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Washington - U.S. regulators on Monday sued Intrade, the online prediction market that gained popularity as an informal oddsmaker for the presidential election, saying it illegally let customers bet on future economic data, the price of gold and even acts of war.
The Commodity Futures Trading Commission said in a complaint in federal court that Intrade and its operator solicited customers to trade investment contracts that technically are options. Options must be traded on approved, regulated exchanges.
"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" laws and rules enforced by the agency, CFTC enforcement director David Meister said in a statement.
By requiring that options be traded on approved exchanges, Meister said, regulators can "police market activity and protect market integrity."
Intrade did not respond to an emailed request for comment.
It was unclear whether regulators believe that all trades on Intrade by U.S. investors are illegal. The CFTC said it would not comment further because the matter was in litigation.
Intrade is known for facilitating bets on award shows, weather and other high-profile events. The prices at which customers are willing to make those bets are cited as informal odds. Trade Exchange Network, Ltd., Intrade's operator, also used to allow betting on sports through other sites that it operated.
For example, on Monday the site gave "Argo" a 28.5 percent chance of winning the Oscar for best picture and assigned a 19 percent chance that the United States or Israel would launch an airstrike against Iran by June 30.
The CFTC oversees markets for futures and options, investments that allow people to bet on the future prices of commodities like grain and oil. Those contracts help farms, airlines and other businesses to protect themselves against unexpected price swings.
In the complaint, the CFTC alleged that Intrade, based in Ireland, had illegally solicited U.S. investors to use the website between September 2007 and June 25 of this year.
Intrade and TEN falsely claimed in annual reports that the contracts were not being sold to ordinary U.S. customers, the CFTC said. Regulators want the companies to pay fines and return profits that were obtained illegally. They want the site and its operators barred from any future activities related to options trading.
Intrade users reported on Twitter that the site already blocks them from trading contracts related to the prices of oil and gold.
One of them, Joe Schilling, posted an image of an email he said was sent by Intrade in 2009, stating that crude oil and gold contracts were unavailable to U.S. users "due to a regulatory request" from the CFTC.