It claimed to be one of the most accurate polls in New Zealand because it was largely influenced by insider trading.
The site came close to predicting the 2011 general election result, but was less accurate than all major polls in predicting the 2014 election.
After the Government passed the Anti-Money Laundering and Countering Financing of Terrorism Act in November, iPredict applied to be exempted from its compliance rules.
In a statement on the iPredict website, its owners said they believed they could get an exemption because they placed a cap on investment and traders' transactions were small. The average trader worth was $41 and the withdrawal process was lengthy, meaning there was a low risk of money laundering on the site, the statement said.
However, the ministry turned down its application.
"Our application has been declined by the [Associate Justice] Minister, Simon Bridges, on the grounds that we are a 'legitimate money laundering risk'," the statement said.
"This is essentially because we have no customer due diligence checks. He considered the level of regulatory burden is proportionate to the risk."
As a non-profit organisation, iPredict could not afford to cover the costs of complying with the Act.
Mr Bridges said he declined iPredict's exemption on the advice of a committee which was made up of officials from the ministry, police, customs, internal affairs, and the Financial Markets Authority.
"The main reason for declining the application was that [iPredict] does not identify its customers, which creates an opportunity to use the iPredict market to launder illicit funds," he said.
"The customers can deposit and withdraw funds from their accounts, including from overseas. Deposit restrictions apply, but these can be circumvented by setting up multiple user accounts as the customers' identities are not verified."
The minister said the requirements for carrying out due diligence were not onerous. Companies only needed to get a customer's full name, date of birth and address.
