Intrade, Internet Gambling and Commodities Trading

2012 was looking like a great year for Intrade, an online market that allowed people to place bets on political contests and other events. Intrade had accurately predicted the outcome of the presidential election for two times in a row. On November 26th the Commodity Futures Trading Commission sued Intrade and accused the site of running an illegal exchange. Intrade responded by immediately banning Americans from the site. Earlier the company had indicated that a majority of its customers were located in the US but that may not be the case. Since most commodities trading is little more than gambling the rationale behind the lawsuit may be hard for some to understand.

This week New Jersey became the third state to legalize internet gambling. The move was possible thanks to a policy reversal by the department of justice in December 2011. For years the DOJ had prosecuted online gambling operators under the 1961 wire act. In a response to Illinois and New York who wanted to know if it would be OK to sell lottery tickets on the internet the DOJ rules that only sportsbetting is illegal online. Those in the internet gaming industry were shocked. David Stewart, a lawyer specializing in gambling law at Ropes & Gray. Stated “The Justice Department came out 180 degrees opposite of where it was before. I’ve never seen that.”

Even though the Commodity Futures Trading Commission lawsuit against Intrade is still pending the new DOJ position may clear the way for Intrade to return as an online political betting site. In a past ruling the CFTC said that political betting is out of the organization’s scope. The Nevada statute allows 20 games including poker, craps, internet bingo and several other games. Companies that want to set up sites for games not on Nevada’s list may apply for a license from the Nevada Gaming Control Board. Anthony Cabot, a Las Vegas lawyer who specializes in gambling law. Stated “There’s nothing that would stop Intrade from getting a license in the state of Nevada.”

Intrade may resist becoming a ‘gambling’ website. The company has always thought of itself as a legitimate market and not a casino. The site was founded by a stock trader and for many the difference between trading and gambling may only be semantic. In fact at one time commodities trading was considered illegal gambling. Political intraders in the US have been angry ever since the site exited the US and would like nothing better than Intrade to return to the US.