Commission Bans Trading On 2012 Election

by InvestorPlace Staff | April 2, 2012 6:10 pm

[1]Investors looking to profit directly from the upcoming general election by betting on who they believe might win are out of luck.

The Commodity Futures Trading Commission, which monitors futures and options markets, has banned the North American Derivatives Exchange from offering political event contracts[2]. A political event contract would allow an investor to wager on who they thought would win, say, the presidential election this fall, or congressional elections.

The issue appears to be how closely linked these contracts are to gambling. Many states — and even Las Vegas — have already prohibited such wagers[3]. There was also concern that supporters of a candidate could use the contracts to “game” the election, by buying large positions in a candidate and driving public opinion in his or her favor.

Although Nadex appears to have lost out on this opportunity, investors interested in making money off of the presidential election still have options. Intrade, one of the largest prediction markets in the world, is still accepting similar bets on the presidential election. This is because Intrade is based in Ireland. It is unclear whether American law applies to Intrade’s offerings.

As it stands currently at Intrade, Mitt Romney is being given a 93.8% chance of winning the Republican nomination, while Barack Obama is being given a 60.5% chance of being re-elected.

— Benjamin Nanamaker, InvestorPlace Money & Politics Editor

The opinions contained in this column are solely those of the writer.

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