Why are prediction markets illegal?

Because regulators — the U.S. Commodity Futures Trading Commission (CFTC) in particular, which has the legal authority to regulate commodity markets — have declared prediction markets to be “contrary to the public interest”. But if the “public interest” is the open-textured standard that applies to prediction markets like Intrade (which the CFTC effectively shut down in late 2012), then shouldn’t the courts also apply the same standard to the operations of the CFTC itself?  That is, why don’t Intrade’s lawyers sue the CFTC (perhaps under a “regulatory taking” theory) and request an injunction or cease-and-desist order preventing the CFTC from acting against the public interest? My larger point is this: shouldn’t the government be required to play by the same rules as the firms they are regulating?

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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2 Responses to Why are prediction markets illegal?

  1. JMI says:

    Really interesting, thanks​!​

    I think that you would be really interested in some of the most cutting-edge research that I have come across explaining crowds, open innovation, prediction markets, and citizen science.​

    http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1919614

    And you may also enjoy this blog about the same too:
    https://thecrowdsociety.jux.com/

    Powerful stuff, no?

  2. enrique says:

    Hello. I am very impressed with The Crowd Society blog and will be following it closely. I am also looking forward to reading the “crowd prediction” papers at the first link above.

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