Trading gold for politics
November 27, 2012 7:17 AM   Subscribe

Popular “prediction market” Intrade is shutting its doors to US Customers, following a suit (filed post-election fortunately) by the Commodities Futures Trading Commission. Some see this as inevitable, given their history of dissembling to regulators. Other (predictably) see it as another restriction of internet freedom.

Intrade previously. You have until December 31st to close out any open predictions without withdrawal fee. Good luck.
posted by Potomac Avenue (29 comments total) 7 users marked this as a favorite

 
I've been waiting for the hammer to drop on Intrade for a couple years (as it's pretty clearly illegal under current CFTC regulation). The CFTC I guess finally decided to take some action, although I hope the eventual result is a pathway towards regulating and making expressly legal prediction markets such as Intrade.
posted by gagglezoomer at 7:25 AM on November 27, 2012 [2 favorites]


Meanwhile, the derivatives market in the US is woefully under-regulated. The influence of money in politics and legislation is largely to blame in both cases.
posted by Daddy-O at 7:38 AM on November 27, 2012 [16 favorites]


So the commodities and futures traders can gamble till the money is gone and people are broke and their lives are ruined, but Intrade has to close?
posted by marienbad at 7:43 AM on November 27, 2012 [14 favorites]


As long as they're paying taxes on the collapse apparently!
posted by Potomac Avenue at 7:44 AM on November 27, 2012


Low hanging fruit, boys.
posted by Burhanistan at 7:45 AM on November 27, 2012 [3 favorites]


Loved the article linked under fortunately. Been very interested in the gap between 538's odds and intrades odds throughout the campaign. I think Silver wrote, after it was over, that the gap only took place at intrade, as opposed to other prediction markets, so Silver believed it was an attempt to manipulate opinion rather than the link's anonymous view that it was overly optimistic Romney supporters.

I'd find the link for you, but I've spent my 10 NYT articles this month.
posted by rakish_yet_centered at 7:54 AM on November 27, 2012


Oct. 23: The Virtues and Vices of Election Prediction Markets, Nate Silver.
posted by stebulus at 8:03 AM on November 27, 2012 [3 favorites]


Wait which countries Laws is this Dublin based service supposedly breaking?

The articles never seem to mention whether these are US Laws and how these really apply to Non-US companies. Really shouldn't the users be charged with using foreign sites to circumvent US laws?
posted by mary8nne at 8:20 AM on November 27, 2012


One thing I have never been sure of with derivatives (maybe this should be an AskMe, actually, but this is as good a place as any to ask) is whether one could create derivatives on say, whether Israel will conduct a military strike on Iran in December. Is this any different than betting on the price of corn in March? Or am I missing something fundamental about derivatives? Are they anything other than bets on future outcomes?

(Meanwhile, I will continue to pretend that derivatives are simply a mathematical function applied to another mathematical function that does neat things, usually by finding the slope of the curve at a point, but more interesting things in higher dimensions/the complex plane.)
posted by Hactar at 8:32 AM on November 27, 2012


The articles never seem to mention whether these are US Laws and how these really apply to Non-US companies. Really shouldn't the users be charged with using foreign sites to circumvent US laws?

The law (or regulation?) being broken is something like "offering the services to US customers." That's something a consumer of the product can't be guilty of.
posted by gjc at 8:35 AM on November 27, 2012


Planet Money has been doing a series about what legitamite purposes owning an off-shore company in another jurisdiction could serve. I wonder if setting up an Angola LLC, with an associated non-US bank and credit card, for the purpose of using prediction market would pass that test.
posted by bswinburn at 8:39 AM on November 27, 2012


The articles never seem to mention whether these are US Laws and how these really apply to Non-US companies. Really shouldn't the users be charged with using foreign sites to circumvent US laws?

The US has historically taken a very expansive view of its own jurisdiction. For example, it's been illegal for Americans to bribe foreign officials in foreign countries for decades but until very recently British companies could list it as an expense in their accounts. See also: the fate of gambling sites offering accounts to American customers. If you offer a service to American customers (for very broad definitions of "offer") the US government will assert jurisdiction if what you're offering contravenes American Federal laws.

I don't know how much of this is philosophical and how much is just a practical result of American commercial power. For instance, if they can't go after a gambling site they'll target their payment processors, being threatened with exclusion from the giant American market and possibly seizure of their assets will usually motivate the processors to terminate their relationships with the gambling site. If that doesn't work, blacklist the processor and go after their counterparties until you reach someone that enough assets in the US that they can be persuaded.
posted by atrazine at 9:11 AM on November 27, 2012 [2 favorites]


Good thing I saw this coming! Made a fortune shorting Intrade US futures.
posted by chavenet at 9:12 AM on November 27, 2012 [4 favorites]


Hactar, speculating or hedging on the price of corn in March would be a commodity futures contract. Derivatives include commodity futures contracts, but can be based on other things as well, such as the price of a stock, an interest rate, or the value of one currency versus another.
posted by Daddy-O at 9:21 AM on November 27, 2012


From an investment point of view, my biggest regret of the year was not buying a huge chunk of Obama "stock" on Intrade prior to the US election. Even the day before the election, when Nate Silver had Obama at 90% to win and every sensible person in the world agreed that Obama was going to win, Intrade had the odds of Obama winning at only 66% or so, meaning that you could buy an Obama stock for $6.66 and then sell it for $10 after he won. And they had thousands of shares at this price! 1/2 odds the day before the election.

Meanwhile, every real online casino, like William Hill, Pinnacle Sports, Ladbrokes, etc, was offering Obama odds along the lines of 2/9 the day before the election. I think the majority of their clients were from Europe.

Basically, Intrade must have had a large number of American right wing morons who honestly bought into the Karl Rove, Dick Morris, Fox News garbage that Romney was headed for a landslide win. And they were willing to bet hundreds, even thousands, of dollars on it.

I was determined to not miss this opportunity come 2016, but without US customers from the red states, who else will bet on the Herman Cain/Michele Bachmann ticket winning 350 seats in the electoral college? Sigh.
posted by obscure simpsons reference at 9:25 AM on November 27, 2012 [3 favorites]


Don't worry there will be another Intrade by then, with luck a legal one based (or paying taxes in) the United States. However, lol @ U at not snapping up that intrade deal. I doubt any official market will be that easily gamed again. You'll have to stick with your rich foolish uncle.
posted by Potomac Avenue at 9:37 AM on November 27, 2012


thanks for the post. I did not know we still had regulations.
posted by Postroad at 9:40 AM on November 27, 2012


I love how the government in the US isn't afraid to look shamelessly hypocritical, shutting down online gambling while the states offer their own state-operated lotteries and casinos.
posted by mullingitover at 9:49 AM on November 27, 2012 [1 favorite]


Well, I still did get the 2/9 odds elsewhere. But I never created an Intrade account, and by the time it occured to me that I should get one for the election, there was not enough time left to set it up. Oh well.
posted by obscure simpsons reference at 9:52 AM on November 27, 2012


Huh, I just cashed my check from my election winnings on intrade 20 minutes ago.
posted by Estragon at 9:53 AM on November 27, 2012


Pundits across the country breathe a sigh of relief. "If you're so smart, why aren't you rich?" was coming precariously close to being a serious question. Fortunately for them, acceptable answers now include "Well, I'd love to make scads of money from the increased accuracy which my predictions have over the weighted-median interested party, but gosh darn it, it's just not allowed." This makes excellent cover for "If my op-eds had to make falsifiable predictions and I had to bet money on them I'd be broke within a year."
posted by roystgnr at 10:44 AM on November 27, 2012 [3 favorites]


I didn't bet on Intrade because I felt the 66% chance of Obama winning accurately reflected the 33% chance both Florida and Ohio election counts would be falsified by Republican elections officials.
posted by surplus at 10:58 AM on November 27, 2012 [4 favorites]


Legal? Who gives a fuck if it's "legal"?

/banker
posted by telstar at 11:49 AM on November 27, 2012 [1 favorite]


I didn't bet on Intrade because I felt the 66% chance of Obama winning accurately reflected the 33% chance both Florida and Ohio election counts would be falsified by Republican elections officials.

Obama would have won even if both Florida and Ohio election counts were falsified.
posted by Justinian at 3:28 PM on November 27, 2012 [1 favorite]


I deposited my Intrade cheque on Thursday, but apparently large $US cheques have a 3-week hold period here.

Intrade, and the foolish people who apparently populate it, are responsible for paying down 10% of my student loan. I'm sad to see them go. They absolutely need to be regulated, but it seems like at the moment they're in a gray area with no possibility of operating sans regulation, and no regulaytion forthcoming. Sadface.
posted by Lemurrhea at 5:54 PM on November 27, 2012 [2 favorites]


With regards to the long-arm jurisdiction stuff, I think there's a difference between this and foreign corruption laws. Anti-corruption laws are criminal and target a resident of the country, over whom they have personal jurisdiction. This case, like the other internet cases, takes an expansive view of "doing business in the country" and I think it exceeds jurisdiction.

Although if Intrade was willing to forego any marketing focused at Americans, (maybe) dropping $USD in favour of euros, and generally required active & serious effort by US citizens, they probably wouldn't need to bar them altogether. Not sure it's worth it.
posted by Lemurrhea at 5:59 PM on November 27, 2012


but I've spent my 10 NYT articles this month.

Just go into your cookies and scroll down until you see something like an "nytimes.com" folder. Delete it; that resets your NYT article clock. You can do this as many times as you like each month.
posted by mediareport at 10:54 PM on November 27, 2012


Obama would have won even if both Florida and Ohio election counts were falsified.

Yet, if Florida and Ohio were both stolen, then chances were higher that other states would be stolen too. So my 33% chance of a stolen election still remained.

/and historically, since 2000 and 2004 were both stolen and 2008 was not, 33% was probably a little low.
posted by surplus at 5:04 AM on November 28, 2012 [1 favorite]


Kerry did not win in 2004. So 33% is a pretty good guess.
posted by one more dead town's last parade at 12:54 PM on November 28, 2012


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