A new website, PredictIt, lets users bet real money on predicting political and financial events. There are “shares” of either “yes” or “no” in important political or world events. Will President Obama close Guantanamo Bay? Will the Nigerian president be reelected?
There’s a chance to make a lot of money if you’re right. For example, right now, I could buy a “yes” share that Jeb Bush will be the Republican presidential nominee for 46 cents. If he does in fact become the nominee, I win $1 – for a profit of 54 cents. Otherwise, I get nothing, losing my investment. Of course, until the nominee is announced, I can sell my shares to other users who are still holding out hope and take home a nice profit.
The inspiration for PredictIt came from “academic pioneers in the ‘wisdom of crowds’ and predictions market fields,” according to John Phillips, the CEO of Aristotle, a DC-based political consulting firm that provided the technical input for PredictIt.
Similar attempts at providing political betting opportunities for Americans have been met with legal challenges. The well-known InTrade closed to US customers in 2012 due to pressure from the Commodity Futures Trading Commission (CFTC).
PredictIt is different, said Phillips. “Every step of the way, and by design, the team structured the approach to meet existing legal requirements.” In October, the CFTC issued a no-action letter to allow the operation of the PredictIt market, in effect preventing it from suffering the same fate as InTrade. The PredictIt market is run by Victoria University in Wellington, New Zealand, as a non-profit project, and the CFTC believes PredictIt maintains an “educational public interest purpose.”
Though PredictIt doesn’t disclose how many people have made predictions so far, Phillips said liquidity was achieved almost immediately. “At any time of the day or night, there are buyers and sellers of shares on every PredictIt question at the site,” he said.
Experts say that these prediction markets are often more accurate than polls, simply because people have a real financial stake in the outcome. “Polls say who you’re going to vote for. Markets say who you think is going to win,” Justin Wolfers, an economics professor on leave from the University of Michigan, told the Washington Post.
The site offers an interesting way to “put your money where your mouth is,” said Phillips. And besides that? “PredictIt is really, really fun.”