Comment on Jason Ruspini rebuts Eric Zitzewitz on the regulation of political predict

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This wasn’t a rebuttal, and I’m glad that someone is still arguing for prediction markets. The tricky part here was that Dodd-Frank (July 2010) did not directly prohibit such contracts but said that the CFTC may determine that such contracts (that involve activity that is unlawful under any State law) are contrary to the public interest. That didn’t really sound like anything new, but in late July 2011, the CFTC released regulations to comply with Dodd-Frank, and those included an outright prohibition for such contracts. That was odd since the broad interpretation of the regulation, possibly unintended, appears to contradict the earlier approval of event contracts, including those of the Cantor Exchange (at which time Dodd-Frank had basically taken shape). Moreover, part of the historical background and purpose of the Commodity Exchange Act was to supersede State gambling laws where legitimate hedging was involved. Hopefully either my broad interpretation is wrong, or the regulation will be revised in a way that is still in-line with Dodd-Frank, but the chances of these specific contracts being approved seems very slim.



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