Wisconsin threatens to strip the vote from prediction market participants

Many actions today are termed “threats to democracy,” and this is often an exaggeration. But the term fits to a tee the Wisconsin Elections Commission’s (WEC) amazingly brazen attempt to strip the votes of numerous state residents who participate in the growing phenomenon of prediction markets.

The state that rightly prides itself on being the first to ratify the Constitution’s 19^th Amendment to give women the right to vote in 1920 is now reaching back to a statute from 1849 to disenfranchise men and women who participate in prediction markets related to state elections.

This week, multiple state news outlets reported that the WEC sent out a news release warning Wisconsin voters that “if you bet on an election, it could cost you your vote.” In the news release, which was posted on X by Milwaukee TV station WISN political director Matt Smith, WEC Administrator Meagan Wolfe states, “We want voters to understand that they cannot legally make a bet on an election and cast a ballot in that same election.”

CEI scholars have noted that prediction markets have grown in popularity and create many benefits, from faster and more accurate information dispersal to improving ordinary Americans’ ability to hedge political and economic risks. As this blog post’s coauthor John Berlau wrote in National Review: “Financial elites have long had the ability to put money on political races — and hedge the business risks of election outcomes — through complex financial instruments like derivatives. [Prediction markets] allow the public to utilize these strategies as well.”

Our colleague Steve Swedberg has similarly observed, “Prediction markets transfer risk, aggregate information, and generate forecasts that can improve decision-making across society.” He warned that “when regulators mistake a forecasting tool for a casino game, innovation becomes the first casualty.”

Yet the law the WEC is wielding to intimidate voters who participate in prediction markets does not just predate this innovation; it was enacted before the Civil War. According to the Milwaukee Journal Sentinel, the cited legislation from 1849 states that no one may vote in an election in which he or she made “any bet or wager depending upon the result of the election.”

We at CEI and many other observers have argued that transactions on these venues are not bets, but events contracts similar to futures and options traded on commodities markets. But even setting that argument aside, it’s important to note that a couple of things have happened since 1849 that may render this state law in conflict with the Equal Protection Clause of the 14^th Amendment to the Constitution, ratified in 1868.

In Harper v. Virginia State Bd. of Elections (1966), the Supreme Court held that “the right of suffrage is a fundamental matter in a free and democratic society” and that “any alleged infringement of the right of citizens to vote must be carefully and meticulously scrutinized.” The Court noted that wealth — like race — is “not germane to one’s ability to participate intelligently in the electoral process,” and that introducing any “capricious or irrelevant factor” as a voting qualification violates the Equal Protection Clause of the Fourteenth Amendment. In Dunn v. Blumstein (1972), the Court noted that statutes affecting constitutional rights “must be drawn with ‘precision’” and “must be ‘tailored’ to serve their legitimate objectives,” and that a state “may not choose the way of greater interference,” where there are less restrictive means.

Wisconsin’s election-betting disqualification law functions as a complete and absolute bar to voting. It goes beyond regulating the manner of voting (such as voter ID laws). Instead, Wisconsin’s law eliminates the fundamental right to vote for a defined class of citizens who are otherwise qualified to vote.

If challenged, the Court will need to determine whether having a financial stake in an election wager is genuinely related to a voter’s qualifications, or whether, like wealth, it is an irrelevant factor that the state may not use to exclude otherwise qualified citizens from voting. The WEC may argue that the law is necessary to preserve the integrity of the electoral process. However, Wisconsin already has a law that criminalizes election wagering under its gambling statutes — a less restrictive means of deterring conduct without disenfranchising a class of voters. And without evidence of election bettors actually engaging in corrupt conduct, any connection between wagering and electoral integrity is speculative at best.

So it would be a good bet for Wisconsin voting officials at the WEC to back off their attempts to disenfranchise or intimidate prediction market participants.

CEI Research Associate Luigi Bilibio contributed to this post.