This week, government regulators told a Chicago futures exchange that it can't take bets on who will win the 2012 elections. The North American Derivatives Exchange, or Nadex, had applied for permission to let people buy and sell contracts for as little as $100 that would pay out based on the outcome of the presidential race, or whether Democrats or Republicans end up controlling the House and Senate next year. The Commodity Futures Trading Commission said the contracts amount to "gaming and are contrary to the public interest." Was that the right call?
This ban doesn't seem fair: It seems plausible, as Nadex argued, that investors might want to use these derivative contracts to, say, "hedge against the possibility of a tax increase if President Barack Obama won a second term," says Paula Dwyer at Bloomberg. Moreover, the CFTC "allows political events contracts to trade on the Iowa Electronic Market, sponsored by the University of Iowa." And the website Intrade, based in Ireland, allows election betting. Why not "bring that activity onshore," where it can be regulated?
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