Aug 16, 2022
In 2014, Victoria University in New Zealand struck a deal with the Commodity Futures Trading Commission, the agency that regulates some markets in the US. CFTC would let Victoria set up a prediction market - at the time a relatively new idea - for research purposes only. Their no-action letter placed strict limits on Victoria’s project:
The market would be run by the university and not-for profit. It would charge only enough fees to cover operations.
Questions would be limited to 5,000 traders each, who could bet up to $850 per question. They would be on politics and economics only.
They would do the usual know-your-customer process and take steps to avoid their traders try to meddle in world events.
Regulatory approval in hand, Victoria’s market - PredictIt - became the top prediction market in the US, beloved by a community of over a hundred thousand traders - many of whom exchanged barbs at each other in its raucous and unmoderated comment section. PredictIt estimates were featured in the New York Times, Washington Post, and 538. Some of my best (and worst) memories are about following election results in real-time by watching the relevant PredictIt markets, which usually updated faster than any single other media site.
On August 4, the CFTC reversed itself, saying the PredictIt had “not operated its market in compliance with the terms of the letter” and that it had to shut down by February.