Will the CFTC “Do the right thing?”
Those that aren’t prediction / event / outcome market affectionados, might not have realized that the CFTC recently asked
…for public comment on the appropriate regulatory treatment of financial agreements offered by markets commonly referred to as event, prediction, or information markets.
During the past several years, the CFTC has received numerous requests for guidance involving the trading of event contracts. These contracts typically involve financial agreements that are linked to events or measurable outcomes and often serve as information collection vehicles. The contracts are based on a broad spectrum of events, such as the results of presidential elections, world population levels, or economic measures.
As you might have expected my immediate reaction was – it’s about bloody time! (Or more cynically, that the CME had finally figured out / got around to working out how to monopolize compete in these emerging markets.) The deadline for comment was July 7th and although I haven’t had the time to look closely at many responses (available here from the CFTC), I was heartened to read John Delaney’s (InTrade CEO) contribution thanks to Chris’ posting of it at Midas Oracle (incontournable for keeping up with all the latest news and gossip on the subject of prediction markets.) It’s too bad the CFTC’s website doesn’t have a Digg/Shashdot-type mechanism* for people to vote up (or down) contributions. If it did I would certainly have endorsed this contribution – well crafted, robust, articulate and (imo) stating the blindingly obvious (which btw is a good thing in this Kafka-esque context.) My thoughts as to the contradictions implicit in the increasingly anachronistic US regulatory system are on record, and I hope this first baby step by the CFTC is a prelude to more great modernization to come. Jed – another good source of event market news and analysis – thinks it will happen only very slowly if at all. I wonder if we can get Obama’s staffers to put this in the ‘Yes We Can’ column!
*seriously this could be a great idea for any government agency soliciting public input. Many people simply do not have the time/money to craft a complete and articulate response but are very likely to find one or more responses submitted by others that they are happy to endorse. Clearly you would have to guard against gaming/spamming but I’m sure clever people could mitigate / manage around this. I read that Obama is keen to introduce modern web-based tools to government if he is elected. Maybe someone on his staff will pick this idea up and run with it.
