Intrade to Shutdown US Accounts

Frankly, I’m shocked the site was run­ning for as long as it was.  While a respectable “pre­dic­tion” mar­ket (and by that, I mean wager book), the web­site was really noth­ing more than a place to put bets on elec­tions and mea­sure the ebb and flow of where the money was going.

While a com­mon prac­tice in the U.K — where Intrade is based and bet­ting on elec­tion out­comes is the norm — it is also highly ille­gal in the U.S.  This is only a nat­ural reac­tion to the even­tual crack­down.  It just took a while for the author­i­ties to catch up.

Online pre­dic­tion mar­ket Intrade, hugely pop­u­lar among polit­i­cal blog­gers and pun­dits, will no longer allow U.S. res­i­dents to par­tic­i­pate after run­ning into reg­u­la­tory and legal trou­ble Monday.

The com­pany alerted Amer­i­can cus­tomers on its web­site that they must close their accounts by Dec. 23, or else the com­pany will do so itself, after deter­min­ing a fair mar­ket value. Funds must be with­drawn by Dec. 31.

Intrade, which is oper­ated by the Irish firm Trade Exchange Net­work Ltd. was a favorite ref­er­ence point for polit­i­cal prog­nos­ti­ca­tors, who pointed to futures being traded on the out­come of the pres­i­den­tial elec­tion as a reflec­tion of the odds fac­ing each campaign.

The Com­modi­ties Futures Trad­ing Com­mis­sion sued Intrade and TEN on Mon­day for offer­ing com­mod­ity options con­tracts between Sep­tem­ber 2007 and June 2012 in vio­la­tion of the agency’s ban on off-exchange trading.

Accord­ing to the suit, the CFTC claimed the firm filed false cer­ti­fi­ca­tion forms stat­ing that Intrade lim­ited its offer­ings to eli­gi­ble mar­ket par­tic­i­pants. The agency also claimed that TEN vio­lated a cease-and-desist order, signed in 2005, cov­er­ing sim­i­lar conduct.

It is against the law to solicit U.S. per­sons to buy and sell com­mod­ity options, even if they are called ‘pre­dic­tion’ con­tracts, unless they are listed for trad­ing and traded on a CFTC-registered exchange or unless legally exempt,” said David Meis­ter, direc­tor of the CFTC’s Divi­sion of Enforcement.

Intrade said on its web­site that it would not charge its usual $4.99 monthly fee for Decem­ber and will waive its $20 fee levied for pro­cess­ing bank wire withdraws.

I’m work­ing under the assump­tion that one can still go to the web­site in the years to come, after all, this isn’t the Red Chinese’s “Great Fire­wall” we’re talk­ing about here. The only ques­tion now is will they even bother to oper­ate the mar­kets as they’ve done in the past, with only those out­side the U.S. allowed to par­tic­i­pate, or just shut­ting them down completely?

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