Legal Prediction Market for Presidential Elections

December 28th, 2011

From Politico:

Nadex said it plans to file a request Monday with the Commodity Futures Trading Commission to list contracts on the victor of the 2012 presidential race and the majority parties in the House and Senate.

If the federal regulator has no objections, trading could start as early as January 4, the day after the Iowa caucuses, Nadex executives said. The CFTC — which could hold up the listing for further analysis — declined comment on its procedures. . . .

“There’s always a puzzle when new financial markets begin as to whether people will want to trade in them,” said Justin Wolfers, a University of Pennsylvania economics professor. “Whenever economists think up new ideas of things people want to trade, often we’re wrong.”

And it seems that Dodd-Frank actually paved the way for these markets:

The rebirth of political markets was made possible, in part, by the Dodd-Frank financial reform passed last year.

By specifically banning contracts tied to terrorism, assassination, war, or any illegal activities, the law provided guidance indicating that speculation on elections was again acceptable.

“We think it’s not just consistent with the letter of the law,” said Nadex general counsel Tim McDermott, “but the spirit.”

Between this news, and the recent news that DOJ views the wire fraud law to only apply to gambling on sporting events, I think FantasySCOTUS may be a vehicle for a money-driven market.

H/T Doug Mataconis (a fellow GMU alum)