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Trading the Presidential Marketplace for an Outright Casino

One of the observations about the recently shuttered Intrade predictions market—at least when it came to American voting—was that it was nothing more than gambling on the outcome of elections. That was seen, somehow, as bad, a perception enhanced by some states' laws prohibiting betting on elections. Still, as our Seth Masket wrote last month shortly after Intrade went dark, it’s really no different than any of the legal markets in which we, say, bet on the price of pork bellies:

If you never used it, Intrade was really a clever gambling device, allowing you to bet on the probability of an event occurring. You establish an account and put some money in it. Then you look among hundreds of different betting “contracts” (who’s going to win the presidency, who’s going to win American Idol, will U.S. GDP growth average above 3 percent this year, etc.) and decide where to place your money. Surer things were more costly bets. But you could buy and sell a contract any time prior to the event. So, for example, if you had bought an Obama re-election contract on May 1, 2011, (then valued at about 60) and then sold it on May 3, 2011, the day after Bin Laden was killed (when the contract was valued at about 70), you’d have turned a tidy profit.

But Intrade, to be safe, based itself in Ireland, and not New York City or Las Vegas, to stay a hair out of reach of American regulators. Its current troubles, by the way, seem a product more of financial irregularities than a blown call on Romney, although efforts by the U.S. Commodity Futures Trading Commission to prevent Americans from using Intrade certainly aren’t helping. Whether Intrade will rise from the ashes is anyone’s bet right now. In a more pro-active approach, the law-abiding academics behind the Iowa Electronic Market, an even more innocent exploration of predicting election outcomes, in 1992 troubled the CFTC to rule on whether their experiment was illegal or not. The answer they got was a sort of don’t-ask, don’t-tell bureaucratic waffle, as Emily Badger explained last year:

Technically, what they were doing was illegal. But the CFTC concluded that the market didn’t violate the public’s interest, and so it was permitted to continue under a series of restrictions, and under the understanding that all of this was meant to be an academic undertaking. The researchers argued that they had to have some money on the table, or the market wouldn’t work (and even a dollar seems to be enough to get people’s attention). But no single trader could invest more than $500 in the market, and the market itself had to be limited to 1,000 traders. The researchers also weren’t allowed to advertise or charge commission.

The feds were less forgiving when the North American Derivatives Exchange asked to sell real live futures contracts. On April 2 of last year, the CFTC rejected the application, explaining, “As a result of reviewing the complete record, the CFTC determined that the contracts involve gaming and are contrary to the public interest, and cannot be listed or made available for clearing or trading.”

Who is the killjoy in all these stories? The CFTC, which acts like it has jurisdiction and therefore has. So the good folks of Nevada, who brought us Bugsy Siegel and the Bunny Ranch, are considering ripping down the pretense that these are "markets" and not "games." Tick Segerblom, a Las Vegas Democrat in the state Senate, introduced a bill amending the pro-gambling state’s pari-mutuel system so that is no longer a misdemeanor to wager on an election or candidate (but only on federal elections or candidates). “If they can bet on our election in England,” TIME quotes Segerblom, “then there’s no reason why we couldn’t bet on our election in the United States.” And right now, London-based Ladbrokes has Marco Rubio as the Republican favorite for 2016, but the real punters will likely take a flutter on Chelsea Clinton as the Democratic nominee at 200-1.

Just think—your next tout could be an elbow-patched poli-sci prof.