Astral Codex Ten

CFTC

35 min read

CFTC

Article

CFTC is a recurring organization in the Astral Codex Ten archive, appearing 18 times across 18 issues between February 07, 2022 and November 07, 2024. The archive places it in contexts such as “The CFTC seemed angriest about the “you can only access contracts through the Polymarket website” part of this”; “begging the CFTC to legalize prediction markets; the CFTC refused”; “the CFTC is too conservative”. It most often appears alongside Kalshi, Metaculus, Manifold.

Metadata

  • Category: Organizations
  • Mention count: 18
  • Issue count: 18
  • First seen: February 07, 2022
  • Last seen: November 07, 2024

Appears In

Source Context

Recovered passages from the original issue text. When the raw archive preserved outbound links inside the source passage, they are listed directly under the quote.

The Passage Of Polymarket
February 07, 2022 · Original source
Polymarket got fined $1.4 million by the Commodity Futures Trading Commission and was ordered to cease noncompliant trading in the US.
Inline links: got fined $1.4 million by the Commodity Futures Trading Commission
The rumor on the prediction market grapevine (which I absolutely cannot substantiate; please don’t sue me for libel) is that this might have something to do with competing prediction market Kalshi. Kalshi spent two years and probably a lot of money getting the CFTC to agree they were legal, and has a former CFTC Commissioner as a Director. Their legal status forces them to do an annoying and expensive regulatory dance all the time; illegal prediction markets were able to move more nimbly, provide better user experience, and eat their lunch. This was a big problem for them - but they’d just finished making lots of friends in the agency that decides which illegal things to crack down on, so, as Tyler Cowen likes to say, “solve for the equilibrium”.
Inline links: rumor, two years, has a former CFTC Commissioner as a Director
Some might call a headquarters building with a CEO sitting in it and millions in the bank account a “center”, so in what sense was Polymarket decentralized? See here for more discussion, and here for the full text of the CFTC decision, but my understanding is - all of the markets themselves were smart contracts on the blockchain run by automated market makers, but you could only access them through the Polymarket website, and the Polymarket people decided how they resolved. Polymarket did not charge fees, and made money by providing liquidity. The CFTC seemed angriest about the “you can only access contracts through the Polymarket website” part of this. Crypto attorney Collins Belton writes:
Inline links: here, here, Collins Belton
22
March 21, 2022 · Original source
Out of the frying pan (Vladimir Putin) and into the fire (the CFTC). Still, welcome, and glad to hear you’re okay. Meanwhile, the Ukrainian development team continues to do good (can I say “heroic”?) work:
Open Thread 236
August 08, 2022 · Original source
1: Lots of people have asked for my thoughts on CFTC shutting down PredictIt. I’ll write something on this next Monday, but for now I tentatively agree the conclusions of this Karlstack article. Short version: the guy on Twitter claiming responsibility is probably a troll; more likely this is Kalshi/Sequoia Capital weaponizing the CFTC to shut down competitors and get a monopoly. PredictIt’s parent group has a link to contact your member of Congress and other relevant officials here, but the website doesn’t work very well and I doubt the political campaign will work much better.
Inline links: CFTC shutting down PredictIt, this Karlstack article, here
22
August 16, 2022 · Original source
In 2014, Victoria University in New Zealand struck a deal with the Commodity Futures Trading Commission, the agency that regulates some markets in the US. CFTC would let Victoria set up a prediction market - at the time a relatively new idea - for research purposes only. Their no-action letter placed strict limits on Victoria’s project:
Inline links: Their no-action letter
On August 4, the CFTC reversed itself, saying the PredictIt had “not operated its market in compliance with the terms of the letter” and that it had to shut down by February.
Inline links: reversed itself
There was no explanation of how it might not be in compliance with the terms of the letter. PredictIt has clearly stuck to the 5,000 traders and $850 investment limits, and AFAIK no one has accused them of meddling in world events. Victoria University did hire a private company, Aristotle Inc, to run operations, which seems against the “not for profit” clause. But this happened in 2015, and the relationship between PredictIt and Aristotle hasn’t changed since then. Also, supposedly PredictIt has been “in regular communication” with the CFTC throughout its lifespan to make sure they were on the right side of the law; if CFTC was angry about something they did in 2015, why wouldn’t they have told them before now? So what’s going on?
Inline links: supposedly
Links For October
October 12, 2022 · Original source
12: PredictIt is suing the CFTC over their recent shutdown order; Richard Hanania also seems to be involved in some way.
Inline links: PredictIt is suing the CFTC, also seems to be involved in some way
22
October 18, 2022 · Original source
Sources: Manifold, CSPI, Metaculus, Polymarket, PredictIt, Insight, GJOpen The lowest forecaster is higher than the highest pollster! Taking 538 as an example, forecasters range from 5 pp higher (Manifold) to 17 pp higher (PredictIt). Tournaments and real-money markets tend to give higher numbers than play-money sites. I would go with 47% on this one, based on the convergence between GJO, CSPI, and Polymarket. CFTC vs. PredictIt (and everyone else), Part II The Commodity Futures Trading Commission is the US agency regulating prediction markets. In August, they told PredictIt (the biggest political prediction market) to shut down, effective in February. Now a motley group of stakeholders are suing the CFTC for a stay of execution. Plaintiffs include: 2 professors using the site as “a source of data for research”
Inline links: Manifold, CSPI, Metaculus, Polymarket, PredictIt, Insight, GJOpen, they told PredictIt
Several additional plaintiffs I can’t find good information about
Inline links: additional plaintiffs
Several additional plaintiffs I can’t find good information about You can find the complaint here. The plaintiffs write: The [CFTC’s action], without explanation or other indication of reasoned decisionmaking, without “written notice of the facts or conduct which may warrant” the Revocation, and without providing anyone “an opportunity to demonstrate or achieve compliance” with the terms of No-Action Relief or other requirements, violates the Administrative Procedure Act. 5 U.S.C. §§ 558, 706. Among other things, the Revocation is “arbitrary, capricious, an abuse of discretion, [and/or] otherwise not in accordance with law” and occurred “without observance of procedure required by law.” The Court should “hold unlawful and set aside” the Revocation, including its command that contracts that would otherwise turn on events occurring after February 2023 be prematurely liquidated. 5 U.S.C. § 706. The Court also should enter a preliminary and then permanent injunction against the prescriptions in the Revocation requiring the liquidation of contracts by February 2023, including contracts that concern the 2024 elections, well before they would ordinarily mature. I am not a lawyer, but it sounds kind of like they’re saying “the decision was bad, and the Administrative Procedure Act says regulators shouldn’t do bad things”. I am split between the part of me which hates government regulators doing bad things, and the part of me which feels like this is how you get a cover-your-ass-ocracy that never does anything at all without fifteen layers of paperwork and ten trillion dollars per action. Whatever. At least this time it’s in my favor. Of course there are prediction markets about it: Source: Insight Prediction Nuclear Warcasting, Part 2 Samotsvety Forecasting is a team made of top prediction market players and tournament winners, vaguely affiliated with effective altruism, who make predictions in the public interest. Earlier this year, they got attention for forecasting the risk of nuclear war - in particular, they said there was an a 0.01% per month chance of London getting nuked this spring. Since then, most of the fear has crystallized into a specific scenario. Suppose Russia is losing very badly in Ukraine. Putin, fearing a coup or revolution at home if he gives up, decides to use a tactical nuclear weapon, ie a “small” nuke more suited to winning battles than destroying cities. He nukes a Ukrainian battlefield position. The West is enraged at this violation of the nuclear taboo and feels like it needs to respond decisively - maybe by nuking something on Russia’s side, or through some other act of extreme escalation. Then Russia feels like they need to respond, and eventually it escalates to strikes on major cities and global nuclear war. There are reasons for doubt. Tactical nukes wouldn’t really be useful in Ukraine; the battle lines are too spread out and there’s no single place where a nuclear explosion could take out a substantial portion of Ukraine’s forces. In the past, nuclear powers have accepted lost wars gracefully rather than turning to nukes. And the Russians deny it, and saying this is all just Western propaganda intended to scare people. Amid this uncertainty, Samotsvety has published an update: now they are at 16% chance that “Russia uses any type of nuclear weapon in Ukraine in the next year”, and 0.02% per month of a strike on London. Although they didn’t mention it this time, they previously said the risk of a strike on San Francisco was a little over half that of London; I don’t know if that’s changed. See also Dan Keys’ comment here for some skepticism of Samotsvety’s process. Swift Centre is a lot like Samotsvety; they’re a collection of top forecasters brought together by EA to make important predictions. They also took a swing at the nuclear question, and said 9.1% chance of a hostile nuclear detonation in Europe in the next six months. They didn’t calculate the risk that this would spread to global war, but they did discuss how different scenarios would bring the risk up or down: One of my hopes for forecasting is that it eventually becomes so well-validated that decision-makers can take these kinds of considerations into account: “Should we sent ATACMS missiles to Ukraine? It would have such-and-such benefits, but also increase the risk of nuclear escalation by 3.6%, is it worth it?” We can’t directly compare Samotsvety and Swift because they’re predicting over different time periods. But assuming that there’s more risk in the next six months than in the six months after that, I think Samotsvety is a little higher but they’re not embarrassingly far off. Metaculus is a bit more optimistic than either, believing there’s only a 4% chance of detonation in Ukraine in 2023 and a 7% chance of any use in the next ~year. Max Tegmark is going much higher than anyone else and says 16% chance of global nuclear war. Kalshi Applies For Election Markets Kalshi is a regulated and fully-legal prediction market with good lobbyists and a compliance team. This means the CFTC probably won’t randomly shut them down one day. But it also means they can only create new markets with CFTC permission. In July, Kalshi asked the CFTC for permission to make midterm election prediction markets - specifically, which party will win control of the House and Senate. The CFTC has said they will make a decision by October 28 (which doesn’t leave much time for predicting to happen before the November 8 election, but I guess it sets a precedent). September was the Request For Comment period, when the CFTC solicited comments from stakeholders about what they should do. Kalshi tried really hard to get lots of people to send in positive assessments - I know this because of how many people asked me “why is the CEO of Kalshi emailing me about this thing?” Their strategy seems to have worked; among the people who wrote to the CFTC in support were: A managing director at JP Morgan
Inline links: additional plaintiffs, here, https://substackcdn.com/image/fetch/$s_!LaYa!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F0aaec309-35d6-430d-aeaa-b7cab022f4d6_548x215.png, Insight Prediction, Samotsvety Forecasting, Earlier this year, accepted lost wars gracefully, published an update, comment here, Swift Centre, They also took a swing at the nuclear question, https://substackcdn.com/image/fetch/$s_!TczM!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F702c1236-47d9-4c60-9b99-ab9b2ca320e7_737x377.png, a 4% chance, a 7% chance, 16% chance, In July, they will make a decision by October 28, A managing director at JP Morgan
Mantic Monday: Twitter Chaos Edition
November 21, 2022 · Original source
1: Government regulator CFTC is poised to reject Kalshi’s request to host election prediction markets (see also here). I’ve been extra harsh on Kalshi because of allegations that they worked to destroy competitors. But I would look beyond that if I thought they were really going to achieve all of our dreams and create a real legal high-volume prediction market on important questions. This kind of thing is why I’m still pessimistic. Election betting is the bread-and-butter of most prediction markets; Kalshi spent months and rallied a dream team of supporters to beg for permission to do that, and apparently still failed. I think there’s more of a future in play money and cryptocurrency, much as I hate to admit it. Still, I will temporarily put aside my grudge against Kalshi to say that I’m sorry about this and I admire the level of fighting spirit they showed here.
Inline links: poised to reject, here
2023
January 31, 2023 · Original source
Taking Stock Prediction market users really want stocks. “Stock” in this sense means an instrument that measures the status of a person, group, or idea. When their status goes up, the stock goes up. When their status goes down, the stock goes down. It feels like a natural way to bet on things like “I’m bearish on Elon Musk and think everyone else is overestimating him.” It’s hard to turn this vague idea into a real financial instrument. You could try tying it to their Twitter follower count, or Google search trends, or net worth, but none of these exactly track “status”. If Musk commits murder in broad daylight, his search volume will go up, his Twitter follower count will stay about the same, his net worth might not be affected, but his status will have gone way down. The current solution is to make no effort whatsoever to moor stocks to the real world and just hope they work out. This could work! It’s kind of like a Ponzi scheme or crypto token. Some big influencer endorses MoonCoin, and MoonCoin goes up, because MoonCoin has gained status, which means more people will want to buy it, because it’s even more likely that more people will want to buy it later. Crypto tokens keep a fig leaf of “and maybe in the cyberpunk future when all transactions everywhere have switched to crypto this will really pay off”, but over time that fig leaf became increasingly threadbare, and a fun low-stakes instrument like Manifold stocks might do fine without it. But the 0% to 100% prediction scale is a bad match for stocks. If Elon started at 50% in 2000, then when Tesla made it big he surely should have doubled. And that brings him up to 100% and leaves nowhere for him to go. Also, people who bet on Elon Musk in 2000 might be miffed that their prescient choice only doubled their money. Probably the solution is some kind of cardinal number. But which one, and at what scale? Again, the lesson from crypto is that maybe it doesn’t matter. Just start at 10 or something or something and see where it ends up. Manifold leadership isn’t totally resigned yet to having stocks be meaningless Ponzi schemes. If you have a better idea for how to run stocks, leave it in the comments here and they’ll probably see it. CFTC vs. PredictIt Update So far it’s not clear if this means indefinite normal operation, or if they’ll spend the extra time trying to wind existing markets down. The overall chance of them winning their lawsuit remains unchanged at around 25%. PredictIt has gotten some sympathetic news coverage, including from the Washington Post. In the process, the Post tried to get some clarity on what terms of the no-action letter PredictIt violated, apparently without success: @CFTC why they're shutting PredictIt down. They give no real answer, just as in the original withdrawal letter. Closest thing we have to an answer is that they don't want other prediction markets. But why? No sense here at all. washingtonpost.com/lifestyle/2023… ","username":"RichardHanania","name":"Richard Hanania","profile_image_url":"","date":"Tue Jan 24 18:12:59 +0000 2023","photos":[{"img_url":"https://pbs.substack.com/media/FnQbawZaYAAKRws.jpg","link_url":"https://t.co/zeKhe8sjnT","alt_text":null}],"quoted_tweet":{},"reply_count":0,"retweet_count":8,"like_count":39,"impression_count":0,"expanded_url":{},"video_url":null,"belowTheFold":true}" data-component-name="Twitter2ToDOM"> @StephenPiment I'm flat appalled the CFTC said \"you violated terms\", but won't tell anyone, @PredictIt included, which ones, and then has big enough balls to try to get the judge to dismiss PI's \"shotgun\" defense. Um, with no info what other case COULD they make?\n","username":"kmett","name":"Edward Kmett","profile_image_url":"","date":"Sun Nov 27 19:01:29 +0000 2022","photos":[],"quoted_tweet":{},"reply_count":0,"retweet_count":8,"like_count":21,"impression_count":0,"expanded_url":{"url":"https://www.bonus.com/news/cftc-predictit-hearings-coming/","image":"https://substack-post-media.s3.amazonaws.com/public/images/8d5a1d5e-49ee-4294-84cd-eb5a4259bbc3_1200x800.jpeg","title":"Hearings Coming Soon in PredictIt Lawsuit, CFTC Asks to Dismiss","description":"The CFTC is seeking to have the PredictIt lawsuit dismissed, while the plaintiffs want the case fast-tracked due to the shutdown deadline.","domain":"bonus.com"},"video_url":null,"belowTheFold":true}" data-component-name="Twitter2ToDOM"> I guess they’ll have to give some kind of explanation during the hearing, right? Related: Richard Hanania has an article on How To Legalize Prediction Markets. The actual advice isn’t very surprising, and mostly boils down to “write letters to the government officials in charge of this”, but like other people I learned something new from the details: In the United States, prediction markets are, with a few minor exceptions, against the law. If you don’t have a legal background, you might think that means that Congress at some point considered the issue, decided people shouldn’t be able to bet on real world events, and passed a law to that effect, which was then signed by the president. But this is not what happened. As with most things, Congress has never directly considered the matter. Rather, prediction markets are illegal due to the discretion of a government agency called the Commodity Futures Trading Commission (CFTC). Why does it have this right? And on what basis has it made prediction markets illegal? […] In 1936, Congress passed and FDR signed the Commodity Exchange Act. In 1974, Congress created the CFTC to enforce the original law, which has been amended on multiple occasions over the years. The CFTC has authority to regulate what are called “derivatives markets.” A derivatives contract derives its value from some kind of underlying asset or benchmark in the real world. The thing to understand about derivatives is that the baseline is that they’re legal. That’s why you can “bet” on the price of oil through a futures contract. The CFTC wasn’t created to ban derivative markets, but to regulate them, though this can involve prohibiting certain kinds of markets altogether. Current law includes the following provision on event contracts, [banning]: activity that is unlawful under any Federal or State law;
Inline links: remains unchanged at around 25%, Washington Post, How To Legalize Prediction Markets, can involve
other similar activity determined by the Commission, by rule or regulation, to be contrary to the public interest So the CFTC may ban certain prohibited categories. With this statutory authority, it has decided to take advantage of its power to the maximum extent possible and create a blanket ban on all markets that involve “terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law.” Prediction markets for elections are therefore banned because, according to the CFTC, they are a type of “gaming,” that is, gambling. To repeat, and summarize for those whose eyes gloss over when faced with legalese, the steps are Congress says the CFTC can prohibit event markets that involve “gaming” if it’s in the public interest.
Inline links: create a blanket ban, they are a type
Congress says the CFTC can prohibit event markets that involve “gaming” if it’s in the public interest.
Open Thread 286
July 23, 2023 · Original source
2: Kalshi is trying to get CFTC permission to run some political prediction markets in the US again, maybe with good implications for other markets if they succeed. CFTC comment period ends tomorrow (sorry), I am slightly more optimistic that these make a difference after the FDA retracted its telemedicine plan based on them. News article here, discussion on the subreddit here, and the CFTC’s comment page is here.
Inline links: here, here, here
23: Room Temperature Superforecaster
August 01, 2023 · Original source
Kalshi is a legal prediction market trying to comply with regulations. They asked their regulator, the CFTC, for permission to make prediction markets about the upcoming elections. In grand regulatory tradition, CFTC has drawn this out into an excruciating yearlong process that has aggravated everyone involved.
Most comments seemed to be anti-Kalshi. Some big anti-market and anti-gambling organizations urged their audiences to participate, especially a group called Better Markets. Most of these people’s talking points involved gambling on elections being a threat to democracy: what if it incentivized people to rig elections?
Inline links: Better Markets
Various Prestigious Economists. I appreciate these people. Every time the CFTC does this, they send in their comment. It’s always “We Are Various Prestigious Economists, And Have You Considered That Economics Tells Us That Prediction Markets Are Good?” Keep fighting the good fight.
Inline links: Various Prestigious Economists
23
October 31, 2023 · Original source
Prediction markets have often existed in a regulatory gray area. A newer market, Kalshi, has tried to cooperate with regulators to become a new kind of fully-legal and highly-regulated platform, but it’s been tough going. The day of the conference, main government regulator CFTC denied Kalshi’s petition to have betting markets on elections (see the first item here for previous discussion). This is pretty discouraging; election betting is the bread and butter of prediction markets, and the government seems to have banned it.
Inline links: here
Pratik Chougule leads the Coalition for Political Forecasting, a pro-prediction-market lobbying group. He discussed the CFTC’s recent decision, which was less about the normal factors and more about CFTC bureaucrats’ concern that they would be put in a situation where they had to determine election results. Suppose that Biden beats Trump in 2024, and Trump claims there was election fraud. Normally this is a problem for Congress, election regulators, the courts, the media, and the American people. But if there are election prediction markets, then election fraud would indirectly become a type of financial fraud, and now it is also a problem for the CFTC. I think this is a stretch - one could easily frame the question as “will such-and-such a source certify Biden as the winner of the 2024 election?” and then any fraud is already priced in - but I guess this isn’t how CFTC thinks.
Inline links: Coalition for Political Forecasting
He is not really optimistic about the government liberalizing any time soon. There was a moment in the late Trump administration when something could have happened. But the 2020 election fraud controversy made regulators more paranoid about election integrity, and the FTX collapse made regulators more paranoid about seemingly-innovative forms of online betting. The only good news Pratik has is that CFTC is very busy right now, and it will probably be easy for small projects to continue operating in legal gray areas and not face much regulatory scrutiny unless they do something really wrong or grow too big too quickly.
23
December 05, 2023 · Original source
1: Last month, we talked about the CFTC (regulatory body) denying Kalshi’s request to have election questions on their prediction market. Kalshi is now suing the CFTC to reverse their decision, saying that “the contracts contain no unlawful acts prohibited under the Commodity Exchange Act and therefore, the CFTC has no power to block them”. I have to admit I’m surprised by this - I thought Kalshi was trying to cultivate good will with the CFTC, and this seems pretty adversarial. Also, if they win, what’s left of the CFTC’s ability to regulate prediction markets at all? Any regulation experts want to weigh in?
Inline links: denying, is now suing the CFTC to reverse their decision
24
May 13, 2024 · Original source
The Commodity Futures Trading Commission, the body that thwarts real-money prediction markets, has announced that it will be thwarting them even harder from now on.
Disclaimer: This post involves more discussion of laws than usual. I am not a lawyer. Assume there are some errors. I will try to correct them after I learn about them. CFTC Extra-Double-Bans Prediction Markets The Commodity Futures Trading Commission, the body that thwarts real-money prediction markets, has announced that it will be thwarting them even harder from now on.
The proposed resolution is 17 CFR Part 40. It starts by explaining the current state of the law: the CFTC is allowed to regulate “events contracts”, ie predictions. The law says they should favor contracts about economic events (like “will interest rates go up”), and disfavor contracts about atrocities or gaming (like “will there be a terrorist attack?” or “will the Yankees win the World Series?”). Everything else - the bread and butter of prediction markets - is in a gray zone that the CFTC has to review on a case-by-case basis.
Inline links: 17 CFR Part 40
Prediction Markets Suggest Replacing Biden
July 02, 2024 · Original source
I assume they chose these three because they’re the only ones discussed enough to have enough data. I am following their lead. I appreciate John and Maxim’s work, but I’m not completely comfortable trusting it. Their model is based on results from Betfair, Smarkets, PredictIt, and Polymarket. But I don’t know much about the first two (as an American, I’m banned from even reading Betfair), and the latter two are notoriously bad at partisan political questions. They usually overestimate Republicans’ chances, partly because Democrats’ opposition to online political betting has turned the pool of online political bettors disproportionately red. While a fluid and easily-accessible prediction market should be able to avoid biases like these, neither PredictIt nor Polymarket really qualifies. The CFTC, which regulates prediction markets, has crippled both - PredictIt has very low maximum investments per market, and Polymarket is crypto-only and banned for US citizens. These have prevented their biases from being corrected and made both of them perform relatively weakly in head-to-head contests. And Stossel/Lott’s focus on betting sites automatically excludes two of the biggest and most historically accurate forecasting engines from their calculation - Metaculus and Manifold. In order to get numbers I trusted more than theirs, I looked at Metaculus, Manifold, PredictIt, and Polymarket, weighting each by how much I trusted it. Here’s what I found: The Biden number is about 4% higher than Nate Silver’s model over the same time period; see below for why that might be. [EDIT 7/2/24: Original version had a miscalculation which decreased everyone’s odds by about 10%. Above version should be correct.] You can find my sources at the bottom of the post. “Explicit” odds are based on questions like “What are the chances of Biden winning if he is the nominee?” “Implied” odds were generated by combining the questions “What is the chance of Biden being the nominee?” and “What is the chance of Biden winning?”; this is safe enough with Biden, but with unlikely nominees like Newsom, some of the percentages can get small enough that they start running into small-number-biases and become less trustworthy. I’ve weighted each market’s explicit calculation higher than their implicit one to compensate. A possible objection to these results: conditional probabilities don’t exactly reflect the intuitive concept of decision-making. That is, we’re not asking “We want to know whether or not to keep Biden, so what are the chances that he’ll win if we do?”, we’re asking the market for the chance that he’ll win, in the set of worlds where people decide to keep him for other reasons. We should expect this to overestimate his performance. That is, imagine that tomorrow, Biden has completely recovered, he easily wins his next debate with Trump, and everyone agrees the most recent debate was just a fluke - in that world, he is both more likely to be nominated and more likely to win. Alternatively, if tomorrow he gets much worse and can’t even speak in full sentences, he’s much less likely to be nominated and much more likely to lose. Since the real world includes both those possibilities, restricting ourselves to the set of worlds where he gets nominated means we’re overestimating the chance that he wins. There are similar-albeit-less-severe problems with other candidates - if we choose Newsom, that might be because he won some kind of debate or process versus Harris and all the other potential replacements. Overall I expect this to be mostly correct, but probably overestimate Biden’s chances by a percent or two relative to others. Along with these three candidates, Metaculus had an explicit “should the Democrats replace Biden?” question: Manifold also asks how Democrats will do if they replace Biden (without specifying a particular replacement): We can compare this to their Biden market… …and find that once again, they expect replacing Biden to go better (though I think 51% is just cope). At the Manifest prediction market conference in early June, I interviewed Nate Silver: …and asked him for his probability that the Democrats would win this election, versus his probability that the Democrats would win conditional on Biden not being the nominee (specifically “drops dead tomorrow of natural causes”). He said 40-45% chance normally, 50% chance without Biden. This was before the debate, but I think it matches the markets’ opinion that switching candidates would help the Democrats’ chances - and this has only become more true since the debate. On the other hand, polls asking people how they would vote in possible matchups don’t show any advantage of alternate candidates over Biden. Here’s the only post-debate poll I could find: And if Biden does need to be replaced, Democrats mostly support Harris, who the prediction markets find least promising: Maybe Democrats are the wrong people to ask - they’re already going to vote Biden, so you want someone who’s more attractive to independents. Of course, in a normal primary it would be Democrats making the decision. But if elites are going to do something behind closed doors, maybe they should take advantage and choose the candidate most likely to win, for once. I think these polls are the strongest objection to the prediction markets’ verdict. You could make an argument where prediction market users are mostly educated liberal white males, and even though they’re incentivized to honestly determine what ordinary people think, they’re too out-of-touch with ordinary people to do so effectively. Or they might be over-fixating on “voters don’t like Biden’s senility” without considering that, even if voters didn’t know Biden was currently senile before Thursday, they probably guessed that he would become senile sometime in his four-year term, and had basically accepted that his aides would do the hard work. Maybe they prefer a well-known likeable incumbent over an unknown quantity (and the unknown quantity’s potential new/weird aides), even if the well-known likeable incumbent is senile. Maybe elites know more than we do about how hard it is to inject a new candidate at the last moment, how dangerous it is to have someone who hasn’t been thoroughly vetted for scandals, et cetera. Still, for now I trust the prediction markets. I think replacing Biden would add ~10 prcentage points to the Democrats’ chance of victory. At the end of this post, I’ll list the prediction markets I’m using as sources. But before then, a brief interlude of: Fuzzy Subjective Human Factors I Am Not Really Qualified To Talk About Many people on Twitter are asking “how could anyone possibly have been stupid enough to not realize that Biden was senile?” I was that stupid. I didn’t say it openly, because I’m at least smart enough to have a high threshold for giving my opinion on political things I don’t know much about. But I thought it in my heart. So in case the people asking “how could anyone have been that stupid?” actually want an explanation, here’s my former reasoning. Republicans have been accusing Biden of being senile (and the Democrats of hiding it) for at least five years now. Before the 2020 debates, they were excited that this was when they could finally prove once and for all that Biden was senile. Then Biden did fine, and they retreated to “well he’s senile but they have some secret drug they’re giving him, just during debates, that makes him look fine”. Notice this is from 2020; according to polls, he did win the debate that year (source) I think a lot about experimental cognitive enhancement drugs, and I can say with confidence that nothing like that exists. Stimulants can help people with mild dementia be more active and motivated, but they don’t really improve cognition directly, and they can’t make a demented person temporarily lucid. Still, for the past four years, every time Biden was going to do something - a press conference, a State of the Union, whatever - the Republicans would say “ha, this time is going to be the proof that he’s senile!” And then he would always do fine, and they would retreat back to “I guess he used the secret drug this time too”. The satire site Babylon Bee had some funny articles about this: Babylon Bee, after Biden gave a good State of the Union speech earlier this year. Meanwhile, the Democrats were spreading the alternate narrative that Trump was senile. This one has gotten less press, because I don’t know how many people really believed it. But it came up occasionally, along with out-of-context video snippets where Trump said or did something dumb or meandering. Of course, anybody with a presidential candidate’s level of public exposure will have a few gaffes. Even if they don’t, you can always deceptively crop something so it looks like they did. Wait, why is a psychoanalyst getting quoted as a top expert in dementia? (source) I didn’t know you could diagnose someone via Change.org petition, but 2544 people who claim to be licensed professionals can’t be wrong! So with the constant attempts to prove that both candidates were senile, the constant demonstration by both candidates that they weren’t, and the constant retreat into conspiracy theories of “I guess he used the magic drug again but we’ll get him next time!”, I just tuned out this entire category of thing. And I guess I kept it tuned out longer than I should have, whoops. Reversed stupidity is not intelligence. Even if liars are saying something for their usual liar reasons, it can still be true. For twenty years, people spread false rumors that Castro was on his deathbed, but this didn’t make Castro immortal. In the same way, I should have figured out that even if I couldn’t trust any particular claim that Biden was senile, the prior for an 81 year old becoming senile was still high. But I guess I assumed that if he was becoming senile, some Democratic elites would have secret knowledge about it, and they couldn’t possibly be so stupid as to deny it while also scheduling him for a debate where it would inevitably come out. So I figured the Democratic elites who were closest to him thought he was doing well, and I trusted them more than the people who had been wrong every time for the past five years. I’m still confused what those elites were thinking. Reading the news coverage for the past few days (including some video clips from a post-debate rally where he seemed noticeably better) it seems like some combination of: He has good days and bad days, and they were hoping this would be a good day.
Inline links: https://substackcdn.com/image/fetch/$s_!3oIv!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F31e3710e-6231-49c6-989b-1bc16f70fdf7_833x288.png, https://substackcdn.com/image/fetch/$s_!Fr-Z!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fa7933bcc-fc24-4043-9064-47a958e24497_787x306.png, https://manifold.markets/HamishTodd/conditional-upon-the-democratic-par, Here’s, https://substackcdn.com/image/fetch/$s_!Q3fs!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ff99e148f-4051-40f9-b0c6-22eb10289854_1500x1091.png, https://substackcdn.com/image/fetch/$s_!MXOh!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F7d694e0c-d306-4578-a55d-5314ca965a83_1500x1246.png, https://substackcdn.com/image/fetch/$s_!qt9P!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fa11d1a27-cfc2-4708-9db1-e344b391ac9a_1288x758.png, source, think a lot about experimental cognitive enhancement drugs, https://substackcdn.com/image/fetch/$s_!shq2!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F92d67bb2-5940-44ba-ad21-df822276280a_781x829.png, Babylon Bee, https://substackcdn.com/image/fetch/$s_!2y5u!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fa986c7ac-16c2-4987-b520-8f6ddf9ad13d_757x690.png, https://substackcdn.com/image/fetch/$s_!SN0G!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F6068601f-0eef-4a1c-b885-19f5712decf1_751x668.png, https://substackcdn.com/image/fetch/$s_!vL01!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fcb26c689-1e81-422b-9493-ae44cac59125_858x814.png, source, https://substackcdn.com/image/fetch/$s_!6ssu!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F760276bb-2f91-4545-bbf5-d3f9fe911de7_975x654.png, Change.org petition, Reversed stupidity is not intelligence
Links For September 2024
September 12, 2024 · Original source
40: This month in prediction markets: a court reverses the CFTC’s ruling that Kalshi can’t have prediction markets on Congressional elections. I have to say - before I found a few subfields of politics where I was interested enough to follow the nuts and bolts, I never really understood how much of the law-making process was government agencies setting policies, the people who dislike those policies going to court, and the court cancelling the policies. Also, thanks to TracingWoodgrains and his lawyer friends for their related work trying to protect US prediction markets.
Inline links: a court reverses the CFTC’s ruling, their related work trying to protect US prediction markets
24
September 17, 2024 · Original source
3: Kalshi vs. CFTC, round one million: after CFTC banned Kalshi from hosting political contracts last year, Kalshi appealed. Earlier this month, the judge sided with Kalshi, saying that the CFTC’s attempt to define elections as “gaming” so it can regulate them under anti-gaming laws is an illegal power grab. The judge claims this has no relevance to the CFTC’s broader anti-political-market push, but since the whole thing is based on the elections = gaming theory I think it has a lot of relevance indeed. The CFTC has since appealed, and Kalshi is blocked from hosting the contracts until the appeal goes through (it’s 49 days until the election; at this point even a pro-Kalshi ruling might be a Pyrrhic victory). Also, why is Kalshi trying to get Congress contracts up, but not a Presidency contract? More sympathetic test case?
Inline links: Earlier this month, sided with Kalshi
Mantic Monday: Judgment Day
November 05, 2024 · Original source
The CFTC has suffered a string of recent defeats in its quest to regulate prediction markets. Most recently, with one month to go, an appeals court struck down their decision that Kalshi couldn’t offer election betting. In their ruling, the judges said that:
Inline links: struck down their decision that Kalshi couldn’t offer election betting, their ruling
I think this means the CFTC had a very high burden of proof, because they were trying to get Kalshi to stop trading right away before the election, and they failed to meet this burden by providing anything more than the usual vague case that someone might manipulate the market - but I’m not an expert, you should read the full ruling here.
Inline links: the full ruling here
Congrats To Polymarket, But I Still Think They Were Mispriced
November 07, 2024 · Original source
Polymarket (and prediction markets in general) had an amazing Election Night. They called states impressively early and accurately, kept the site stable through what must have been incredible strain, and have successfully gotten prediction markets in front of the world (including the Trump campaign). From here it’s a flywheel; victory building on victory. Enough people heard of them this election that they’ll never lack for customers. And maybe Trump’s CFTC will be kinder than Biden’s and relax some of the constraints they’re operating under. They’ve realized the long-time rationalist dream of a widely-used prediction market with high volume, deserve more praise than I can give them here, and I couldn’t be happier with their progress.
Inline links: Polymarket, called states impressively early and accurately, including the Trump campaign