The folly of making political prediction markets like Intrade illegal

On Monday the U.S. Commodity Futures Trading Commission (CFTC) sued offshore prediction market operator Intrade, prompting it to close its doors to U.S. customers. This will likely kill Intrade in its current form. …

Why prohibit something so harmless? After all, U.S. policy already allows many forms of gambling that have significant social costs and produce no useful information.

The real reason may be found in debate surrounding another recent setback for prediction markets, Congress’ last-minute modification of the Dodd-Frank financial reform bill in 2010 to prohibit markets on box-office receipts planned by the Hollywood Stock Exchange (HSX). [cont.]

Eric Zitzewitz, Dartmouth College (Reuters)