Reports have been swirling around about the death of another business at the hands of a US government agency. While those reports weren't totally true, as usual, the US government has squashed any attempt by unfree US citizens to do what they want. Intrade is still alive and kicking (although it probably wouldn't be if it was based in the US), minus its US customers...for now anyway. As of Dec. 23, 2012, all US accounts with Intrade will be suspended thanks to the meddling of the US Commodity Futures Trading Commission (CFTC).
While Intrade itself isn't dead, its founder is. Irish businessman John Delaney founded Intrade in 2001. He died at age 42 last year in an attempt to realize his lifelong goal of climbing Mount Everest. He was just 50 meters from the peak and since his body was unable to be recovered, he's still there. (I wonder if there was a bet on whether or not he'd make it.) Delaney was born in 1969 near Dublin where Intrade would later be based. He got his MBA in finance from the University College Dublin and after a career in investment banking he got into online gambling in 1999.
For those of you who are unfamiliar with Intrade: this company simply allows anyone to bet on yes-or-no events in the real world. You can literally bet on anything with a yes-or-no outcome. Examples listed right now on the site's “How It Works” section are:
· The Dow Jones to close on or above 13,000 on 30 Dec 2012
· Barack Obama to be reelected president in 2012
· The United States or Israel to bomb Iran before the end of 2012
(Note the second example. That's a little dated. They should have replaced it with “CFTC to forbid US customers from using our website.”... I would've put hard earned money on that one... easy call!)
It's actually very simple and serves a very basic desire among humanity to try to predict events...and make a little money by being right. What's more, since there's money on the line, the players tend to have the best information available to make the best possible guesses.
Is it accurate? That is to say, do the majority of bettors on Intrade tend to be right about the outcomes on which they're betting? Amazingly so, as you'd expect the case to be in a semi-free market when money is on the line. Having something to lose tends to sharpen performance (the reason entrepreneurs and businesspeople will always make better decisions than politicians). In 2011, professional pundit Rachel Weiner admitted, “The site's collective wisdom tends to be more reliable than the cadre of professional pundits when it comes to forecasting election results.” She continues, “In 2008, bettors got only two states wrong – Indiana and Missouri...In 2004 [however] the site got every state right.”
You can listen to immoral talking head James Carville yammer on about all his picking of the elections, but he never even came close to the free market's performance.
Delaney sold Intrade to Tradesports in 2003. Based out of Ireland, Intrade does not comment on the legality of customers in other countries using its services. And who can blame them? Especially when there are rogue states armed to the teeth and with a powerful inclination to meddle with their subjects' personal lives and financial dealings, particularly with foreign banks and businesses. You know, like the USSA.
The CFTC has been stiff-arming Tradesports since 2005 when Tradesport first applied for permission to open a regulated futures exchange in the US. You see, while Intrade has nearly 100,000 members in over 162 countries, the bulk of its membership are US residents. Yet on Nov. 26, 2012, the US CFTC filed a civil lawsuit seeking an injunction against allowing US citizens to trade on Intrade's website.
Why does the CFTC have such a bug up its collective butt about Intrade? According to Brad Plumer on the Washington Post blog:
“Intrade...wasn't merely allowing participants to bet on the outcomes of events like elections or wars or the Oscars. The site was also allowing its US customers to bet on the future price of things like gold or oil between 2007 and 2012, the lawsuit said. If that's true, it would mean Americans were essentially able to buy and sell commodity option on Intrade away from regulated exchanges. According to the CFTC, that's against the law.”
It was already difficult for US customers to use Intrade since due to new banking regulations in 2012, US customers were no longer allowed to fund their Intrade accounts with their credit or debit cards like non-US customers could. This resulted in each trade costing US customers $20.