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Catching a Falling Financial Knife

Anti-Business US Government Puts a Stop to Intrade Making US Customers Happy

Politics / US Politics Nov 28, 2012 - 03:51 AM GMT

By: Jeff_Berwick

Politics

Reports have been swirling around about the death of another business at the hands of a US government agency.  While those reports weren't totally true, as usual, the US Government has squashed any attempt by unfree US citizens to do what they want.  Intrade is still alive and kicking (although it probably wouldn't be if it was based in the US), minus its US customers...for now anyway.  As of December 23, 2012, all US accounts with Intrade will be suspended thanks to the meddling of the US Commodity Futures Trading Commission (CFTC).


While Intrade itself isn't dead, its founder is.  Irish businessman John Delaney founded Intrade in 2001.  He died at age 42 last year in an attempt to realize his lifelong goal of climbing Mount Everest.  He was just 50 meters from the peak and since his body was unable to be recovered, he's still there.  (I wonder if there was a bet on whether or not he'd make it.)  Delaney was born in 1969 near Dublin where Intrade would later be based. He got his MBA in finance from the University College Dublin and after a career in investment banking he got into online gambling in 1999. 

For those of you who are unfamiliar with Intrade: this company simply allows anyone to bet on yes-or-no events in the real world.  You can literally bet on anything with a yes-or-no outcome.  Examples listed right now on the site's “How It Works” section are:

·         The Dow Jones to close on or above 13,000 on 30 Dec 2012

·         Barack Obama to be reelected president in 2012

·         The United States or Israel to bomb Iran before the end of 2012

(Note the second example.  That's a little dated.  They should have replaced it with “CFTC to forbid US customers from using our website.”... I would've put hard earned money on that one... easy call!)

It's actually very simple and serves a very basic desire among humanity to try to predict events...and make a little money by being right.  What's more, since there's money on the line, the players tend to have the best information available to make the best possible guesses. 

Is it accurate?  That is to say, do the majority of bettors on Intrade tend to be right about the outcomes on which they're betting?  Amazingly so, as you'd expect the case to be in a semi-free market when money is on the line.  Having something to lose tends to sharpen performance (the reason entrepreneurs and businesspeople will always make better decisions than politicians).  In 2011, professional pundit Rachel Weiner admitted, “The site's collective wisdom tends to be more reliable than the cadre of professional pundits when it comes to forecasting election results.” She continues, “In 2008, bettors got only two states wrong – Indiana and Missouri...In 2004 [however] the site got every state right.”

You can listen to immoral talking head James Karville yammer on about all his picking of the elections, but he never even came close to the free market's performance.  

Delaney sold Intrade to Tradesports in 2003.  Based out of Ireland, Intrade does not comment on the legality of customers in other countries using its services.  And who can blame them? Especially when there are rogue states armed to the teeth and with a powerful inclination to meddle with their subjects' personal lives and financial dealings, particularly with foreign banks and businesses.  You know, like the USSA.

The CFTC has been stiff-arming Tradesports since 2005 when Tradesport first applied for permission to open a regulated futures exchange in the US.  You see, while Intrade has nearly 100,000 members in over 162 countries, the bulk of its membership are US residents.  Yet on November 26, 2012, the US CFTC filed a civil lawsuit seeking an injunction against allowing US citizens to trade on Intrade's website.

Why does the CFTC have such a bug up its collective butt about Intrade?  According to Brad Plumer on the Washington Post blog:

“Intrade...wasn't merely allowing participants to bet on the outcomes of events like elections or wars or the Oscars. The site was also allowing its US customers to bet on the future price of things like gold or oil between 2007 and 2012, the lawsuit said. If that's true, it would mean Americans were essentially able to buy and sell commodity option on Intrade away from regulated exchanges. According to the CFTC, that's against the law.”

It was already difficult for US customers to use Intrade since due to new banking regulations in 2012, US customers were no longer allowed to fund their Intrade accounts with their credit or debit cards like non-US customers could.  This resulted in each trade costing US customers $20.

Now the CFTC claims that Intrade's allowing US residents to bet on commodity outcomes “violated market integrity.”  How it violates market integrity is something they'll never say... because its total BS.  From government thug David Meister, the Director of the the CFTC's Division of Enforcement:

“It is against the law to solicit US 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.”

Anyone paying attention knows that the CFTC and any government agency does nothing to protect the integrity of anything.  What they do is protect their fascist manipulated markets over which they exercise extreme control to tip the scales towards Goldman Sach$ and the other Wall Street fascist companies that can do whatever they want.  To translate, what criminal Meister really means is that Intrade's operations placed these bets outside of US regulatory control via the CFTC, and even though the customers were happy and the market was self-regulating, the government needs to throw its weight around and interfere with every exchange in as many parts of the world as possible.  Intrade dealt fairly with its customers - something you cannot say the same for with the big banks and brokerages in the US - and its predictions as determined by the direction of the majority of bets were consistently accurate.  Liberty-defending investigative journalist John Stossel put it well:

“These regulations don't help police market activity. When people make money on Intrade, Intrade sends them the money. There are no allegations of fraud. Customers are happy with Intrade, judging by increased activity on the site (over $50 million was bet about whether Obama or Romney would win.)

“The market polices itself.”

Of course it does.  But government agencies can't let it.  It's just not in the government's nature to allow markets to work.  The very essence of government is “interference backed by the most and biggest guns”...while making sure to get a healthy cut of the action.  Intrade is just the latest victim in this racket.  Last year it was online poker.  People peaceably betting with each other on outcomes?  “Not on our watch,” says the CFTC. 

Economist and Intrade fan Bryan Caplan has the CFTC's number, however.

“The CFTC's real complaint is that consumers eagerly bet on Intrade because the company exemplifies market integrity: “I trust Intrade with my money because of their reputation, not government regulation. Reputation: That's the same mechanism, of course, that underlies eBay, Amazon Marketplace, and the whole cornucopia of internet commerce that the mainstream information economist of 1990 would have dismissed as free-market Fantasy Island.

“...Americans send money to Intrade because Intrade delivers the goods (and produces the positive externality of accurate forecasts in the process!).

“In the information age, firms' reputations are just a click away. That's all the protection any consumer needs. The only people the CFTC is 'protecting' are their own obsolete employees.”

Reputation is the only “regulation” the free market needs.  But government can't have their subjects understanding that.  That would undermine the thread-bare legitimacy of the state.  Imagine, the world doesn't need a political mafia loaded to the gills with guns to take our money and tell us what to do!  Well, that'd be anarchy!

Intrade Shows Up At Its Own Funeral To Laugh At US Gov't

In typical free market fashion, Intrade is already adapting to the state's attempts to kill its business.

From Intrade's website:

"The report of Intrade's death was premature"

We understand yesterday's announcement was met with surprise and disappointment by our US customers, but this in no way signals the end of Intrade in the US. In the near future we'll announce plans for a new exchange model that will allow legal participation from all jurisdictions - including the US. We believe this new model will further enhance Intrade's position as the leading prediction market platform for real time probabilities about future events.

For our non-US customers, we will continue to offer real-money prediction markets. In the coming weeks and months we plan to implement a number of improvements to the Intrade website. These include expanding our market categories, adding more convenient funding options and a new and improved trading interface. We’ll keep you posted on these initiatives as they develop.

You  just can't keep a good business down.  Take note, US government and governments everywhere.  The free market is more fit for survival than the state could ever hope to be.  This is more than just the struggle of some betting site to keep making money.  The reaction of Intrade is an encouraging sign of things to come.

It should also be noted of the importance of alternative currencies to the fiat gumbo in order to sidestep all these violent incursions into our lives.  If we all could switch to a un-legislatable currency like Bitcoin or even to precious metals in one form or another it would keep these violent criminals more at bay.

In the meantime, staying a step ahead – or out of the way – of the state is an ongoing task.  Right now only American Intrade accounts are being closed.  This is just the latest example of why it's handy to have a foreign passport and presence, in order to protect from the aggressions of the planet's most aggressive and presumptuous of states.  And though the US is in many ways the worst, most violent, most criminal, most overreaching government on the globe, it's hardly alone in its odiousness.  Recall that recently the Dutch government made GoldMoney stop accepting Dutch customers.  Or, as I wrote about last year, when Internaxx, based in Luxembourg called me to close my account because I was "Canadian".  I responded, I'm not "Canadian", I'm a human being.  They retorted, "that's still not good enough".  So I pulled out one of my other passports from a Caribbean nation and they backpeddled, "Oh, well now we can accept your business."  Having another citizenship and passport gives you an out and a way to keep on operating when one of your tax farmer governments pulls stunts like this.

I have to point out, however, that having citizenship in two Western governments is like having the fire too jump into after the pan becomes too hot.  That's why at TDV Passports, we offer citizenship programs in much freer parts of the world where governments aren't quite as...robust...as they are in Europe and north of the Mexican border.

I highly doubt the Paraguyan... or Dominican Republic... or Cambodian governments (just to name a few in which we have been deslaving people) will soon be calling a press conference to announce that their citizens can't use Intrade.

It's just a curiosity when the majority of US citizens... or citizens of other western countries will finally realize they are not only not the freest on Earth... but some of the least free human beings on this planet.

Regards,

Jeff Berwick

Anarcho-Capitalist.  Libertarian.  Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks.  Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast.  Jeff is a prominent speaker at many of the world’s freedom, investment and gold conferences as well as regularly in the media.

© 2012 Copyright Jeff Berwick - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Jeff Berwick Archive

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Catching a Falling Financial Knife