Bitcoins were created to allow the movement of money without regulatory oversight. The Commodity Futures Trading Commission (CFTC) exists solely as a regulatory body. As such, some conflict between the two entities is inevitable.
Prediction market Bets of Bitcoin may have found away around such conflict through a relatively simple strategy: avoiding regulatory compliance all together.
What exactly are prediction markets? They’re online marketplaces where users can place money on real-life events, such as what the price of gold will be by the end of 2012, when the existence of extraterrestrial life will be confirmed, or a number of other serious, goofy, and moderate wagers.
As Forbes points out in its article about the CFTC’s role in futures trading regulations, popular prediction markets such as Intrade and Nadex have come under fire from allowing U.S. citizens to engage in its practices. While the markets countered that they are not based in the U.S., and therefor not suggest to regulation, the CFTC responded with, essentially, an eloquently phrased “nice try.”
David Meister, the director of the CFTC’s Division of Enforcement, said the following after Intrade’s ruling on November 26:
“Today’s action should make it clear that we will intervene in the ‘prediction’ markets, wherever they may be based, when their U.S. activities violate the Commodity Exchange Act or the CFTC’s regulations.”
Forbes called the ruling a “stunning justification of global policing power and indicating a particular annoyance with prediction markets,” and noted that Intrade has since closed its doors to U.S.
Rather than seek regulatory approval, Bets of Bitcoin has taken an alternate route. It makes bets anonymous and protects financial privacy, making it “irrelevant” where the customers are located.
What do you make of prediction markets? Is it fair for the CFTC to rule on non-U.S. entities? Would you feel secure gambling with bitcoins? Let us know in the comments below.
To read more about Bets of Bitcoin and its regulatory sidestep, read the full Forbes piece here.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More