I can’t watch a basketball game on TV without seeing ads urging me to place a bet on one app or another.
I can’t walk down the street in New York City without seeing ads about the latest lottery jackpot.
And when I sit at my desk in the office, I spend hours studying another type of betting — trading in financial markets, where you can place wagers on companies, bonds, commodities and derivatives of all descriptions.
Yet the most consequential betting of all — wagers on elections in the United States — may soon be shut down by regulators.
The Commodity Futures Trading Commission has ordered a ban on such betting on the financial exchanges known as prediction markets, where it’s possible to make wagers on who will win the 2024 presidential election and on a host of other matters. And the commission’s proposed new rule would give it the power to block trading on a broad range of other subjects.
Even so, the prediction markets, which allow people to place bets on the outcome of a wide range of events, including American elections, are fighting back in the courts. And despite the regulatory crackdown, many markets are open and running.
I’ve used prediction markets for years — never for trading but as a source of information gleaned from prices that represent the collective wisdom of thousands of people. All market pricing needs to be analyzed with a heavy dose of skepticism, of course, yet these markets are a useful adjunct to polls, economic and political models and traditional reporting, especially in a fraught election year like this one.
“Prediction markets on elections and other economically meaningful events have much greater social utility than essentially every other form of gambling that is currently legal,” said Eric Zitzewitz, a Dartmouth economist who has studied these markets extensively. “We learn nothing from a crap game, and very close to nothing that’s economically interesting from sports betting. But having a market price the odds of economically meaningful political outcomes is extremely valuable to those who are affected by them.”…