Betting on a Trump win or a North Korea H-bomb: a predictions site gains traction

NEW YORK/WELLINGTON Erik Duhaime is a passive stock market investor, but he isn’t afraid to short Donald Trump or go long on Hillary Clinton.

The 28-year-old from Cambridge, Massachusetts, trades on PredictIt, an online political stock market that allows users to wager small amounts of money on “yes” or “no” predictions about whether an event will occur. That includes who will win the U.S. presidential election in November.

“This is probably one of the ways I restrain myself from being active in the stock market,” said Duhaime, a PhD student at Massachusetts Institute of Technology Sloan School of Management, who checks the site a few times a week for fun.

PredictIt, which was launched in 2014, now has more than 30,000 traders registered, up from 19,000 at the end of 2015, and has received shout-outs from pundits and presidential campaign advisors alike. Users must be U.S. residents and registered voters.

PredictIt says it is not like an online gambling site because it mainly exists to supply its data to universities for academic research, one of the main reasons the U.S. Commodity Futures Trading Commission allows it to operate legally, according to a letter issued by the regulator in 2014. It is jointly run by Victoria University in Wellington, New Zealand, and a Washington-based political consulting firm Aristotle International Inc.

Unlike mainstream financial markets, bets are not big: The CFTC caps each participant’s position at $850 per market, and the average deposit when people sign up is just $100.

The regulator hasn’t been as friendly to such betting sites in the past. In 2012, the CFTC filed a civil complaint against the now defunct Intrade for violating a ban on off-exchange options trading. The Ireland-based market also allowed people to wager money on “yes” or “no” questions, but it wasn’t tied to an academic institution and didn’t have a cap on the maximum amount that could be traded.