INSIGHT UNITED STATES


Due to the increasing popularity of the activity they now find themselves in the spotlight and in the case of PredictIt, based in New


Zealand, face closure. In addition New York based Kalshi, the first federally regulated exchange


marketplace for futures trading,


wants to offer trading on the outcome of the next US election, putting it on a


potential collision course with regulators.


developed the IEM to be an Internet-based teaching and research tool and allows students to invest real money ($5.00- $500.00) and to trade in a variety of contracts.


By design, the Victoria University of Wellington’s model bears many close similarities to the IEM model. As is the case with the IEM since 2014 it has operated under an agreement with the Wall Street’s top derivatives regulator Commodity Futures Trading Commission (CFTC) that allows it to function for educational purposes. In 2014 the CFTC published a “no action letter” which underlined requirements and restrictions for the site. Amongst the CFTC’s conditions were limitations on any contract to 5,000 traders and an $850 investment per trade.


As is the case with the IEM, PredictIt allows users to buy and sell political futures and uses the results from its market as teaching tools in its courses on statistical analysis, market theory, and trader psychology. It makes its data available to members of the academic community at no cost.


However, it is not offering any new markets for the time being since the CFTC withdrew its permission


to operate. Te site has become increasingly mainstream with, according to some reports, tens of thousands of regular users trading on a multiple number of outcomes daily. According to other estimates the site has dealt with as many as 110 million contracts since the 2018 election cycle alone. Te CFTC did not specify why it had withdrawn its permission but did say that it had failed to comply with market rules.


PredictIt will continue operating in existing markets, trading through till February 15, 2023 unless the CFTC reverses its decision. PredictIt sued the regulator over its decision to cancel its no-action letter. It has asked the CFTC to justify its decision and in October PredictIt traders, academic users and market technology partner Aristotle filed a preliminary injunction against the CFTC for the purpose of allowing continued trading in existing PredictIt markets.


KALSHI


Meanwhile, Kalshi is pushing federal regulators to open up the election futures betting market. In November 2020, Kalshi became the first federally regulated exchange marketplace for futures trading. It allows trades on


WIRE / PULSE / INSIGHT / REPORTS P69


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