The U.S. Commodity Futures Trading Commission (CFTC) announced it has filed a civil complaint in federal court against Intrade, effectively blocking access to the world’s best-known predictive trading market to U.S. residents.
Intrade, based in Ireland, offers participants an online opportunity to invest money in predicting the likelihood of events, ranging from presidential election outcomes to Academy Award winners. The prediction market is considered a form of crowdsourced collective wisdom, and Intrade has racked up numerous accurate forecasts for events over the years. (For example, throughout the fall, the market was saying it was 60% likely that President Obama would be re-elected, versus about a 30% probability of a Romney victory.)
The CFTC alleges Intrade was facilitating off-exchange options trading among U.S. customers, as well as making false statements to that regard. The CFTC also says it regards the buying and selling of commodity options as subject to requirements that the site register as a commodities exchange.
For its part, Intrade says “this in no way signals the end of Intrade in the U.S. In the near future we’ll announce plans for a new exchange model that will allow legal participation from all jurisdictions - including the U.S. We believe this new model will further enhance Intrade’s position as the leading prediction market platform for real time probabilities about future events.”
Intrade operates with real money, but it’s primary currency is information — and by asking for a commitment of real money, is able to provide a glimpse into trends before they even happen. Predictions markets have grown to be a valuable information source for business leaders.
The question is: even if or when Intrade works things out out with the agency — will this open the door to actions against other prediction markets, or other forms of crowdsourcing in which there is financial compensation? Will this put a chill on crowdsourced collective wisdom?