Described by John Stossel:
Today, Americans were told that they must close their Intrade.com accounts. That happened because the federal government agency known as the “Commodity Futures Trading Commission” (CFTC) today sued the prediction market, where people from all over the world bet about things like who will win elections.
Intrade has…successfully predicted events like Saddam Hussein’s capture and the winner of the Oscars. People with the best information trade about those events, and drive up the odds on Intrade.
After all, such things are against US financial regulations, don’t you know:
Section 4c(b) and 9(a)(3) of the [Commodity Exchange] Act, §§6c(b) and 13(a)(3) (2006); Section 2(e) of the Act, as amended by the Dodd-Frank Act, to be codified at 7 U.S.C. § 2(e); and Regulation 32, as amended, to be codified at 17 C.F.R. § 32 (2011)
The CFTC is, here, specifically and deliberately targeting “prediction markets:”
It is against the law to solicit US persons to buy and sell commodity options, even if they are called “prediction” contracts, unless they are…traded on a CFTC-registered exchange…. Today’s action should make it clear that we will intervene in the “prediction” markets, wherever they may be based.
Why does this matter? Because if the government can “intervene” to destroy an obscure little idea and the free market business it generated, it can do so in the free market generally, and that market becomes a government run market.
The CFTC argues that the regulation
is important for a number of reasons, including that it enables the CFTC to police market activity.
So the CFTC says it’s necessary to enforce so that it can enforce. Nothing circular here.
One more thing. The CFTC has, with this…position…placed your penny-ante poker game at risk, too. After all, each of you, as you deal the next round, are soliciting options on the future—of your and your opponents’ hands.