Opinion | Why don’t Biden’s regulators want you betting on the 2024 election? – The Washington Post

As the 2022 midterm elections approach, the liberal polling bias of 2020 still casts a shadow over American politics. In the biggest miss in presidential polling since 1980, Joe Biden won by about four points less than predicted. The distorted expectations may have helped Donald Trump undermine trust in the results.

There was one source that more accurately reflected political reality in the run-up to the last election: betting markets. Online bookmakers can generate horse-race probabilities by selling contracts tied to election outcomes. PredictIt, a nonprofit exchange that limits speculation to $850 per event, is the most accessible site for Americans. It captured GOP strength in key states that almost all mainstream pollsters missed.

But if the Commodity Futures Trading Commission gets its way, the 2020 presidential election will be PredictIt’s last. In August, the CFTC sent a letter to Victoria University in New Zealand, which operates PredictIt as a research project, ordering the market to shut down by a February 2023 deadline.

PredictIt is now challenging the CFTC order in federal court. The case involves administrative law, but there are deeper political stakes in the background. The elimination of PredictIt would force voters and the news media to rely more on polling to set election expectations, inflating the authority of pundits and deflating the wisdom of crowds.

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The CFTC in 2014 gave PredictIt permission to operate as a spontaneous political betting market, provided that it respect certain limits on fees, advertising, trading volume and content. The commission’s two-page letter shutting down PredictIt declares that the site is not “in compliance with the terms” of the authorization. In an email on Sept. 1, a CFTC spokesman told me that the nature of PredictIt’s noncompliance “remains confidential within the commission.”

Guest Opinion: We made thousands on this website. But we’re still happy it’s shutting down.

The spokesman said that “the specifics were outlined” to Victoria University, but the lawsuit filed by PredictIt, academics and traders on Sept. 9 tells a different story. It charges that the CFTC “took this step with no reasoned explanation for its decision, no explication of facts that would support its decision, no transition plan for addressing scores of existing contracts held by more than ten thousand traders, and no consideration of any alternatives to the chaotic, disruptive, and economically damaging wind-down of the Market its decision forces.”

The lawsuit asks a federal court in Texas to block the CFTC from shutting down PredictIt. The plaintiffs acknowledge that CFTC staff members suggested “in one oral discussion” that the commission might disapprove of PredictIt offering contracts on political events other than elections, such as the likelihood of particular legislation passing.

Yet PredictIt insists that such markets are consistent with “the text, context, and history” of the 2014 authorization “and extensive subsequent communications with CFTC staff.” Even if the current CFTC considers certain PredictIt markets to be out of bounds, it’s unclear why the regulators would order the liquidation of all contracts, including active bets on the 2024 presidential election (which currently reflect a 55 percent chance that a Republican will win).

The CFTC will have a chance to elaborate on its decision-making in response to the litigation, but it’s fair to ask whether the bureaucratic impulse toward centralization and conformity is at play. Just as Democrats have pressured social media sites to tighten control on what they see as misinformation, perhaps the Biden administration sees PredictIt’s lightly regulated public betting markets as unscientific and prone to mislead.

But gathering information about the country’s political mood helps both parties and the media allocate resources and respond to voter priorities more efficiently. The use of political betting markets for this purpose is even older than modern polling. One academic review of Wall Street betting data from 1884 to 1940 found that in presidential elections with decisive outcomes, “the mid-October betting favorite won 11 times” while “the underdog won only once.”

Polling came to supplant markets as the dominant tool for forecasting elections in the 20th century. But even as pollsters in the 21st century are armed with increasingly powerful computers, their predictive abilities might have hit a limit as new forms of communication change social mores and make a representative sample harder to reach.

Just as top-down control of the media and political parties is weakening, so pundits might be losing their monopoly on political prognostication. Instead of trying to shore up collapsing monopolies, the United States’ political institutions need to adapt to a more decentralized world.

Markets can be prone to irrational exuberance — but so can elite consensus, which, unlike the market, imposes no cost on failure. A successful regulatory clampdown on betting markets such as PredictIt would damage trust in the political establishment, weaken an important check on partisan confirmation bias and accelerate America’s loss of a shared political reality.


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