[Infowarrior] - Intrade to cut off bets from US

[Richard Forno]

http://www.ft.com/intl/cms/s/0/bbe326a6-37f0-11e2-a97e-00144feabdc0.html

Last updated: November 26, 2012 10:35 pm

Intrade to cut off bets from US

By Gregory Meyer and Arash Massoudi in New York

Intrade, the leading prediction market for bets on events from elections to box-office receipts, said it would cut off US customers next month in the face of a regulator’s lawsuit.

The Dublin-based online marketplace was regularly cited as a barometer of the fluctuating odds of the candidates during the US presidential campaign. More than 22m shares have been traded this year by more than 55,000 different users and the US is its biggest source of business, according to its website.

Intrade instructed US customers to unwind all open predictions before December 23 or “Intrade will close out your predictions for you”.

“We are sorry to announce that due to legal and regulatory pressures, Intrade can no longer allow US residents to participate in our real-money prediction markets,” a message posted on the Intrade chat room said. The company did not respond to requests for comment.

The announcement came hours after the US Commodity Futures Trading Commission filed a civil complaint charging Intrade’s operators with letting US customers trade options contracts between 2007 and June 2012 in defiance of a ban on off-exchange options trading in the US.

“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 listed for trading and traded on a CFTC-registered exchange or unless legally exempt,” David Meister, CFTC enforcement director, said. Intrade is not registered as an exchange in the US.

Intrade’s “binary” options contracts pay out on a “yes” or “no” answer to broad public questions. On Monday, the most active question in its politics market was “Tim Geithner to depart as Secretary of the Treasury before end of first term”. Bettors assigned it a 25.3 per cent probability of being true.

The CFTC sought an injunction against illegal solicitations of US customers. However, the Intrade message disclosed “plans for a new exchange model that will allow legal participation from all jurisdictions – including the US.” No date was set.

Regulators have taken a cautious stance towards event markets. The CFTC in April rejected a bid by the North American Derivatives Exchange to list contracts that would have paid out based on the 2012 elections.




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