May 1, 2008 could signal a turning point for the prediction markets industry.*
Yesterday, the US Commodity Futures Trading Commission (CFTC) issued a request for public comments as they mull over the legal and regulatory status of prediction markets.
I read the Concept Release in detail, and I am happy to report that it is a careful, thoughtful, even scholarly document that reflects a solid understanding of the goals of prediction markets, and that appears to signal a real willingness on the part of the CFTC to consider reasonable options and arguments.
In short, this development leaves the optimist in me dreaming of a day in the not so distant future when US companies can try out some truly innovative products.
It’s not often that an industry in its infancy cries out for more government oversight. But the CFTC is certainly preferable to the gambling Gestapo.
Anyone who desires to see more prediction markets in the US, please let the CFTC know what you think!
| *Or not. |
Hi David,
Thanks for your optimistic spin on what I too consider a historic day for event and prediction markets and their participants. I have read your exchange with the midas oracle (Chris), and it was great to see how this release can be interpreted from both angles.
“In short, this development leaves the optimist in me dreaming of a day in the not so distant future when US companies can try out some truly innovative products.”
You are very accurate with this assumption and will be surprised at one of the comments given by an organization presently establishing innovative sports based financial instruments. They have diligently been working with representatives from NERA and the CFTC in designing future instruments to meet the regulatory governance of the CFTC at some point in the not so distant future. It is my strong belief, that it is this one organization that has pushed the envelope to get the CFTC to acknowledge the need for governance on these highly innovative financial instruments.
These facts align with the “willingness on the part of the CFTC to consider reasonable options and arguments.”
I am a private shareholder in this organization, and because of a binding NDA, I am unable to release anymore information until they produce their formal comment to the CFTC.
Will check in again shortly once comments become available.
Good night.
Thanks Paul, very intriguing. Looking forward to hearing more when available.
Hi David,
I don’t mean to sound ignorant…but, are prediction market services (like Intrade) unquestionably illegal in the US? Particularly…Florida? I can’t seem to confirm this anywhere.
Thanks,
Mike M
Doctor David Pennock,
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Do you favor the American Enterprise Institute’s proposals to regulate the real-money prediction exchanges in the United States of America?
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Are you pulling for FOR-PROFIT, real-money prediction exchanges?
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Thanks,
Mike: running the exchange is probably illegal. Trading in the exchange is probably fine, or at least no one would enforce otherwise. However all the laws are very gray.
Chris: Yes.
MSNBC has a nice article discussing the CFTC call for comments on regulating prediction markets as well as the “Promise of prediction markets” article in the journal Science by 20+ economists including Nobel Laureates.