Comment Text:
I am a concerned citizen who has actively and profitably traded political event contracts on PredictIt since the 2020 US elections. I write to speak in favor of allowing legal and well-regulated political event contracts in onshore US designated contract markets, as well as to support the ongoing existence of PredictIt unless and until it is either displaced by or itself evolves into a designated contract market.
First, on the substance of whether betting on political events constitutes “gaming”, I feel strongly, as do my tax returns in the past few years, that success in trading political event contracts is a skilled endeavor far more comparable to trading other financial markets than “gaming”. This distinction – whether a betting outcome is primarily determined by skill or chance, is the most common distinction used when judging which novel activities constitute “gaming” across our various state and federal laws, and important because many other ways to draw that line beg the question of whether nearly all market trading is simply “gaming” that we subject to a double-standard simply because we culturally associate some wagering activities as occurring in gambling halls and others as occurring in trading pits.
We can put aside the philosophical question on the larger nature of what constitutes “gaming”, however, by considering political event contracts are pertinently unlike wagering on sporting events conventionally treated as gaming, because political events have significant implications on our lives beyond transient entertainment. As the saying goes, “elections have consequences”. Their outcomes matter beyond the events themselves and have implications relevant to business, policymaking, and how our citizens plan for their personal futures. It is straightforward to imagine them useful as a tool for hedging risk analogous to commodity futures exactly because political events deeply affect our lives and occupations.
Frankly, the notion that political events have less direct impact on the economic landscape and thereby less demand for hedging against economic risks than events currently accepted as tradable such as the weather, strikes me as intuitively false, contrary to everything I’ve been taught of the benefits to living in a free society where the people choose their leaders, and just an incredibly pessimistic and nihilistic view of how much our political choices as citizens at the ballot box actually matter to policy outcomes in America.
Second, I’d like to speak up for the value of what currently exists in America today primarily in the form of PredictIt and to highlight that we are not choosing whether to have political event contracts in the world, but whether we have them housed onshore within the purview of US regulators. Allowing them onshore means we get the opportunity to steer the benefits of market data on our politics to be usefully available for the public good and it allows us to regulate straightforward barriers to guard against perverse incentives.
PredictIt, particularly in its form as of the 2020 election cycle before the attempted withdrawal of the no-action decision under which it currently operates, has proven both that political event contracts can be traded in a manner which, through limits to size of these contracts, generate market data which informs the public as to the actual state of our elections in near real-time while also containing risks from perverse incentives. The particular limits on PredictIt, while arbitrary and deserving of review, have in some ways increased its value as a natural experiment. Restriction often breeds creativity, and I point to one such side-effect: the low contract limitations on PredictIt led it to meet growing demand by creating many parallel markets on substantively very similar but not identical political events, which produced granular public datasets about US politics that otherwise could not have existed.
I feel that the recent actions that have driven Polymarket offshore provide a cautionary tale as to what will happen if we do not allow political event contracts within a well-regulated, US-based framework. In the 2024 election cycle, most of the liquidity to trade these events now exists outside of direct US jurisdiction. Any fear we may have about the adverse impacts of political event markets is likely to be realized if we stand by and allow these markets to grow to their viable economic scale offshore where we cannot effectively and in a timely manner expect to hold them to any standards.
Finally, one last point I would like to close on, which I don’t expect many other commenters would have the perspective to say: nothing in my life has made me better informed as a US citizen about the practical mechanics of our political system, including relatively granular aspects of how we conduct our elections, count our votes, determine viable nominees for cabinet positions, and develop consensus on legislation in our legislative branch than the active research I have had to do to participate and succeed at trading political event contracts. Apropos, this is the first time I’ve ever chosen to learn about and choose to participate in a proposed regulatory rulemaking action by publicly commenting in my capacity as a citizen.
