Private Prediction Markets and the Law
AbstractThis paper analyses the legality of private prediction markets under U.S. law, describing both the legal risks they raise and how to manage those risks. As the label “private” suggests, such markets offer trading not to the public but rather only to members of a particular firm. The use of private prediction markets has grown in recent years because they can efficiently collect and quantify information that firms find useful in making management decisions. Along with that considerable benefit, however, comes a worrisome cost: the risk that running a private prediction market might violate U.S. state or federal laws. The ends and means of private prediction markets differ materially from those of futures, securities, or gambling markets. Laws written for those latter three institutions nonetheless threaten to limit or even outlaw private prediction markets. As the paper details, however, careful legal engineering can protect private prediction markets from violating U.S. laws or suffering crushing regulatory burdens. The paper concludes with a prediction about the likely form of potential CFTC regulations and a long-term strategy for ensuring the success of private prediction markets under U.S. law.
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Bibliographic InfoArticle provided by University of Buckingham Press in its journal Journal of Prediction Markets.
Volume (Year): 3 (2009)
Issue (Month): 1 (April)
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Web page: http://www.ubpl.co.uk/
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- Erik Snowberg & Justin Wolfers & Eric Zitzewitz, 2012.
"Prediction Markets for Economic Forecasting,"
NBER Working Papers
18222, National Bureau of Economic Research, Inc.
- Erik Snowberg & Justin Wolfers & Eric Zitzewitz, 2012. "Prediction Markets for Economic Forecasting," CESifo Working Paper Series 3884, CESifo Group Munich.
- Snowberg, Erik & Wolfers, Justin & Zitzewitz, Eric, 2012. "Prediction Markets for Economic Forecasting," IZA Discussion Papers 6720, Institute for the Study of Labor (IZA).
- Snowberg, Erik & Wolfers, Justin & Zitzewitz, Eric, 2012. "Prediction Markets for Economic Forecasting," CEPR Discussion Papers 9059, C.E.P.R. Discussion Papers.
- Erik Snowberg & Justin Wolfers & Eric Zitzewitz, 2012. "Prediction Markets for Economic Forecasting," CAMA Working Papers 2012-33, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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