Regardless of how regulations evolve in the space, retail traders will have opportunities of varying legal risk to place bets on political outcomes. 

Offshore, online betting sites and sportsbooks are increasingly offering political lines that are accessible to Americans. 

If political betting continues to be one of the most rapidly growing categories, offshore sites and sportsbooks may emerge as the largest destination for 2024 election bets. 

From a public interest perspective, it would be an unfortunate development if retail traders gravitate to offshore books. 

The business models and incentives of offshore sites make it difficult for them to serve the public interest in ways comparable to prediction markets. 

Many bookmakers move aggressively to restrict or prohibit gamblers from taking positions on political lines if they appear to have an edge in the market. 

In this respect, anti-money-laundering, know-your-customer, and other regulations work to the benefit of bookmakers. 

This is because these regulations give bookmakers the ability to deter traders with a perceived edge from using their sites by burdening them with onerous, intrusive requests to verify their income, identity, and other information. 

While there are offshore books that are committed to political betting and take high volumes for their political lines such as Star Sports and BetOnline, the tradeoff is often big margins and prices that are considerably different from the ‘crowd wisdom’ in prediction markets. 

The transparency, liquidity, and community that allow prediction markets to facilitate price discovery, hedging, and other public interest benefits are generally lacking with offshore books.

The question facing regulators is not whether Americans will have the ability to bet on politics, but rather, whether prediction markets will be the main outlet for this activity.

Pratik Chougule is the executive director of the Coalition for Political Forecasting. Solomon Sia is a board member of the Coalition for Political Forecasting. This post is adapted from the authors’ report, “Political Betting Regulation in the United States: Pathways to Liberalization.”