out of curiosity, how many "conspiracy people" do you have exposure to/hang out with?
        pfisch 4y ago
        I have made well over 10k betting against them in absurd bets where the odds of trump becoming president months after the election were estimated by them to be much higher than any rational person would think them to be. I also spend a decent amount of time looking at qanon websites/forums/reading their insane chatter on twitter. What do you think the odds of Biden being a body double clone are? Many of them think the odds of this are well over 50%.
  - r00fus 4y ago
    Problem with your idea (which is conceptually valid) is that you can buy and sell on Predictit well before the closure of the "market/event". So many people who agreed with a politician or idea (that some event would happen) would still sell early (at 90c/1$) because they could use those funds in other markets. Worse still - you have people who would pump & dump the market - pushing the contra position (Trump wins 2020) and post comments showing showing holdings supporting contra, and then dump after it gains a significant share. I've heard of some predictit users doing this same operation 5x or more on a single market (an iconic example: Iowa Dem Primary 2020). So it's all speculation.
  - floe 4y ago
    Although it doesn't make sense to have prediction markets for truly catasclymic events -- anyone who believes nuclear war is imminent is gonna prefer to buy canned food over prediction market contracts.
  - hackernewds 4y ago
    Not sure this is good veracity of truth. Most people also predicted Hillary Clinton would win. Given the nature of over/under there is incentives to bet on the incorrect side knowingly
- jdmoreira 4y ago
  I also have strong suspicions this is related to Kalshi somehow
- ProjectArcturis 4y ago
  Do you have a source on Kalshi applying to list election contracts? In general, I agree, looks like regulatory capture by Kalshi.
  - akelly 4y ago
    https://kalshi-public-docs.s3.amazonaws.com/regulatory/notices/CONGRESS%20for%20posting.pdf https://kalshi-public-docs.s3.amazonaws.com/regulatory/notic...
ramesh31 4y ago
They were definitely operating in an extreme legal grey area. Without a doubt it's straight up gambling. Yet they issue you a normal 1099 at the end of the year. It felt really weird having to claim a "political consulting" business on my taxes instead of just claiming it as gambling income with a W-2G. Not sure how they were ever legally able to operate in the US honestly.
- dustyleary 4y ago
  > Without a doubt it's straight up gambling Not “without a doubt”. Gambling means a game of chance/luck. Court cases over poker, regardless of which way the decision goes, hinge on whether the Court is convinced that poker is a game of skill, rather than luck. Predictit definitely did not want to issue W-2G, because that is for gambling income, and their position is of course that their platform is not an illegal gambling service. I think that it’s pretty easy to argue that consistently winning money on a prediction market is a matter of skill. Just like consistently earning money on the stock market. Of course, both can be used for gambling. So if prediction markets are not allowed, why are day trading or stock futures allowed? A casual read of a few relevant subreddits will show that there are a lot of people “straight up gambling” with financial markets. It’s a real shame that prediction markets aren’t allowed to operate in the US. Markets (of any sort) are incredibly useful. Disallowing them because you can use them for gambling is throwing the baby out with the bath water.
  - User23 4y ago
    > Gambling means a game of chance/luck. Court cases over poker, regardless of which way the decision goes, hinge on whether the Court is convinced that poker is a game of skill, rather than luck. I think it really just has to have an element of uncertainty. For example one can gamble on chess tournaments. I suppose one can broadly construe an element of "luck" if Magnus somehow botches a game, but it strikes me as something quite different from whether or not one's lottery numbers come up. As you say, poker is the archetypical example of a skill game with an element of chance. Backgammon is another good example. I would say darts is another example that falls further on the skill end. > So if prediction markets are not allowed, why are day trading or stock futures allowed? As noted in another comment on this submission, it appears one can greatly increase the chances of regulators approving an activity by having former regulators on staff. Needless to say traditional finance companies enthusiastically hire those people.
salawat 4y ago
Seems to me they've got things branded incorrectly. Don't make a prediction market. Make a PasteIt. Think about it, you're trying to get people to process and offer up unknown information, right? Focus on that. It's bounties for verifiable information. Not predicting, or a game of chance. You pay for information to be brought up that you would never have thought to look for. If you do it that way, you're completely sidestepping the issue of providing a gambling primitive. You're just incentivizing data collection and dumping. The outcome becomes secondary, the context generated maintains primacy, and I wager what markets are really interested in is looking at highly accurate predictors and trying to infer what channels of information they're privy to in order to expand data observation pipelines. Unless these "prediction markets" really are just some high brow word for gambling parlors. Then again, I always figured that was all futures and derivatives trading were, yet there is a staunch refusal to classify them as such.
- Georgelemental 4y ago
  In an anonymous pastebin, there is no incentive for you to provide info that is accurate and complete. Prediction markets give you an incentive to find the right answer.
  - salawat 4y ago
    Doesn't have to be anonymous... Did I unintentionally stumble on a name that implied that?
    - Georgelemental 4y ago
      Non-anonymous makes you even less likely to get true insider info.
AccountAccount1 4y ago
The gambling angle is straight up dumb, why are they framing it that way? Aggregating information (however true) provides a net benefit in any endeavor, and there has to be a financial incentive to do information arbitrage, that's the whole point, because people would not even worry about it. The whole thing is that, the media now cannot say that elective x has a 65 approval rate (based on a survey of 6 coworkers) when on Predictit is at 10%.
usgroup 4y ago
This has happened many times before. Why do governments close prediction markets? What sort of problems do they cause?
- mistermann 4y ago
  It may be beneficial to the government that the organized practice of epistemology remains solely with the (trustworthy) media and The (approved) Experts. The internet is enough of a problem as it is for interfering with citizen's perceptions of what is true.
  - intelVISA 4y ago
    Damn internet always making people think things.
JoshCole 4y ago
I know many people strongly believe in rational market theories. For these people this sort of betting site isn't just a betting site: it is the mechanism by which they engage in understanding politics and their primary means of political discourse. Beyond that, it is also an incentive for their own political engagement. They have several mathematical models that are strongly suggestive that they are right to have this belief. From that framing the government should have no authority whatsoever to take action against PredictIt: doing so is a gross violation of natural rights. To me this seems like an error comparable to restricting freedom of religion, detaining someone so as to prevent them from voting, or the burning of an intellectuals book and the jailing of them so as to prevent the spread of their ideas. It seems an abomination. What is the justification? Just that there was gambling or is there a deeper fundamental problem that I am missing? Gambling to me seems more fundamental to reality than breathing. Everyone engages in it all the time, but we just don't call it that when we think it might be a gambling category which is of benefit to society. If there is no justification - what paths can be pursued to permanently sunder the governments ability to take this sort of action in the future? I say all this with no sense of judgement for the CFTC; clearly this is within their mandate under reasonable interpretations. Rather, I think other mandates - more important ones - supersede theirs and should be restricting their authority.
- bequanna 4y ago
  The government has no problem with gambling or lotteries. They only have a problem when their percentage of the action isn’t big enough. An alternative theory is that this market was providing information that the current regime is looking to suppress: actual popularity of candidates, policies, etc. Any speech that violates the official narrative is deemed wrongthink and seems to be fair game for law enforcement/regulators.
  - JoshCole 4y ago
    > An alternative theory is that this market was providing information that the current regime is looking to suppress: actual popularity of candidates, policies, etc. I don't mean to suggest that this is the intent. I'm saying it seems to me that something worse than that is the fundamental consequence of the decision. Banning the mathematically rational discussion of politics is actually a bit more extreme than say murdering and burning the books of intellectuals; in terms of attacking truth it does so on a more fundamental level, it is like banning the use of addition as a method of counting - an attack on the very process by which things are known, not just a person. You aren't just murdering one person - this kills an entire category of rational agent; it isn't a ban on knowing a particular fact that is inconvenient. It disallows the seeking in a much more general way. To try and maybe get across the nature of the violation: this seems to me about as bad as the government declaring that the scientific method was no longer allowed to be used or that people were no longer allowed to have faith. For sure methods of arriving at the truth can be very dangerous, but I don't think it follows from that that the government ought to be allowed to prevent their use for that purpose. So I'm wondering what I'm missing - or whether there is actually an overstep of authority that ought to be reigned in.
Bostonian 4y ago
This is terrible. I wish things would go in the opposite direction, with the CFTC allowing futures exchanges such as the CME to trade presidential party election futures.
unethical_ban 4y ago
"Get money out of politics" also "It is a shame that a financial incentive to manpiulate elections or to vote for a candidate for any reason except the voter's confidence in that candidate got banned" I'm not saying I definitely want political bookies banned, but I don't immediately see how it is anything but a detriment to honest decision making in choosing how to respond to issues. Maybe I'll vote to take away some human rights if the election is close and I can make a few bucks?
- karlkeefer 4y ago
  Prediction markets have a built-in incentive for accuracy that's absent from broadcast news. It's useful to have an aggregate answer to things like "how likely is Russia to invade Ukraine" that is to some degree shielded from the normal filters of partisanship. Or from another angle: Changing your individual vote in an attempt to shift the outcome of an election is extraordinarily unlikely to actually make the difference, so prediction markets most likely punish people (with losses) who try to game it with their own votes. If you and a large group of people plan to do this, that will be priced into the market, preventing you from profiting very much.
- Dylan16807 4y ago
  I think these markets were a few orders of magnitude too small for the latter to happen.
caseyross 4y ago
From the official withdrawal letter [1]: > [Victoria University] has not operated its market in compliance with the terms of [the 2014 letter granting no-action relief]. Nowhere does the CFTC state exactly what the alleged violations where, so we can only speculate. It certainly lends support to the hypothesis that the no-action withdrawal is regulatory capture by a competing prediction market. [1]: (Forced PDF download) https://www.cftc.gov/csl/22-08/download https://www.cftc.gov/csl/22-08/download
frellus 4y ago
I don't understand why they can't just make them trades based on future political actors. Feels like that's what the futures market is in general - risk betting.
seaourfreed 4y ago
We need prediction markets. It is evil that government kills prediction market companies. Prediction markets are needed to OUT establishment politicians that are far worse that challengers. (For both sides of the partisan spectrum) It is evil that government kills prediction market companies.
unholiness 4y ago
Betting on PredictIt has been a side-hobby of mine for the last 5 years, in which time I turned my fun $10 deposit into (just) over $1000. For me, it's a satisfying way of interacting with the news, motivating clear-headedness and accuracy over simplicity and filter bubbles. The talk about "rational markets" in this thread is well-meaning, but I think it could better targeted toward BetFair and other uncapped foreign markets. PredictIt has a cap of $850 from any individual in any market, which means almost no market is dominated by "sharps" exploiting differences between prices and reality. Sure, PredictIt's prices are often more accurate than the average person's guess, but they still exhibit a lot of small and predictable biases: - "Yes" positions are more popular - Pro-Republican positions are more popular - Cheap, improbable positions are more popular - Positions confirming simple ideas are more popular - Positions traders wish were true are more popular - Things being discussed on the news are treated as more contentious than they are Ultimately, almost all of my 100x growth just boiled down to finding these biases and maximizing my expected log(return) with them in mind. I do believe PredictIt was good for discourse. Though it may have ultimately affected a small number of views, the "put-up-or-shut-up" mentality is much closer to the scientific method than media and its tendency to navel-gaze. The domain of PredictIt markets was small, but I often imagine a world which creates this kind of ecosystem for a broader array of scientific fields. For me, though, this is the end of the line. The 2020 races (with Georgia runoffs) risk being unresolved by the 2/15 deadline, and it's impossible to predict what PredictIt will do then, much less if markets will properly price that in. It's been a fun run, and I'm glad it lasted as long as it did.
- ummonk 4y ago
  The fees that PredictIt charges also make the market highly mispriced. E.g. you can't arbitrage two markets on PredictIt because PredictIt will take a cut of any profits you make in a particular market, without deducting any losses in other markets.
  - unholiness 4y ago
    This is true about arbitraging between markets on PredictIt, but I do think the impact of fees on market prices (and on ability to make money on PredictIt) was usually overstated. PredictIt has two fees: A 10% fee on winnings, and a 5% fee on withdrawals. The 10% fee on winnings is only on winnings. So when buying a share for 90¢, your $1 won will earn 99¢ and pay 1¢ in fees. This means in a market with multiple candidates, betting "No" on all of N candidates will always earn you $(N - 1) without fees. That's is a winning bet iff all the "No" shares add up to $(N - 1.1111). In practice, the bias toward "Yes" shares alone is strong enough that buying all "No" shares, even at current asking prices, usually cost between $1.07 and $1.10 less than $N. So, if you're only buying "No" shares in markets with multiple outcomes, the prices are set close to a point that entirely negates that 10% fee. And of course the 5% fee on withdrawals is only on withdrawals. If you send the money straight back into another trade over and over, the fee is diluted enough to be irrelevant to any individual trading decisions.
jrm4 4y ago
Okay crypto people. For better or worse, here's your use case.
- flaque 4y ago
  Here you go: https://polymarket.com https://polymarket.com
- gjs278 4y ago
- latchkey 4y ago
  Less about crypto and more about decentralization and web3. In hindsight, it was obvious.
robbrown451 4y ago
I wonder if some sort of cryptocoin/blockchain alternative could be created, that would be harder to shut down. It would probably have to be based on having an elected council (with an odd number of members) signing off on the outcome of a market. If people see a bias in their history (which of course should be public), they will factor that into their bids, hopefully discouraging people from getting on the council to make money on their own bids. And of course the council should be elected with some kind of ranked-choice/condorcet so you tend to elect centrists rather than extremists.
- junofan 4y ago
  Augur and Kleros might be worth checking out. You can find other neat designs just by trawling arxiv.
  - robbrown451 4y ago
    Cool! It isn't surprising that someone thought of it before me!
- chillacy 4y ago
  Look up Polymarket There are also no-money markets like Forecast and the traditional forecasting competitions like GJP and Metaculus
failTide 4y ago
Wow. I almost started working on a project 6 months ago based solely on the fact that PredictIt was able to get that no-action letter from the CFTC.
password4321 4y ago
Time for https://pennywagers.com https://pennywagers.com to add political betting! https://news.ycombinator.com/item?id=30162767&p=2#30163868 https://news.ycombinator.com/item?id=30162767&p=2#30163868
- wallawe 4y ago
  Thanks for the shout out, didn't expect to see this here! It's hard to find a good data source - getting the lines is easy, but the grading part is hard (or really expensive). Any ideas?
Consultant32452 4y ago
PredictIt provides useful information to the world, positive externalities. Lotteries are a tax on the poor and innumerate and the governments run them.
gbronner 4y ago
I'm mildly annoyed that I'll have to pay the 5%.
imustbeevil 4y ago
> When DMO issued the letter on October 29, 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 U.S. 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. > DMO has determined that Victoria University has not operated its market in compliance with the terms of the letter and as a result has withdrawn it. https://www.cftc.gov/PressRoom/PressReleases/8567-22 https://www.cftc.gov/PressRoom/PressReleases/8567-22 For the "other side". They got a waiver to operate an unregistered securities market, as a non-profit University-based organization. They allegedly did not operate it as they said they would, so they are losing their waiver. If companies want to offer these services, they are entirely within their American rights to do so legally.
elliekelly 4y ago
This headline is misleading. PredictIt was operating in reliance on a No Action Letter[1]. The CFTC has since withdrawn the No Action Letter. The CFTC _never_ granted “approval” and relying on a No Action Letter always involves the risk that the view of the staff/Commission will change. [1]https://en.wikipedia.org/wiki/No-action_letter https://en.wikipedia.org/wiki/No-action_letter

186 points by akelly 4y ago

This is a huge blow to political discourse. PredictIt has been operating since 2014 with the approval of the CFTC as the largest election betting platform in the US. Today they received notice from the CFTC instructing them to cease operations by February 15th without clear justification for the decision. One year ago, YC backed betting market Kalshi launched with CFTC approval. They employ a former commissioner of the CFTC as Chief Regulatory Officer, and two weeks ago applied for CFTC approval to have election markets. And half a year ago, the popular unapproved blockchain betting market Polymarket was fined and shut down in the US by the CFTC. Further reading: https://twitter.com/NathanpmYoung/status/1555387422510264321 https://twitter.com/NathanpmYoung/status/1555387422510264321 https://www.cftc.gov/csl/22-08/download https://www.cftc.gov/csl/22-08/download https://astralcodexten.substack.com/p/the-passage-of-polymarket https://astralcodexten.substack.com/p/the-passage-of-polymar...

belorn 4y ago
In term of political discourse it is/was a good source to verify the validity of some of the more up voted stuff on HN. One top comment a few years ago predicted that the US would abolish election and be a monarchy by 2020. An other that there would be a full scale nuclear third world war in 2019. There were one saying that the US would enter a new civil war by 2021. In each case I checked betting sites to see if such views held enough popular support, but alas I could not find any to bet against. If people who hold conspiracy theories put down money and lost, maybe that would do more to change how people think than any political debate ever could.
- pessimizer 4y ago
  As far as I can tell from hanging out on Predictit for years, it's actually pretty shit at predicting things. That some event isn't something that you can gamble on, or that a particular outcome of an event isn't an option until five minutes before it actually happens, doesn't tell you anything. > If people who hold conspiracy theories put down money and lost If people who say that the government claim on X is true had to put money behind it, we'd see a massive wealth transfer from smirking status quo guys to little groups of conspiracy theorists. Half the time (like for example the missile strike on that family of saints as we left Afghanistan), the government line has been disproved before the press release even gets out; easy money. edit: if anything, Predictit acts as a summary of current media coverage/sentiment.
  - bombcar 4y ago
    > edit: if anything, Predictit acts as a summary of current media coverage/sentiment. This is exactly it; you have some small percentage of people "putting their money where their mouth is" but most of it is people trying to second guess and game everyone else (you could reliably make money trading shares on the news cycle, for example).
  - pfisch 4y ago
    If you spent time on predictit you would know the conspiracy people aren't rational and lose all their money. They bet in ways that reflect their disjointed understanding of the world. Not understanding the odds of their bets in general, and getting wrecked on stupid, improbable maga bets about Hillary getting locked up. Conspiracy people tend to be ultra partisan and believe things with no real evidence beyond they want these things to be true. That doesn't work when they start betting actual money. There was tons of money to be made long after the 2020 election on whether or not trump would magically become president again.
    - aaaaaaaaata 4y ago
      Out of curiosity, how many "conspiracy people" do you have exposure to/hang out with?
      - pfisch 4y ago
        I have made well over 10k betting against them in absurd bets where the odds of trump becoming president months after the election were estimated by them to be much higher than any rational person would think them to be. I also spend a decent amount of time looking at qanon websites/forums/reading their insane chatter on twitter. What do you think the odds of Biden being a body double clone are? Many of them think the odds of this are well over 50%.
- r00fus 4y ago
  Problem with your idea (which is conceptually valid) is that you can buy and sell on Predictit well before the closure of the "market/event". So many people who agreed with a politician or idea (that some event would happen) would still sell early (at 90c/1$) because they could use those funds in other markets. Worse still - you have people who would pump & dump the market - pushing the contra position (Trump wins 2020) and post comments showing showing holdings supporting contra, and then dump after it gains a significant share. I've heard of some predictit users doing this same operation 5x or more on a single market (an iconic example: Iowa Dem Primary 2020). So it's all speculation.
- floe 4y ago
  Although it doesn't make sense to have prediction markets for truly catasclymic events -- anyone who believes nuclear war is imminent is gonna prefer to buy canned food over prediction market contracts.
- hackernewds 4y ago
  Not sure this is good veracity of truth. Most people also predicted Hillary Clinton would win. Given the nature of over/under there is incentives to bet on the incorrect side knowingly
jdmoreira 4y ago
I also have strong suspicions this is related to Kalshi somehow
ProjectArcturis 4y ago
Do you have a source on Kalshi applying to list election contracts? In general, I agree, looks like regulatory capture by Kalshi.
- akelly 4y ago
  https://kalshi-public-docs.s3.amazonaws.com/regulatory/notices/CONGRESS%20for%20posting.pdf https://kalshi-public-docs.s3.amazonaws.com/regulatory/notic...

ramesh31 4y ago

They were definitely operating in an extreme legal grey area. Without a doubt it's straight up gambling. Yet they issue you a normal 1099 at the end of the year. It felt really weird having to claim a "political consulting" business on my taxes instead of just claiming it as gambling income with a W-2G. Not sure how they were ever legally able to operate in the US honestly.

dustyleary 4y ago
> Without a doubt it's straight up gambling Not “without a doubt”. Gambling means a game of chance/luck. Court cases over poker, regardless of which way the decision goes, hinge on whether the Court is convinced that poker is a game of skill, rather than luck. Predictit definitely did not want to issue W-2G, because that is for gambling income, and their position is of course that their platform is not an illegal gambling service. I think that it’s pretty easy to argue that consistently winning money on a prediction market is a matter of skill. Just like consistently earning money on the stock market. Of course, both can be used for gambling. So if prediction markets are not allowed, why are day trading or stock futures allowed? A casual read of a few relevant subreddits will show that there are a lot of people “straight up gambling” with financial markets. It’s a real shame that prediction markets aren’t allowed to operate in the US. Markets (of any sort) are incredibly useful. Disallowing them because you can use them for gambling is throwing the baby out with the bath water.
- User23 4y ago
  > Gambling means a game of chance/luck. Court cases over poker, regardless of which way the decision goes, hinge on whether the Court is convinced that poker is a game of skill, rather than luck. I think it really just has to have an element of uncertainty. For example one can gamble on chess tournaments. I suppose one can broadly construe an element of "luck" if Magnus somehow botches a game, but it strikes me as something quite different from whether or not one's lottery numbers come up. As you say, poker is the archetypical example of a skill game with an element of chance. Backgammon is another good example. I would say darts is another example that falls further on the skill end. > So if prediction markets are not allowed, why are day trading or stock futures allowed? As noted in another comment on this submission, it appears one can greatly increase the chances of regulators approving an activity by having former regulators on staff. Needless to say traditional finance companies enthusiastically hire those people.

salawat 4y ago

Seems to me they've got things branded incorrectly. Don't make a prediction market. Make a PasteIt. Think about it, you're trying to get people to process and offer up unknown information, right? Focus on that. It's bounties for verifiable information. Not predicting, or a game of chance. You pay for information to be brought up that you would never have thought to look for. If you do it that way, you're completely sidestepping the issue of providing a gambling primitive. You're just incentivizing data collection and dumping. The outcome becomes secondary, the context generated maintains primacy, and I wager what markets are really interested in is looking at highly accurate predictors and trying to infer what channels of information they're privy to in order to expand data observation pipelines. Unless these "prediction markets" really are just some high brow word for gambling parlors. Then again, I always figured that was all futures and derivatives trading were, yet there is a staunch refusal to classify them as such.

Georgelemental 4y ago
In an anonymous pastebin, there is no incentive for you to provide info that is accurate and complete. Prediction markets give you an incentive to find the right answer.
- salawat 4y ago
  Doesn't have to be anonymous... Did I unintentionally stumble on a name that implied that?
  - Georgelemental 4y ago
    Non-anonymous makes you even less likely to get true insider info.

AccountAccount1 4y ago

The gambling angle is straight up dumb, why are they framing it that way? Aggregating information (however true) provides a net benefit in any endeavor, and there has to be a financial incentive to do information arbitrage, that's the whole point, because people would not even worry about it. The whole thing is that, the media now cannot say that elective x has a 65 approval rate (based on a survey of 6 coworkers) when on Predictit is at 10%.

usgroup 4y ago

This has happened many times before. Why do governments close prediction markets? What sort of problems do they cause?

mistermann 4y ago
It may be beneficial to the government that the organized practice of epistemology remains solely with the (trustworthy) media and The (approved) Experts. The internet is enough of a problem as it is for interfering with citizen's perceptions of what is true.
- intelVISA 4y ago
  Damn internet always making people think things.

JoshCole 4y ago

I know many people strongly believe in rational market theories. For these people this sort of betting site isn't just a betting site: it is the mechanism by which they engage in understanding politics and their primary means of political discourse. Beyond that, it is also an incentive for their own political engagement. They have several mathematical models that are strongly suggestive that they are right to have this belief. From that framing the government should have no authority whatsoever to take action against PredictIt: doing so is a gross violation of natural rights. To me this seems like an error comparable to restricting freedom of religion, detaining someone so as to prevent them from voting, or the burning of an intellectuals book and the jailing of them so as to prevent the spread of their ideas. It seems an abomination. What is the justification? Just that there was gambling or is there a deeper fundamental problem that I am missing? Gambling to me seems more fundamental to reality than breathing. Everyone engages in it all the time, but we just don't call it that when we think it might be a gambling category which is of benefit to society. If there is no justification - what paths can be pursued to permanently sunder the governments ability to take this sort of action in the future? I say all this with no sense of judgement for the CFTC; clearly this is within their mandate under reasonable interpretations. Rather, I think other mandates - more important ones - supersede theirs and should be restricting their authority.

bequanna 4y ago
The government has no problem with gambling or lotteries. They only have a problem when their percentage of the action isn’t big enough. An alternative theory is that this market was providing information that the current regime is looking to suppress: actual popularity of candidates, policies, etc. Any speech that violates the official narrative is deemed wrongthink and seems to be fair game for law enforcement/regulators.
- JoshCole 4y ago
  > An alternative theory is that this market was providing information that the current regime is looking to suppress: actual popularity of candidates, policies, etc. I don't mean to suggest that this is the intent. I'm saying it seems to me that something worse than that is the fundamental consequence of the decision. Banning the mathematically rational discussion of politics is actually a bit more extreme than say murdering and burning the books of intellectuals; in terms of attacking truth it does so on a more fundamental level, it is like banning the use of addition as a method of counting - an attack on the very process by which things are known, not just a person. You aren't just murdering one person - this kills an entire category of rational agent; it isn't a ban on knowing a particular fact that is inconvenient. It disallows the seeking in a much more general way. To try and maybe get across the nature of the violation: this seems to me about as bad as the government declaring that the scientific method was no longer allowed to be used or that people were no longer allowed to have faith. For sure methods of arriving at the truth can be very dangerous, but I don't think it follows from that that the government ought to be allowed to prevent their use for that purpose. So I'm wondering what I'm missing - or whether there is actually an overstep of authority that ought to be reigned in.

Bostonian 4y ago

This is terrible. I wish things would go in the opposite direction, with the CFTC allowing futures exchanges such as the CME to trade presidential party election futures.

unethical_ban 4y ago

"Get money out of politics" also "It is a shame that a financial incentive to manpiulate elections or to vote for a candidate for any reason except the voter's confidence in that candidate got banned" I'm not saying I definitely want political bookies banned, but I don't immediately see how it is anything but a detriment to honest decision making in choosing how to respond to issues. Maybe I'll vote to take away some human rights if the election is close and I can make a few bucks?

karlkeefer 4y ago
Prediction markets have a built-in incentive for accuracy that's absent from broadcast news. It's useful to have an aggregate answer to things like "how likely is Russia to invade Ukraine" that is to some degree shielded from the normal filters of partisanship. Or from another angle: Changing your individual vote in an attempt to shift the outcome of an election is extraordinarily unlikely to actually make the difference, so prediction markets most likely punish people (with losses) who try to game it with their own votes. If you and a large group of people plan to do this, that will be priced into the market, preventing you from profiting very much.
Dylan16807 4y ago
I think these markets were a few orders of magnitude too small for the latter to happen.

caseyross 4y ago

From the official withdrawal letter [1]: > [Victoria University] has not operated its market in compliance with the terms of [the 2014 letter granting no-action relief]. Nowhere does the CFTC state exactly what the alleged violations where, so we can only speculate. It certainly lends support to the hypothesis that the no-action withdrawal is regulatory capture by a competing prediction market. [1]: (Forced PDF download) https://www.cftc.gov/csl/22-08/download https://www.cftc.gov/csl/22-08/download

frellus 4y ago

I don't understand why they can't just make them trades based on future political actors. Feels like that's what the futures market is in general - risk betting.

seaourfreed 4y ago

We need prediction markets. It is evil that government kills prediction market companies. Prediction markets are needed to OUT establishment politicians that are far worse that challengers. (For both sides of the partisan spectrum) It is evil that government kills prediction market companies.

unholiness 4y ago

Betting on PredictIt has been a side-hobby of mine for the last 5 years, in which time I turned my fun $10 deposit into (just) over $1000. For me, it's a satisfying way of interacting with the news, motivating clear-headedness and accuracy over simplicity and filter bubbles. The talk about "rational markets" in this thread is well-meaning, but I think it could better targeted toward BetFair and other uncapped foreign markets. PredictIt has a cap of $850 from any individual in any market, which means almost no market is dominated by "sharps" exploiting differences between prices and reality. Sure, PredictIt's prices are often more accurate than the average person's guess, but they still exhibit a lot of small and predictable biases: - "Yes" positions are more popular - Pro-Republican positions are more popular - Cheap, improbable positions are more popular - Positions confirming simple ideas are more popular - Positions traders wish were true are more popular - Things being discussed on the news are treated as more contentious than they are Ultimately, almost all of my 100x growth just boiled down to finding these biases and maximizing my expected log(return) with them in mind. I do believe PredictIt was good for discourse. Though it may have ultimately affected a small number of views, the "put-up-or-shut-up" mentality is much closer to the scientific method than media and its tendency to navel-gaze. The domain of PredictIt markets was small, but I often imagine a world which creates this kind of ecosystem for a broader array of scientific fields. For me, though, this is the end of the line. The 2020 races (with Georgia runoffs) risk being unresolved by the 2/15 deadline, and it's impossible to predict what PredictIt will do then, much less if markets will properly price that in. It's been a fun run, and I'm glad it lasted as long as it did.

ummonk 4y ago
The fees that PredictIt charges also make the market highly mispriced. E.g. you can't arbitrage two markets on PredictIt because PredictIt will take a cut of any profits you make in a particular market, without deducting any losses in other markets.
- unholiness 4y ago
  This is true about arbitraging between markets on PredictIt, but I do think the impact of fees on market prices (and on ability to make money on PredictIt) was usually overstated. PredictIt has two fees: A 10% fee on winnings, and a 5% fee on withdrawals. The 10% fee on winnings is only on winnings. So when buying a share for 90¢, your $1 won will earn 99¢ and pay 1¢ in fees. This means in a market with multiple candidates, betting "No" on all of N candidates will always earn you $(N - 1) without fees. That's is a winning bet iff all the "No" shares add up to $(N - 1.1111). In practice, the bias toward "Yes" shares alone is strong enough that buying all "No" shares, even at current asking prices, usually cost between $1.07 and $1.10 less than $N. So, if you're only buying "No" shares in markets with multiple outcomes, the prices are set close to a point that entirely negates that 10% fee. And of course the 5% fee on withdrawals is only on withdrawals. If you send the money straight back into another trade over and over, the fee is diluted enough to be irrelevant to any individual trading decisions.

jrm4 4y ago

Okay crypto people. For better or worse, here's your use case.

flaque 4y ago
Here you go: https://polymarket.com https://polymarket.com
gjs278 4y ago
latchkey 4y ago
Less about crypto and more about decentralization and web3. In hindsight, it was obvious.

robbrown451 4y ago

I wonder if some sort of cryptocoin/blockchain alternative could be created, that would be harder to shut down. It would probably have to be based on having an elected council (with an odd number of members) signing off on the outcome of a market. If people see a bias in their history (which of course should be public), they will factor that into their bids, hopefully discouraging people from getting on the council to make money on their own bids. And of course the council should be elected with some kind of ranked-choice/condorcet so you tend to elect centrists rather than extremists.

junofan 4y ago
Augur and Kleros might be worth checking out. You can find other neat designs just by trawling arxiv.
- robbrown451 4y ago
  Cool! It isn't surprising that someone thought of it before me!
chillacy 4y ago
Look up Polymarket There are also no-money markets like Forecast and the traditional forecasting competitions like GJP and Metaculus

failTide 4y ago

Wow. I almost started working on a project 6 months ago based solely on the fact that PredictIt was able to get that no-action letter from the CFTC.

password4321 4y ago

Time for https://pennywagers.com https://pennywagers.com to add political betting! https://news.ycombinator.com/item?id=30162767&p=2#30163868 https://news.ycombinator.com/item?id=30162767&p=2#30163868

wallawe 4y ago
Thanks for the shout out, didn't expect to see this here! It's hard to find a good data source - getting the lines is easy, but the grading part is hard (or really expensive). Any ideas?

Consultant32452 4y ago

PredictIt provides useful information to the world, positive externalities. Lotteries are a tax on the poor and innumerate and the governments run them.

gbronner 4y ago

I'm mildly annoyed that I'll have to pay the 5%.

imustbeevil 4y ago

> When DMO issued the letter on October 29, 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 U.S. 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. > DMO has determined that Victoria University has not operated its market in compliance with the terms of the letter and as a result has withdrawn it. https://www.cftc.gov/PressRoom/PressReleases/8567-22 https://www.cftc.gov/PressRoom/PressReleases/8567-22 For the "other side". They got a waiver to operate an unregistered securities market, as a non-profit University-based organization. They allegedly did not operate it as they said they would, so they are losing their waiver. If companies want to offer these services, they are entirely within their American rights to do so legally.

elliekelly 4y ago

This headline is misleading. PredictIt was operating in reliance on a No Action Letter[1]. The CFTC has since withdrawn the No Action Letter. The CFTC _never_ granted “approval” and relying on a No Action Letter always involves the risk that the view of the staff/Commission will change. [1]https://en.wikipedia.org/wiki/No-action_letter https://en.wikipedia.org/wiki/No-action_letter