Disclaimer: This post involves more discussion of laws than usual. I am not a lawyer. Assume there are some errors. I will try to correct them after I

Mantic Monday 5/13/24 - by Scott Alexander

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2024-05-14 21:30:02

Disclaimer: This post involves more discussion of laws than usual. I am not a lawyer. Assume there are some errors. I will try to correct them after I learn about them.

The Commodity Futures Trading Commission, the body that thwarts real-money prediction markets, has announced that it will be thwarting them even harder from now on.

The proposed resolution is 17 CFR Part 40. It starts by explaining the current state of the law: the CFTC is allowed to regulate “events contracts”, ie predictions. The law says they should favor contracts about economic events (like “will interest rates go up”), and disfavor contracts about atrocities or gaming (like “will there be a terrorist attack?” or “will the Yankees win the World Series?”). Everything else - the bread and butter of prediction markets - is in a gray zone that the CFTC has to review on a case-by-case basis.

The new resolution says that, if you think about it, elections and awards ceremonies are kind of like gaming (they’re a competition and you’re betting on the winners). And they’re more likely to be bet on by gamblers than by people with legitimate financial motives. So the CFTC is moving them out of the gray zone and prohibiting them by default.