Tradesports and the CFTC

Via Chris Masse comes a link to this Commodity Futures Trading Commission consent agreement with Tradesports, parent company of the Intrade betting exchange (of which this blog is an affiliate). This is a worrisome development for those of us who are enthusiastic about prediction markets. However, Chris also pointed out this analysis by Chris Hibbert, who thinks the CFTC action may apply only to Intrade’s markets on commodities, and not to its markets on political and other events.

Note that Tradesports has been trying to set up a CFTC-regulated online subsidiary based in the USA, so what we are seeing here may be mainly a case of the CFTC marking its territory. Clearly, Tradesports/Intrade are going to have to pay a significant regulatory and legal tax to do business here, which is no surprise given that Tradesports’ business overlaps that of domestic commodity exchanges who have captured the regulatory process to some extent. We shall see how this ultimately plays out. IMO Tradesports was wise to go the US-subsidiary route. They will eventually gain a foothold here, and once they do they should be able to get more of their products approved. That will be good for everyone other than the competing exchanges.