There's a 'stock market for politics' where users can make money on Washington's chaos

  • PredictIt is a “stock market for politics” where users can make or lose money playing on the goings-on in Washington.
  • The die-hard users will often reach out to political journalists asking for tips or inside information.

WASHINGTON – If you have ever had money riding on a cloture vote, it is likely that you were playing the “stock market for politics” called PredictIt, a New Zealand-based prediction market where patrons can make money on the news of the day.

PredictIt has an office just a few blocks east of the US Capitol Building in Washington on Pennsylvania Avenue. It has several televisions in the window running the gambit of cable news channels, and it looks like an off-track betting shack with a political twist.

While their office is in Washington, PredictIt is fuelled by Victoria University of Wellington, New Zealand. The US Commodity Futures Trading Commission’s Division of Market Oversight gave Victoria the go-ahead in 2014, suggesting their model was consistent with their stated mission to conduct research.

“The University’s main objective for its event contracts market is to determine whether it can aggregate information and predict outcomes of certain events more accurately than through alternative means, such as public opinion polling,” the CFTC said in a statement. “The University plans to use the results from its market as teaching tools in its courses on statistical analysis, market theory, and trader psychology, and as supporting data for research papers and analyses.”

PredictIt essentially functions similar to a stock market. Users can purchase shares of an outcome, like buying “Yes” or “No” shares of whether or not the Farm Bill will pass by June 30. The price fluctuates with the changing odds, allowing users to gain money by playing the market well enough.

PredictIt collects a 10% fee on all shares cashed in higher than their original price. The investments that can be made into a single contract are capped at $US850.

Topics for users to play include very wonky subjects like “Will the Federal Reserve maintain its language on 12-month inflation expectations in June statement?” to more political wagers such as whether or not Nikki Haley will still be ambassador to the United Nations at the end of the month. There is also a category dedicated to investigations, including the odds of criminal charges being being levied against political figures like Hillary Clinton and Trump lawyer Michael Cohen by certain fixed dates.

PredictIt is expanding, too. For the upcoming June 12 primaries in various states, PredictIt will begin experimenting with tournament structures, where groups and individuals will be able to compete for accuracy in the primary races.

Who uses PredictIt?

The average PredictIt user is young, male, and relatively affluent from major US cities like New York and San Francisco.

“There is most definitely a loyal base,” PredictIt spokesman Will Jennings told Business Insider in an interview. “There are traders I’ve spoken to that – we opened late 2014 – they have been with the site since then. So there are certainly die hards who love it and then a kind of more general crowd.”

But Washington politicos are not common users, according to Jennings. PredictIt players are typically working in finance and other analysis and data-heavy industries.

The gamblers who regularly play PredictIt will often reach out to seasoned political reporters asking for some kind of inside scoop. Whether it is whip counts on crucial votes or incoming shakeups at the White House, any information can help.

But PredictIt sees most of its gains as political interest heats up, with high-stakes elections driving increases in new users who play more frequently. The traders have to know their subjects well, because it involves so much risk.

“It’s a seasonal business to some degree and we have markets year round,” Jennings added. “But a year like this with the midterms, we start to really get more momentum when average user is in Montana or Idaho. That’s when generally our crowd grows in big election years like this.”

And the way Washington has been turned on its head in the past two years has driven more engagement.

“The traders are following political risk in real time – it’s obviously been a more interesting couple years in politics,” Jennings said.

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