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.


Justice Ginsburg’s Crucial Dissent in the Texas Voter ID Case

The Jarring Experience of Watching White Americans Speak Frankly About Race

How Facebook’s New Feature Could Come in Handy During a Disaster

The Most Ingenious Teaching Device Ever Invented

Sprawl, Decadence, and Environmental Ruin in Nevada

View From Chicago

You Should Be Able to Sell Your Kidney

Or at least trade it for something.

Space: The Next Generation

An All-Female Mission to Mars

As a NASA guinea pig, I verified that women would be cheaper to launch than men.

Terrorism, Immigration, and Ebola Are Combining Into a Supercluster of Anxiety

The Legal Loophole That Allows Microsoft to Seize Assets and Shut Down Companies

  News & Politics
Oct. 19 2014 1:05 PM Dawn Patrol Justice Ruth Bader Ginsburg’s critically important 5 a.m. wake-up call on voting rights.
Business Insider
Oct. 19 2014 11:40 AM Pot-Infused Halloween Candy Is a Worry in Colorado
Oct. 17 2014 5:26 PM Judge Begrudgingly Strikes Down Wyoming’s Gay Marriage Ban
  Double X
The XX Factor
Oct. 17 2014 4:23 PM A Former FBI Agent On Why It’s So Hard to Prosecute Gamergate Trolls
  Slate Plus
Slate Picks
Oct. 17 2014 1:33 PM What Happened at Slate This Week?  Senior editor David Haglund shares what intrigued him at the magazine. 
Oct. 19 2014 4:33 PM Building Family Relationships in and out of Juvenile Detention Centers
Future Tense
Oct. 17 2014 6:05 PM There Is No Better Use For Drones Than Star Wars Reenactments
  Health & Science
Space: The Next Generation
Oct. 19 2014 11:45 PM An All-Female Mission to Mars As a NASA guinea pig, I verified that women would be cheaper to launch than men.
Sports Nut
Oct. 16 2014 2:03 PM Oh What a Relief It Is How the rise of the bullpen has changed baseball.