A decision on the future of Victoria University’s political betting site PredictIt remains in the balance as the Fifth Circuit court agrees to allow it to keep trading for a bit longer.  

PredictIt is a predictions market and research project from Victoria University that was set up in 2014 in order to collect data on the accuracy and functioning of prediction markets. 

NZ-run political betting site to shut after rule breaches
Victoria University grilled by US regulator over political predictions site

It operates out of the United States and is run by a company called Aristotle International – a political research and data company – but is supervised by the university.  

Users (who must be United States citizens or residents) can buy shares on the outcome of a future event, for example the outcome of the 2024 US presidential election, with the ‘winning’ option paying out at $1. 

Until August 2022 it operated outside of US regulation via an exemption that it was a not-for-profit research and academic entity, rather than a traditional financial market. 

However, in August the Commodity Futures Trading Commission reneged on that arrangement, alleging the platform had not operated under the agreed terms – although it did not specify exactly what the university had done wrong.

It told the organisation it had to wind down and close its operations by February 2023.  

A group of PredictIt users, including Aristotle, but not Victoria University itself, have been challenging that decision in the US courts ever since. 

This week the Fifth Circuit appeals court found earlier attempts by the PredictIt users to get an injunction against the regulator’s demands should have been dealt with earlier and agreed with them that in the meantime the organisation had suffered harm. 

An injunction was finally granted in January just 21 days before it was due to shut down.  

The court recognised the impact of the uncertainty and agreed research information had likely been compromised.

“As traders have attempted to salvage their investments due to a looming and impending shutdown order, academics have had their research compromised by the trading irregularities that corrupted the integrity of their data.  

“Finally, PredictIt’s operators have been saddled with heavy compliance costs given the market’s closure.” 

At the end of 2022 around 2000 traders withdrew their funds and closed their accounts.

It went on to say it would be difficult to rectify the damage.  

“Some of these harms, such as the academic value of accurate data, would be difficult to restore with monetary damages.” 

Victoria University research deputy vice-chancellor Margaret Hyland said the legal decision was still being considered. 

“Victoria University of Wellington is aware of the legal opinion issued by the United States Court of Appeals for the Fifth Circuit. We are considering its implications and seeking legal advice and have no comment to make at this stage.” 

Following the initial notice to terminate operations the Commodity Futures Trading Commission gave more detail on the supposed breaches, including that Victoria University ceded operational control to Aristotle, which was not agreed to, and that it was making money off the site.  

There are also claims the types of contracts available on the site go beyond what was agreed to – such as bets on how many tweets Donald Trump would post across the course of a week, and whether federal charges would be confirmed against Hunter Biden, son of US President Joe Biden. 

Hyland previously told Newsroom the university strongly disagreed with the version of events put forward by the commission.  

“The university’s goal in relation to the PredictIt platform has been purely to support its development as a research and educational tool for the international research community of which we are a part.” 

Aristotle chief executive and PredictIt co-founder John Phillips said it was a victory. 

“This is a sweeping victory for prediction markets like PredictIt and those who find value in the insights they provide. One of the highest courts in the country agrees that in 2014 PredictIt was issued a license to operate, and the CFTC’s attempts to take that away were unjustified.”

The case has now been punted back to a lower court to dissect the allegations, but it is unclear how long that will take and what resource Victoria University will be required to stump up. 

It’s a win for the site, in that it can continue to operate until the court action is finalised, but the fallout as to what it means for the quality of evidence gathered by the university during this time remains to be seen.  

Emma Hatton is a business reporter based in Wellington.

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