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Prediction Market 'Bets Of Bitcoin' Available To U.S. Customers

This article is more than 10 years old.

Launched in August 2011, Bets of Bitcoin is an anonymously-operated prediction market using the cryptographic money bitcoin. Users from anywhere in the world can place bets on the yes or no outcome of future real world events, such as will gold surpass $1,800 per ounce by December 31, 2012 or will the existence of extraterrestrials by confirmed officially by the U.S. government before the end of the year.

The openness and accessibility of the betting site has become more important now that the Commodity Futures Trading Commission (CFTC) has taken legal action against non-anonymous Dublin-based Intrade for unlawfully soliciting and permitting U.S. customers to buy and sell options predicting whether specific future events would occur. Ridiculed as useless and obsolete, the CFTC appears to have raised the bar on doublespeak as they persecute markets with actual integrity and simultaneously reinforce the corruption in the so-called 'officially-sanctioned' markets.

Intrade bowed to pressure from regulators on November 26th and announced that it was closing its doors to U.S. bettors. In a stunning justification of global policing power and indicating a particular annoyance with prediction markets, David Meister, the Director of the CFTC’s Division of Enforcement, explained why even foreign operators can and will be regulated:

It is against the law to solicit U.S. persons to buy and sell commodity options, even if they are called ‘prediction’ contracts, unless they are listed for trading and traded on a CFTC-registered exchange or unless legally exempt. The requirement for on-exchange trading is important for a number of reasons, including that it enables the CFTC to police market activity and protect market integrity. 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 the Commodity Exchange Act or the CFTC’s regulations.

Prediction markets like Bets of Bitcoin and Intrade have been popular for betting on the outcome of political elections, winners of Hollywood Oscars, winners of sporting events, and even scientific breakthroughs. According to Wikipedia, certain kinds of prediction markets may also create controversial incentives.

Other real-money prediction markets operate in Gibraltar, New Zealand, and the United States. There is also an innovative binary options broker based in Cyprus that was denied U.S. regulation when sought.

Regardless, regulation by CFTC or any U.S. regulatory body should not even be the objective of prediction market sites. Without anyone being victimized, regulating the ability of individuals to play games or trade on predicting future events violates free speech. Prediction markets have become a valuable research tool and "one big thing these markets can do is allow researchers to test the hypothesis of the 'wisdom of crowds'," says Rajiv Sethi, a professor of economics at Barnard College.

The binary option and derivatives trading site Nadex was recently turned down for regulation when it attempted to include political event contracts in its already-regulated range of markets for financial contracts.

Instead of seeking regulatory approval, Bets of Bitcoin focuses on financial privacy and anonymity so that it's irrelevant where the customers are geographically located. Anyone can create a bet statement and new bets are vetted by moderators to eliminate unwanted bets or bets whose outcome can't be easily determined or is easily manipulated.

Granted, Bets of Bitcoin differs from Intrade in several other ways, most notably in the way that the instruments are constructed. Intrade offers a full trading platform so you can get in and out of positions even before the expiration date whereas Bets of Bitcoin offers an allocated payout of losing bets based on weighted time of entry and shares commission with the bet creator. Liquidity is of course better on Intrade since it has been around much longer. The largest bet currently listed on Bets of Bitcoin involves a total of ฿258.55 (equivalent to $3,490.43) on whether the price of gold will or will not exceed $1,800/oz by December 31, 2012.

Online gambling is still illegal in the United States through federal laws and many state laws, but operating with "play money" like Bitcoin rather than "real money" could enable relationships with U.S. players to be cultivated. Due to regulations in the U.S. that restrict what U.S. residents can do with their cards, Intrade would not permit the use of U.S.-based credit or debit cards. However they did require customers to agree that it is legal for them to participate in the prediction marketplace.

Intrade says that non-U.S. customers will continue to have access to the company's real-money prediction markets and they promise that "in the near future we'll announce plans for a new exchange model that will allow legal participation from all jurisdictions - including the U.S."

Why wait? In the meantime, test your predictive skills at Bets of Bitcoin and turn your wisdom into bitcoins.

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