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Censorship Government The Almighty Buck United States

Prediction Market Site InTrade Bans US Customers 260

MyFirstNameIsPaul writes "In an announcement dated Monday, Nov 26, 2012, Dublin-based InTrade stated 'that due to legal and regulatory pressures, InTrade can no longer allow U.S. residents to participate in our real-money prediction markets.' The Washington Post reports that the Commodity Futures Trading Commission filed a complaint in federal court against InTrade for 'illegally facilitating bets on future economic data, the price of gold and even acts of war,' demonstrating just how far the long arm of U.S. law can reach."
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Prediction Market Site InTrade Bans US Customers

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  • by Anonymous Coward on Tuesday November 27, 2012 @12:59PM (#42107089)

    "InTrade can no longer allow U.S. residents to participate in our real-money prediction markets"..."demonstrating just how far the long arm of U.S. law can reach"

    US law being applied to US residents?! Outrageous!

    • Re: (Score:3, Interesting)

      Comment removed based on user account deletion
      • You make it sound like this particular case has anything to do with freedom of speech. It hasn't.
    • by IamTheRealMike ( 537420 ) on Tuesday November 27, 2012 @01:23PM (#42107343)

      No, US law is being applied to a non-US company because they offered services to US residents.

      In a sane setup, the US regulators would go and prosecute US residents who used illegal services, not foreign companies with foreign owners who are not in US jurisdiction. However, prosecuting lots of ordinary Americans is not politically attractive to these sorts of regulatory bodies, so they try and impose US law on foreigners instead. Now maybe these InTrade employees will have to avoid ever flying near the USA again in case their plane is forced to land and they're arrested.

      • Wonder if there was a bet on InTrade that this shit would happen. I would have put money on that. But damn it, I guess I wouldn't get paid since I'm in the US.

      • In a sane setup, the US regulators would go and prosecute US residents who used illegal services

        A simpler way would simply to make any debts associated with locally illegal services unenforceable. That way everyone's laws can stick to their own borders and it becomes very hard to offer services from one country where they are legal to another where they are not.

  • by gstoddart ( 321705 ) on Tuesday November 27, 2012 @01:00PM (#42107105) Homepage

    Why is it illegal to wager on a prediction?

    Or is this just being treated as a special case of on-line gambling, which apparently the world would end if allowed.

    • Re:Hmmm ... (Score:5, Insightful)

      by LaminatorX ( 410794 ) <sabotage.praecantator@com> on Tuesday November 27, 2012 @01:11PM (#42107201) Homepage

      The Feds' problem is that it's effectively a futures/options market in many respects, and such instruments are to be traded on regulated exchanges. Intrade is not so regulated, thus they are being excluded from the US market.

      • Re:Hmmm ... (Score:5, Informative)

        by alexander_686 ( 957440 ) on Tuesday November 27, 2012 @01:27PM (#42107395)

        To put a finer point on this, Standardized derivative contracts that trade on an exchange are heavily regulated. Option and future markets tend to be abused by inside traders, fast talking high pressure brokers, etc.

        Most derivative contracts (by notional amount), however, trade OTC and are lightly regulated. Think SWAPs, CDOs, etc. However, the traders are large companies which are heavily regulated and are (supposed) to have sophisticated risk and capital controls.

      • Also you don't want terrorists betting that there will be an attack in some city one some day and then going out and perpetrating said attack to collect on their wager.

      • Look up the term "bucket shop" for instance. It is one thing to say be a registered CFTC regulate exchange and regulated FCMs (Futures Commission Merchant), IBs, etc. In this case if I buy a gold contract THERE IS GOLD behind that contract, there is sufficient liquidity to guarantee that the trade will settle, the DTC or some other facility will insure that trades ARE settled, order flow is monitored for front running, etc etc etc. The main point there is however that the liquidity exists and that the inves

      • Futures (and options) require an underlying of some kind - a physical or financial instrument like a stock or bond. Wagering (er.. predicting) what the NFP will be, or if the Israel will attack Iran have neither of those elements behind them. Once again, nannyism raises its ugly head (and claws)
    • by s73v3r ( 963317 )

      It's not that it's illegal. There are regulations governing the trading of futures, which is what these are marketed as. The site is likely not following those regulations.

      • It's not that it's illegal. There are regulations governing the trading of futures, which is what these are marketed as. The site is likely not following those regulations.

        But, is this really 'trading futures'? My understanding is that real futures trading is defined thusly [investopedia.com]:

        A financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and

  • by MetalliQaZ ( 539913 ) on Tuesday November 27, 2012 @01:01PM (#42107111)

    Is the long arm of the law reaching too far? Sounds like a gambling company was operating in the US, or at least for US customers. Gambling is illegal (unless the government is in on it, a discussion for another day :) in the US. Therefore they filed a complaint. Sounds like everything is legit.

    • by timmyf2371 ( 586051 ) on Tuesday November 27, 2012 @01:17PM (#42107273)
      InTrade is an Irish company, founded by an Irishman, with a HQ in Dublin. They also banned the use of US credit and debit cards in 2010 - so cannot be actively seen to be soliciting business from the US.

      Considering these facts, I'm not entirely comfortable with an unrelated country being able to have such an impact on a foreign company, which only operates overseas.
      • by TubeSteak ( 669689 ) on Tuesday November 27, 2012 @02:04PM (#42107799) Journal

        Considering these facts,

        Next time try reading to the end of TFA, where they mention that the Irish company, founded by an Irishman, with a HQ in Dublin, had settled the exact same charges (with the CFTC) in 2005.

        Awkward.

      • by Nyder ( 754090 )

        InTrade is an Irish company, founded by an Irishman, with a HQ in Dublin. They also banned the use of US credit and debit cards in 2010 - so cannot be actively seen to be soliciting business from the US.

        Considering these facts, I'm not entirely comfortable with an unrelated country being able to have such an impact on a foreign company, which only operates overseas.

        Since the Irish are terrorist friendly, I'm surprised we haven't invaded yet.

  • by oldhack ( 1037484 ) on Tuesday November 27, 2012 @01:03PM (#42107129)
    The US law affecting the US citizens, what's that got to do with "long arm"?
  • Good riddance! (Score:5, Insightful)

    by Anonymous Coward on Tuesday November 27, 2012 @01:15PM (#42107235)

    I, for one, am very glad these unlicensed options traders are getting stamped out! There's no room in the economy for these shenanigans! Just think what could happen if people started massively trading options on unregulated exchanges - people would start speculating, maybe betting on, say, housing prices going up or down, and before you know it, we could have a housing assets bubble that would burst, bring down the economy and require massive government bailouts! I'm so glad that options trading is restricted only to regulated, licensed exchanges where such things couldn't ever happen......

    The lesson here is this: if you're a small person trying to speculate - that's bad! If you're a giant investment bank trying to speculate - go right ahead, just as long as your dealer^H^H^H exchange is "regulated".

    • by PPH ( 736903 )

      First of all: I say, let them trade. Its not a US exchange. If it or its participants go under, tough luck.

      Second: For banks and other regulated institutions, let them trade. On their own accounts, that is. And, oh by the way, for the purposed of minimum capital requirements, unregulated and unregistered securities are worth zero. You can stuff your vault full of them, but when the regulators come to do an audit, they are just so much toilet paper.

      Third: Why does the IRS allow capital gains to be calculat

      • Re:Good riddance! (Score:5, Insightful)

        by s73v3r ( 963317 ) <s73v3r@g[ ]l.com ['mai' in gap]> on Tuesday November 27, 2012 @02:17PM (#42107965)

        I'm perfectly fine with the taxes being paid on only the profit. I'm just wondering why the hell simply having money to invest is rewarded more than actually doing work. Capital gains should be taxed at the same rate as ordinary income, if not higher. There is no reason whatsoever that we should be rewarding people for simply having money.

        • by dnaumov ( 453672 )

          I'm perfectly fine with the taxes being paid on only the profit. I'm just wondering why the hell simply having money to invest is rewarded more than actually doing work. Capital gains should be taxed at the same rate as ordinary income, if not higher. There is no reason whatsoever that we should be rewarding people for simply having money.

          You have things completely backwards. Somebody already did work for his/her money and paid taxes on that income and now you want to enforce the same damn taxes on the income this person makes from his/her investment made with his already taxed money?

          • by PPH ( 736903 )

            with his already taxed money?

            Only on the profits. And only for registered securities (following my plan).

            I'm willing to trade normal income tax rates on captial gains for an end to double taxation of dividends. The shareholder pays income tax on them anyway. Let corporations pay them before taxes. Like they do with debt. With this change, I'd expect a change away from debt and toward equity financing by many corporations.

        • by dnaumov ( 453672 )

          There is no reason whatsoever that we should be rewarding people for simply having money.

          There is no reward involved, there is just less punishment.

          God forbid a person decides to take his/her own retirement into their own hands and prudently invest their money. No-o, we want everyone to be disinterested in savings, so that everybody can be forced into relying on goverment checks. Much easier to control the population that way.

        • There is no reason whatsoever that we should be rewarding people for simply having money.

          Except that "simply having money", as you put it, is proof that they produced something valuable and chose not to immediately spend the resulting income on consumption. In essence, by consuming less than they produced, they made a loan to the rest of society.

          In the absence of currency manipulation, that would lead to deflation, and the resulting increase in purchasing power would be their interest on the loan. With the policy of forced inflation in vogue right now, other compensation must be offered to main

          • There is also the fact, as least in the case of stocks, that the money being taxed as capital gains has already been taxed once as corporate profits.

            All money in the economy is taxed numerous times - that's inevitable when you tax transactions. You get your income, pay tax off it, then spend it on some goods and services, at which point it becomes someone else's income and taxed again etc. There's no reason why capital gains should be treated specially here.

      • by Duhavid ( 677874 )

        You invest 100, and receive back 105, nominal profit of 5.
        Assuming you are taxed at 15% ( at capital gains rates, income rates would be more, I presume ) on the 105.
        If I have done the math right, tax is 15.75, 10.75 more than your profit.

        • by PPH ( 736903 )

          If I have done the math right, tax is 15.75, 10.75 more than your profit.

          Almost.* For an unregistered security. If its such a great idea, sit down with the SEC or CFTC, come up with a plan to establish a market, record transactions, etc. and we'll credit you the $100.

          *Actually, your tax could be as high as $36.75. We don't know if it was long term, short term or what. As an unregulated, unregistered transaction, we don't know how long you held it. Maybe only since yesterday.

  • by whoever57 ( 658626 ) on Tuesday November 27, 2012 @01:23PM (#42107335) Journal
    No brokerage in the UK will allow a "US person" to open an account. This has been true for at least 3 years and probably more.
  • by Nidi62 ( 1525137 ) on Tuesday November 27, 2012 @01:27PM (#42107389)
    I had money down at InTrade betting that this was going to happen. Now how am I supposed to get my money!?
  • by Teppy ( 105859 ) on Tuesday November 27, 2012 @02:10PM (#42107861) Homepage
    http://betsofbitco.in/ [betsofbitco.in] has no restrictions on location. They're probably totally legal here as well, because except for sports gambling, and futures markets specifically, there are no US federal laws prohibiting gambling. Several laws (The Unlawful Internet Gambling Enforcement Act of 2006, The Federal Wire Wager Act, 18 U.S.C. 1084) prohibit the transfer of funds by wire for purposes of gambling, but gambling itself is only regulated at the state level (with the two specific exemptions above.)
  • InTrade predictions are less gambling than the stock market. At least the predictions on InTrade are less affected by random unscrupulous manipulators. Take the predictions of the ice cover on the Arctic, for instance: if you did your homework, you knew there would be very little ice cover on the Arctic this year, and could bet accordingly.

  • by J'raxis ( 248192 ) on Tuesday November 27, 2012 @04:05PM (#42109247) Homepage

    Unless "the law" means "whatever the U.S. government wants." They filed a complaint in their own courts, which have no jurisdiction over Ireland, and an Irish company caved in under what was an empty threat.

"The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts." -- Bertrand Russell

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