CFTC Rightly Cracking Down on Intrade Commodities Futures

A blog about business and economics.
Nov. 26 2012 5:14 PM

CFTC Rightly Cracking Down on Intrade Commodities Futures

Scanning the Web, the digirati mostly seem apalled that the Commodity Futures Trading Commission is going after Intrade, but honestly I don't see that Intrade has a leg to stand on here.

In principle, Intrade is a "prediction market" and not a casino or an end run around regulation of commodities markets. But when Intrade goes and launches contracts on the price of oil and gold, then they're clearly crossing that line. This is futures speculation, there's a legal way to do it, and what Intrade is doing isn't that legal way. Now in practice, I doubt there'd be any harm if the CFTC decided to play nice and let this slide. But refusing to let it slide is exactly what we need regulators to do. In the Clinton and Bush eras, regulators generally seemed to take the view that the regulations themselves were a kind of unfortunate superstition. Insofar as smart bankers and their lawyers could devise innovative ways to get around the spirit of the rules while theoretically staying within the letter of the law, everyone was supposed to applaud. It was all clever gamesmanship. "Regulatory arbitrage" is the technical term.


And that's exactly what the CFTC is saying no to here. It looks like an oil futures contract and it quacks like an oil futures contract, so they're not going to let it happen just because you phrase it as a "prediction market." Good for them! That's how it ought to be done.

Correction, Nov. 26, 2012: This post originally misspelled the name of the Commodity Futures Trading Commission.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



Meet the New Bosses

How the Republicans would run the Senate.

The Government Is Giving Millions of Dollars in Electric-Car Subsidies to the Wrong Drivers

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Cheez-Its. Ritz. Triscuits.

Why all cracker names sound alike.

Friends Was the Last Purely Pleasurable Sitcom

The Eye

This Whimsical Driverless Car Imagines Transportation in 2059

Medical Examiner

Did America Get Fat by Drinking Diet Soda?  

A high-profile study points the finger at artificial sweeteners.

The Afghan Town With a Legitimately Good Tourism Pitch

A Futurama Writer on How the Vietnam War Shaped the Series

  News & Politics
Sept. 21 2014 11:34 PM People’s Climate March in Photos Hundreds of thousands of marchers took to the streets of NYC in the largest climate rally in history.
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Tv Club
Sept. 21 2014 1:15 PM The Slate Doctor Who Podcast: Episode 5  A spoiler-filled discussion of "Time Heist."
Sept. 21 2014 9:00 PM Attractive People Being Funny While Doing Amusing and Sometimes Romantic Things Don’t dismiss it. Friends was a truly great show.
Future Tense
Sept. 21 2014 11:38 PM “Welcome to the War of Tomorrow” How Futurama’s writers depicted asymmetrical warfare.
  Health & Science
The Good Word
Sept. 21 2014 11:44 PM Does This Name Make Me Sound High-Fat? Why it just seems so right to call a cracker “Cheez-It.”
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.