Traders Outraged as PredictIt Platform Crashes on US Election Night

  • Four-hour downtime occurred Tuesday night, reportedly followed by another on Wednesday
  • Traders missed out on pivotal market moves as an unlikely Trump win became a possibility
  • Americans can legally use PredictIt as the politics platform has a no-action letter from the CFTC
  • Users buy shares of who they think will win, with the price reflecting the current chance of victory
  • Sportsbooks received massive sums of bets during the course of the US presidential election
angry man speaks on a cellphone while sitting at a desk in front of a laptop
PredictIt users were unable to trade at a pivotal time during US presidential election night when the platform crashed for four hours. [Image: Shutterstock.com]

A busy time for politics traders

The PredictIt politics trading platform crashed on the night of the US presidential election for about four hours, leaving many users enraged. PredictIt tweeted about the outage at about 8:30pm ET on November 3:

Unhappy traders replied to the tweet with a wide-ranging set of responses, including some that threatened potential legal action.

The outcome of the election was looking very uncertain at the time. Pre-election, many experts believed that Democratic opponent Joe Biden would be an easy winner over current President Donald Trump. With Trump winning some important states he won last election, but where Biden was thought to have a slight edge this time, the odds started to turn.

Outage led to missed opportunities

Across betting platforms worldwide, Trump flipped from being the underdog to becoming the favorite to be the next president around the time of the outage. The current president’s share price on PredictIt went from $0.40 to $0.61 during this period, while Biden’s price dropped to $0.55 from $0.65.

traders unable to take advantage of the price changes before Biden reclaimed the lead

The platform site downtime during what marked a pivotal shift in the political landscape left traders unable to take advantage of the price changes before Biden reclaimed the lead. By the time PredictIt was back up and running, Biden’s share price was up to $0.76 and Trump’s was as low as $0.31.

To add to the unhappiness of traders, another outage reportedly occurred Wednesday afternoon. 

Is PredictIt legal in the US?

Americans cannot legally place bets on political events, even in areas where sports betting is legal. However, the PredictIt platform can legally operate in the country thanks to the ‘no-action’ relief letter it has from the US Commodity Futures Trading Commission (CFTC).

The independent agency CFTC is part of the federal government and the regulator for the derivatives market. PredictIt’s no-action letter allows it to operate online trading markets on political outcomes for academic purposes.

PredictIt has similarities to the stock market, as users buy shares that relate to the outcome of an event, such as the US presidential election. The shares have a price of between $0.01 and $0.99. If Joe Biden won the election, traders holding shares for the former US vice president would receive a payout of $1 per share, minus fees. Those who bought shares for Donald Trump would get nothing.

PredictIt users can trade shares back and forth, with the prices being based on the current probability of a candidate winning. The owner and operator of the platform is New Zealand’s Victoria University of Wellington.

US election a massive betting event

Sportsbooks have been taking in many bets for the 2020 US election. Betfair recently estimated that it will have handled over £400m ($523m) in wagers by the end of the election, a feat it has now achieved. The biggest bet on the Betfair platform was a £1m ($1.3m) stake on Joe Biden. A former British banker also reportedly bet $5m on a Donald Trump win with sportsbooks in Curacao.

While the election outcome is not yet official, some sportsbooks are already starting to pay out on a Joe Biden victory. Australian operator Sportsbet announced Thursday that it has forked out AU$23m (US$16.6m) to bettors who backed a Biden win.