My co-author Tom Bell offers two proposals to protect prediction markets from CFTC enforcement:
Why take chances, though? I suggest two policies to protect prediction markets and the honest talk they host. First, the CFTC should implement the policies described in the jointly authoredComment on CFTC Concept Release on the Appropriate Regulatory Treatment of Event Contracts, July 6, 2008. (Aside to CFTC: Your web-based copy appears to have disappeared. Ask me for a copy.)
Second, real-money public prediction markets should make clear that they fall outside the CFTC’s jurisdiction by deploying notices, setting up independent contractor relations with traders, and dealing in negotiable conditional notes. For details, see these papers starting with this one.
The Op-Ed Tom, I, and Miriam Cherry authored about the First Amendment implications of the CFTC’s suit is here.