Tag Archives: CFTC

The CFTC is going to close the comments in 12 days. We have 12 days left to convince the CFTC to accept FOR-PROFIT prediction exchanges, and counter the evil petition organized by the American Enterprise Institute (which has on its payroll Paul Wolfowitz, the bright masterminder of the Iraq war).

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THE MIDAS ORACLE TAKES:

– CALL TO ACTION: Let&#8217-s fight so that the CFTC allows the FOR-PROFIT prediction exchanges to deal with &#8220-event markets&#8221-.

– In the for-profit vs not-for-profit debate, our prediction market luminaries, doctored by Bob, are on the wrong side of the issue.

– COMMENTS TO THE CFTC: What to expect from Tom W. Bell and Jason Ruspini

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BACKGROUND INFO:

– CFTC’s Concept Release on the Appropriate Regulatory Treatment of Event Contracts&#8230- notably how they define &#8220-event markets&#8221-, how they are going to extend their &#8220-exemption&#8221- to other IEM-like prediction exchanges, and how they framed their questions to the public. Here are the comments sent to the CFTC.

– The Arnold &amp- Porter lawyers explain the meaning of the CFTC&#8217-s concept release on &#8220-event markets&#8221-. &#8212- (PDF file)

– What Vernon Smith told the CFTC.

– American Enterprise Institute’s proposals to legalize the real-money prediction markets in the United States of America

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APPENDIX:

Paul Wolfowitz&#8217-s profile at the American Enterprise Institute

– How the neo-cons drove the United States of America into the unecessary Iraq war

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COMMENTS TO THE CFTC: What to expect from Tom W. Bell and Jason Ruspini

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For those who are just surfacing from an Afghan cave: Tom W. Bell is a law professor at Chapman University (in California) and Jason Ruspini is a Wall Street professional (in New York).

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It seems that both will, independently of each other, write to the CFTC about the legalization of the &#8220-event markets&#8221- (here are the comments to the CFTC) &#8212-a bad term for the &#8220-non-hedgeable event derivative markets&#8221- (which is also, probably, a term that is quite awful to your ears :-D ). What to expect from them? (WARNING: This is highly speculative.)

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TOM W. BELL

  • He will state the libertarian point of view &#8212-laissez faire, laissez aller. – [DISCLOSURE: I am a mid-core libertarian myself, so I like that.]
  • Overall, he will try to put up a basket of legal hacks &#8212-to establish that the real-money prediction markets should be as free as possible.
  • In particular, he will try to make the point that &#8220-event markets&#8221- should be covered by the laws governing &#8220-notes&#8221- &#8212-not by the laws governing &#8220-contracts&#8221-.
  • By doing so, he will tell the CFTC to go fugging themselves &#8212-since the CFTC is allegedly about &#8220-contracts&#8221-, not about &#8220-notes&#8221-.

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JASON RUSPINI

  • He will state that all the real-money prediction markets should be covered by the CFTC.
  • He will navigate within the legal framework that the CFTC has established in their &#8220-concept release&#8221-. – [See this document from the Arnold &amp- Porter lawyers, if you wanna know what’s a “concept release”, in the mind of the CFTC regulators. – PDF file.]
  • He will be very careful not to offense those bureaucrats.

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TOM W. BELL vs JASON RUSPINI

  • It&#8217-s great that the libertarian point of view is elaborated and disseminated to these bureaucrats. However, the CFTC is an agency, not the US Supreme Court Of Justice &#8212-and the fact that Tom W. Bell is right does not mean that he will prevail.
  • Jason Ruspini&#8217-s approach is extremely reasonable: he adopts the enemy&#8217-s point of view, and, from within, tries to maneuver the regulatory barriers to create as much room as possible. Also, Jason Ruspini will address only the CFTC questions which he grasps well. (Contrast that with some who spread themselves too thin, and answer all the CFTC questions, even those where they have no expertise or experience. Their answers are, and, will be totally ignored. It&#8217-s not what you say that is important- it&#8217-s what you say in relation with who you are to say that.) I&#8217-m pulling for Jason Ruspini&#8217-s approach.

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TAKEAWAY

  • If Jason Ruspini does not fuck it up, he has the potentiality to influence positively the CFTC, and to become one of the great leaders of the field of prediction markets. Let&#8217-s wish for that. Our field needs courageous men (and women) with the right political compass and the sense of pragmatism.

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THE MIDAS ORACLE TAKES:

– CALL TO ACTION: Let&#8217-s fight so that the CFTC allows the FOR-PROFIT prediction exchanges to deal with &#8220-event markets&#8221-.

– In the for-profit vs not-for-profit debate, our prediction market luminaries, doctored by Bob, are on the wrong side of the issue.

– A young economist rebuts the American Enterprise Institute.

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BACKGROUND INFO:

– CFTC’s Concept Release on the Appropriate Regulatory Treatment of Event Contracts&#8230- notably how they define &#8220-event markets&#8221-, how they are going to extend their &#8220-exemption&#8221- to other IEM-like prediction exchanges, and how they framed their questions to the public. Here are the comments sent to the CFTC.

– The Arnold &amp- Porter lawyers explain the meaning of the CFTC&#8217-s concept release on &#8220-event markets&#8221-. &#8212- (PDF file)

– The Schulte &amp- Roth &amp- Zabel lawyers&#8217- takes. &#8212- (PDF file)

– The Sullivan &amp- Cromwell lawyers&#8217- takes. &#8212- (PDF file)

– What Vernon Smith told the CFTC.

– The American Enterprise Institute’s proposals to legalize the real-money prediction markets in the United States of America

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APPENDIX:

Paul Wolfowitz&#8217-s profile at the American Enterprise Institute

– How the neo-cons drove the United States of America into the unecessary Iraq war

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The CFTC is going to close the comments in 13 days. We have 13 days left to convince the CFTC to accept FOR-PROFIT prediction exchanges, and counter the evil petition organized by the American Enterprise Institute (which has on its payroll Paul Wolfowitz, the bright masterminder of the Iraq war).

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PREVIOUSLY:

– CALL TO ACTION: Let&#8217-s fight so that the CFTC allows the FOR-PROFIT prediction exchanges to deal with &#8220-event markets&#8221-.

– In the for-profit vs not-for-profit debate, our prediction market luminaries, doctored by Bob, are on the wrong side of the issue.

–

BACKGROUND INFO:

– CFTC’s Concept Release on the Appropriate Regulatory Treatment of Event Contracts&#8230- notably how they define &#8220-event markets&#8221-, how they are going to extend their &#8220-exemption&#8221- to other IEM-like prediction exchanges, and how they framed their questions to the public.

– Arnold &amp- Porter lawyers explain the meaning of the CFTC&#8217-s concept release on &#8220-event markets&#8221-. &#8212- (PDF file)

– American Enterprise Institute’s proposals to legalize the real-money prediction markets in the United States of America

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APPENDIX:

Paul Wolfowitz&#8217-s profile at the American Enterprise Institute

– How the neo-cons drove the United States of America into the unecessary Iraq war

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The CFTC extends its regulatory arm to… the City of London.

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A CFTC Commissioner in the Financial Times:

So what effects do the Durbin legislation and the CFTC regulatory action have? Are they the kind of &#8220-excessive&#8221- regulation contemplated by the Balls Clause? Given the circumstances of the trading activity and entities involved, and the tailored approach to a work-able regulatory solution, the answer would appear to be No. The proposals are intended to provide authority to the US commodities regulator over US individuals trading certain products on a foreign board of trade. The idea is to ensure that foreign markets offering contracts that mirror energy products traded on US exchanges should have the same transparency requirements as the US market. The Durbin legislation would give the CFTC the ability to exercise power over manipulation, speculation and record-keeping by US citizens and instructs the US regulator to assess the foreign regulator&#8217-s ability to apply comparable regulatory principles prior to granting relief from US regulatory requirements. Similarly, the CFTC&#8217-s action would condition access to US customers on the ICE&#8217-s adoption of position limits and accountability levels on the WTI contract.

Let Prediction Markets Fight Terrorism.

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The Commodity Futures Trading Commission (CFTC)&#8217-s recent request for comments about the regulation of prediction markets includes a number of specific questions. I am not sure whether I will manage to write up answers to all of them before the July 7 deadline, but question in particular—question 14—has attracted my attention. The CFTC there asks, &#8220-Should certain underlying events or measures&#8211-such as those based on assassinations or terrorist activities—be prohibited altogether due to the social perception and impact of such events? What statutory or other legal basis would support this treatment?&#8221-

I answer the first part of question 14, &#8220-No,&#8221- (and thus need not answer the second part). I doubt that the CFTC wants to hear that sort of reply, frankly- I instead suspect that it wants a legal excuse to avoid the sort of political firestorm that followed the Pentagon&#8217-s proposal to create a Policy Analysis Market that included claims about assassinations and terrorist events. My draft answer to question 14 explains why I&#8217-m willing to risk disappointing the CFTC:

The CFTC should not forbid trading in claims based on assassinations, terrorist activities, or other criminal acts. Because event markets would offer only relatively thin and traceable trading, they would not offer an attractive investment option to anybody planning to profit from wrongdoing. A would-be terrorist would risk revealing both his plans and his identity if, for instance, he invested in a contract predicting another 9/11. He would instead find it more safe and profitable to simply short certain publicly traded stocks.

Furthermore, event markets in terrorist or criminal acts might benefit the public by revealing life-saving information. Suppose, for instance, that an anthropologist&#8217-s study of corrido culture convinced her that narcoterrorists had begun planning military raids on border checkpoints in Arizona and California. If she had the opportunity to buy terrorist event claims, she might both profit from her research and tip us all off about looming trouble. Sound public policy suggests that we should encourage that sort of trading—not forbid it.

To judge from their reactions to the Policy Analysis Market proposed by the Pentagon in 2003, politicians might need to learn more about the benefits of using trading to help predict assassinations or other terrorist events. That poses a public relations problem, however—not a legal one. The CFTC thus has no sound reason to presumptively forbid trading in contracts related to such events.

Notably, my answer to question 14 differs sharply from the answer offered by Jed Christiansen. He said, &#8220-There should never be any incentive to break a law, so there should never be any contracts that would pay someone if a law was broken.&#8221- I disagree, of course, but I thank him for stimulating me to offer an alternative take.

[Crossposted at Agoraphilia and Midas Oracle.]

Who will write to the CFTC?

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CONFIDENTIAL:

&#8220-The Law Professor&#8221-, &#8220-The Brain&#8221-, and &#8220-The Blogger&#8221- are among those who will each send a comment to the CFTC in the coming 2 weeks.

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UPDATE: This econ guy will write to the CFTC, too.

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UPDATE: Indeed, he did&#8230- brightly.

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The CFTC is going to close the comments in 16 days. We have 16 days left to convince the CFTC to accept FOR-PROFIT prediction exchanges, and counter the evil petition organized by the American Enterprise Institute (which has on its payroll Paul Wolfowitz, the bright masterminder of the Iraq war).

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Paul Wolfowitz&#8217-s profile at the American Enterprise Institute

–

PREVIOUSLY:

– CALL TO ACTION: Let&#8217-s fight so that the CFTC allows the FOR-PROFIT prediction exchanges to deal with &#8220-event markets&#8221-.

– In the for-profit vs not-for-profit debate, our prediction market luminaries, doctored by Bob, are on the wrong side of the issue.

–

BACKGROUND INFO:

– CFTC’s Concept Release on the Appropriate Regulatory Treatment of Event Contracts&#8230- notably how they define &#8220-event markets&#8221-, how they are going to extend their &#8220-exemption&#8221- to other IEM-like prediction exchanges, and how they framed their questions to the public.

– American Enterprise Institute’s proposals to legalize the real-money prediction markets in the United States of America

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NOT-FOR-PROFIT… or… FOR-PROFIT… That is the question.

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The dilemma goes like this:

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  1. If the CFTC allows for-profit prediction exchanges &#8211-&gt- that&#8217-s a good step forward (even though sports are excluded from the legal offerings)-
  2. If the CFTC allows only not-for-profit prediction exchanges &#8211-&gt- that&#8217-s a micro step forward (but still positive in the eyes of many).

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BACKGROUND INFO:

CFTC’s Concept Release on the Appropriate Regulatory Treatment of Event Contracts&#8230- notably how they define &#8220-event markets&#8221-, how they are going to extend their &#8220-exemption&#8221- to other IEM-like prediction exchanges, and how they framed their questions to the public.

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UPDATE: In the for-profit vs not-for-profit debate, our prediction market luminaries, doctored by Bob, are on the wrong side of the issue.

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CALL TO ACTION: Lets fight so that the CFTC allows the FOR-PROFIT prediction exchanges to deal with event markets.

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The second feedback I have received about my speculative post goes like this: &#8230-If some believe that the CFTC might rule that &#8220-event markets&#8221- should be treated only by not-for-profit, IEM-like, prediction exchanges&#8230- &#8230-while some others think that&#8217-s not the case&#8230- &#8230-even though a powerful American think tank is advocating that only not-for-profit prediction exchanges be allowed to organize &#8220-event markets&#8221-&#8230- &#8230-then all that means that this issue is probably still up in the air&#8230- &#8230-and worth fighting for.

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I&#8217-m told people who favor for-profit prediction exchanges (and in their wicked mind, that includes the author of this post) should write to the CFTC.

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UPDATE: NOT-FOR-PROFIT&#8230- or&#8230- FOR-PROFIT&#8230- That is the question.

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UPDATE: In the for-profit vs not-for-profit debate, our prediction market luminaries, doctored by Bob, are on the wrong side of the issue.

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BACKGROUND INFO:

CFTC’s Concept Release on the Appropriate Regulatory Treatment of Event Contracts&#8230- notably how they define &#8220-event markets&#8221-, how they are going to extend their &#8220-exemption&#8221- to other IEM-like prediction exchanges, and how they framed their questions to the public.

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In the for-profit vs not-for-profit debate, our prediction market luminaries, doctored by Bob, are on the wrong side of the issue.

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In the American Enterprise Institute’s proposals to legalize the real-money prediction markets in the United States of America, they advise the CFTC not to allow for-profit prediction market companies (like InTrade, TradeSports and BetFair) to operate socially valuable prediction markets &#8212-in a legal way, in the US.

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It&#8217-s a shame that our prediction market luminaries signed that piece of ****.

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Previously: CALL TO ACTION: Let’s fight so that the CFTC allows the FOR-PROFIT prediction exchanges to deal with “event markets”.

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