The Commodity Futures Trading Commission (CFTC) has filed a civil complaint in federal district court that has shut down Intrade (mentioned on CD more than 100 times), the popular Ireland-based online prediction market, to Americans.
It is against the law to solicit U.S. persons to buy and sell commodity options, even if they are called ‘prediction’ contracts, unless they are listed for trading and traded on a CFTC-registered exchange or unless legally exempt. The requirement for on-exchange trading is important for a number of reasons, including that it enables the CFTC to police market activity and protect market integrity. Today’s action should make it clear that we will intervene in the ‘prediction’ markets, wherever they may be based, when their U.S. activities violate the Commodity Exchange Act or the CFTC’s regulations.”
The CFTC’s real complaint is that consumers eagerly bet on Intrade because the company exemplifies market integrity: “I trust Intrade with my money because of their reputation, not government regulation.” Reputation: That’s the same mechanism, of course, that underlies eBay, Amazon Marketplace, and the whole cornucopia of internet commerce that the mainstream information economist of 1990 would have dismissed as free-market Fantasy Island.
Americans send money to Intrade because Intrade delivers the goods (and produces the positive externality of accurate forecasts in the process!). In the information age, firms’ reputations are just a click away. That’s all the protection any consumer needs. The only people the CFTC is “protecting” are its own obsolete employees.
MP: So it seems like Intrade didn’t get the required “permission slip” from U.S. regulators to offer its prediction contracts to adults in America, who apparently need government regulators to “police market activity and protect market integrity.” The fact that the CFTC hasn’t received any complaints from American traders and the reality that Intrade “exemplifies market integrity” apparently don’t matter to the overzealous regulators at the CFTC.