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..... , - Jj'" ,,... ----- ---- ., OF . 0 THE SECRET.-RIA \ .. _\...; .,.. j · - \. - ..J .1\. I 

July 41h 2008 

The Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street NW 

Washington, DC 20581 

U.S.A. 

Attention: Office of the Secretariat 

INTRADETHE PREDICTION MARKET LIMITED 

t. 

lOB Beckett Way 

Park West Business Park 

Dublin 12, l.reland. 

COMMENT 

RE: "Concept Release on the Appropriate Regulatory Treatment of Event Contracts" 

To Whom it May Concern: 

It is an honour for me as Chief Executive Officer of In trade the Prediction Market Limited ("In trade") 

to provide price discovery information on thousands of event markets free of charge to notable 

institutions such as yourselves at the U.S. Commodity Futures Trading Commission, the U.S. Navy, the 

Federal Reserve Banks of New York, Richmond, and Chicago, the European Central Bank, the Bank of 

Japan, the American Enterprise Institute - Brookings Joint Centre, CATO Institute, and the Bank of 

England. We have similarly supplied our price discovery event market information to political 

organisations, students and staff at every Ivy League College, and students and staff at over 50 

universities worldwide. 

We estimate that over 300 global media businesses such as The New York Times

1

, The Wall Street 

Joumaf, The Washington Post, The Financial Times, The Los Angles Times, Chicago Tribune, 

Economist, Bloomberg, Reuters, Forbes, Time3

, Fortune

4

, CNN, CNBC, Fox, ABC and others have 

used Intrade event market information. 
Investment firms on Wall Street, and the other major financial centres of the world, have solicited and 

been provided with Intrade price discovery event market information. The above lists are not 

exhaustive. 

Further, Intrade provides free real-time transparent price discovery event market information to 

millions of people from the general public. While Intrade serves a global community and has 

registered members from 162 countries, our 82,000 plus membership are predominantly5 resident in the 

United States. The predictive probability information on event markets that we supply to the general 

public is both intuitive and readily and rapidly assimilated6 without the necessity for paid subscriptions 

or a financial education. 

In trade has been transparent and industrious, as have others, in nurturing the development of the event 

market industry. Intrade as a profit-maximizing business does of course expect to significantly benefit 

from its dedicated employment. However the benefits to society at large will be equivalently great 

from Intrade's focus on event markets. 

While U.S. institutions and society benefit from Intrade's services it is perversely unclear as to whether 

Intrade, and indeed myself, are considered persona gratis by the United States. However, we are more 

optimistic than ever that In trade as the de facto leader in the event market industry sector will soon 

have the ability to stand on a firm, transparent and appropriate regulatory footing thanks to the process 

that the CFTC has accelerated through their request for comments on how to regulate event markets. 

Not since the Industrial Revolution have the risks and their commensurate opportunities of dealing with 

great uncertainty and rapid change that we all face been so high. Much of this change and uncertainty 

is technology driven, with most countries, organizations and households accepting, in theory at least, 

that they must change. 

The recent implosion of credit markets is just one example of the great uncertainty and potential for 

events impacting citizens of the United States and further afield. 

To adapt to a changing world in an orderly and optimal manner requires access to information, robust 

decision-making processes and the courage and determination to grasp the opportunities that a dynamic 

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world offers. The CFTC and indeed the United States itself has access to the information, the decisionmaking expertise, and a historical track record of determination and accomplishment. 

But the relentless change that we all face will be best dealt with if we have the best information, in real 

time, to reduce uncertainty, risk and stress7

. Event market information can and has increased the 

quality and timeliness of decision-making. Event markets can act as a democratic mechanism that 

gives voice to the broadest range of event stakeholders and, in so doing, aggregates a peerless 

information set. By encouraging the aggregation, distribution, validation and appropriate use of the 

best event market information, society will benefit even more than it does today from event markets. 

To do otherwise than to encourage event market development would be a societal travesty. 

The dynamic nature of the world that we live in, where the pace and systematic impact of change seem 

to be increasing, will be greatly aided if event markets are given a certain regulatory footing in the 

United States and other jurisdictions. This, coupled with the fact that markets excel in aggregating 

information and estimating the value of a product or the likelihood of an event occurring, testifies to 

the logic that the price discovery that event markets produce should now be encouraged by the CFTC. 

The CFTC by clarifying the status of event markets now will be of great service to Americans. In this 

regard the CFTC has an important opportunity and one that the CFTC seem very positively biased to 

grasp in light of its statements, such as ... 

The CFTC state on their website that they have "An Important Mission in the Ever-Changing 

World ofFinance." 

"The CFTC assures the economic utility of the futures markets by encouraging their 

competitiveness and efficiency." 

"The CFTC is also mandated to enable futures markets to serve the important function of 

providing a means for price discovery and offsetting price risk." 

CFTC Acting Chairman Walt Lukken, when announcing the execution of a memorandum of 

understanding with the SEC on March 11, 2008, stated: "The regulatory structure that oversees the 

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U.S. financial markets embrace innovation, growth and competition in the global marketplace, without 

compromising market integrity, customer protection and the public good." 

The above statements, in addition to the Concept Release by the CFTC, are very encouraging. It is 

specifically this price discovery and risk management mandate that justify the CFTC's embrace of 

event markets, should justification be needed. 

Intrade has listed 211,6078 individual event markets and aggregated and distributed predictive event 

market information on subjects such as Arctic Oil Drilling, Climate Change, Commodities, Company 

Earnings, Constitutional Referenda, Currencies, Disease Outbreaks, Earthquakes, Economic Numbers, 

Entertainment Awards and Earnings, Indices, Euro Adoption, Federal Reserve Announcements, Gas 

Prices, Gasoline Tax, GeoPolitical Events, Homeland Security in the U.S., Mergers & Acquisitions, 

Social Security Reform. and U.S. Taxes. This list is far from exhaustive. 

No other platform has listed more event markets than Intrade. To the best of our knowledge and belief 

the event market leadership position that is often ascribed to Intrade9 is wholly justified from a review 

of the breadth of the event markets listed and information we have aggregated and distributed. 

Information, as noted above, that is used by governmental agencies, businesses, academics, and the 

general public to reduce uncertainty and in so doing increase the speed and quality of decisions being 

made. 

While the obvious benefits to the general public in terms of price discovery and decision-making of 

some Intrade event markets will be more obvious than others, we can make robust arguments that all 

have the potential to serve the dual purpose of price discovery and a mechanism for offsetting price 

risk. 

The CFTC by clarifying its position on event markets will give all event market stakeholders valuable 

direction on market and participant eligibility. Whether used at the federal government level or by the 

individual citizen, event markets provide a magnificent opportunity to use price discovery information 

in managing economic risk. Here are just a few examples from the 211,607 event markets we have 

listed. 

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lntrade has listed markets on the probability of the Homeland Security alert level being above or below 

a certain level at a certain date. "The United States spends roughly $100 billion per year on homeland 

security" according to the White House10• The costs of migrating from a threat level of"Guarded" to a 

threat level of "Elevated" have very significant costs for the government, business, and society11 • By 

utilizing event market price discovery information on the probability that the alert level will be at a 

certain threshold on a given date, the economic consequences of the threat level can be managed in a 

more insightful way. 

Jason Ruspini has suggested markets to lntrade on whether the marginal personal income tax rate for 

single U.S. filers will be equal to or greater than a range of specified percentages for tax years 2009, 

2010 and 2011. Having spoken directly to a number of tax paying citizens from the United States, the 

transparency of this information undoubtedly serves a public good. Is there a Unites States resident 

taxpayer who will read this comment who is not interested in the taxes she or he will pay next year? 

On a more macro level, In trade has listed a market on whether the cold fusion experiment of Dr 

Yoshiaki Arata will be replicated in a peer-reviewed scientific journal before 31 December 2009. The 

possible impact of such a development to our energy needs little hyperbolae. The fact that President 

Bush requested $25 billion for the U.S. Department of Energy's 2009 Budget12 speaks to the 

importance of maximum transparency in such matters. It may also be interesting to note that $493 

million of the $25 billion was allocated to Fusion Energy Services. Does transparency to such price 

discovery information serve positively the United States and others? Absolutely! 

Professor Koleman Strumpf suggested that Intrade list a market on whether Blu-Ray Disc sales will 

outnumber HD-DVD disc sales in the United States in 2008. If an organisation's employees or profits 

are potentially influenced by the outcome of this event, as were Toshiba's, the main supporter of HDDVD, then access to such information is both valuable and gives opportunity for welfare maximisation 

Intrade has also listed, at the request of University of Westminster Business School, markets on 

whether the number of violent crimes committed in 2010 will be lower than those committed in 2007. 

Intrade has additionally listed at the request of a United States resident member of our platform a 

market on the impact of U.S. Government debt if a non-Democrat is elected president of the United 

States in 2008. 

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Professor Eric Zitzewitz, Professor Robin Hanson13, Professor Justin Wolfers 14 and others at the 

forefront of event market academia have all suggested event markets to Intrade in the past that have 

been listed and which provided event market information both for academic study and business and 

general public use. 

Imagine if you were a resident of a state such as Florida that is frequently exposed to severe storms and 

how crucial information on the likelihood of a storm hitting your state can be if your business, family 

and friends are likely to be impacted by such an occurrence. Intrade lists event markets on such 

eventualities. 

The event markets listed on Intrade provide price discovery information on whether an earthquake 

measuring 9.0 or more on the Richter Scale will happen anywhere in the world in 2008; whether Avian 

Flu H5Nl is confirmed in the United States in 2008; whether the U.S. carries out an overt attack on 

North Korea; or even whether Robert Mugabe departs his presidency in 2008. These significant events 

are highly relevant to millions of people in the United States and elsewhere. 

President Bush stated 15 in an address on global climate change that: "This is a challenge that requires a 

100 percent effort; ours, and the rest of the world's." It seems to us impossible to make a "1 00 percent 

effort" to address the challenge of climate change without using event markets to aggregate 

information, such as that provided by Intrade' s market on whether 2008 will be one of the warmest 

years ever recorded. 

All of the markets cited above give information on the probability of the event occurring. Some of the 

information aggregated and distributed by Intrade has been more predictive than other. The predictive 

accuracy of Intrade's event markets and event markets generally have been cited and studied 

extensively by academics and others including, but not limited to Professor Robin Hanson, Professor 

Charles Noussair, Professor David Paton, Professor Leighton Vaughan Williams, Dr. David Pennock, 

Professor Eric Zitzewitz, Professor Mark Perry16, Professor Erik Snowberg, Professor Marco Ottaviani, 

Professor Justin Wolfers, Professor Ko1eman Strumpf, and Professor Paul Tetlock. 

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Nearly all leading academics, not known for their attraction to unanimity, have publicly supported 

event markets. A great majority of these academics have been supplied with Intrade market data in the 

past, a service that Intrade intends to continue, for all study leads to an increase in transparency and 

understanding of event markets. It seems that the leading event market academics make no distinction 

between the benefits derived from academic owned markets like Iowa Electronic Markets and 

commercial market platforms like Intrade. 

Yet many academics, with some notable exceptions, do temper their policy prescription to suggest a 

"safe harbor" for academic sites where research might be more generally available. As noted above 

Intrade has gladly supplied its event market data, typically free of charge to most of the leading 

prediction market academics and their students, and we are committed to encouraging the future study 

of event markets by continuing to supply our event market data free of charge or at very deep 

discounts. The academics that study event markets do a great service in developing our understanding 

of the strengths and weaknesses of event markets. Some commentators suggest that market liquidity 

and breadth typically benefit all event market stakeholders. Thus far commercial platforms like Intrade 

seem to be providing the greatest depth and breadth in event markets. 

As Intrade has been a staunch supporter of event market academic study, and supplies greater depth 

and liquidity in its event markets than any other platform, it seems strange not to be a preferred 

purveyor. Perhaps the predominant reason many academics have held back from advocating and 

treating all event markets alike is a sense that initiatives to clarify or unwind the legislation restraining 

the optimal development of event markets is unlikely to be achievable. It seems many academics and 

commentators suggest a slow bureaucratic and pragmatic caution rather than focus on the optimal 

result. While the optimal result may be more challenging to achieve, for consistency, for better price 

discovery for the benefit of all, as well as for the development of In trade, we encourage CFTC to apply 

common goals, objectives and standards for all participants. 

While some evidence and event markets have highlighted that event markets do not always provide 

robust predictive information, the preponderance of the research suggests that event markets have both 

the ability and track record of providing the best available information upon which decisions may be 

based or optimised. Of course the uncertain status of event markets constrains the development of 

liquidity, price discovery and by logical extension societal benefits. 

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Intrade has received testimonials from numerous U.S. regulated businesses and private citizens which 

state they would like to trade on certain event markets but are unable due to the regulatory uncertainty. 

Therefore, unless and until event markets are given a certain status they will not develop to their full 

potential. 

Based on the above and comments by many others, some of whom have been mentioned by name in 

this comment, the price discovery mandate that the CFTC has can only be served if event markets are 

embraced. 

In terms of offsetting price risk and the opportunity for hedging, the overwhelming majority of markets 

listed by Intrade can easily be seen to have underlying economic implications and risks. For example, 

U.S. tax rate changes, a negative geopolitical event, an increase in the threat level to homeland security 

and the associated costs of a higher threat level, or indeed Social Security reform all have massive 

economic justifications across society. 

As with the CFTC's price discovery mandate, it is impossible for us to imagine how risks can be 

optimally assessed and managed without the status of event markets being clarified. 

The CFTC are also sensitive to retaining the competitiveness of futures markets and retaining 

"competition in the global marketplace". There has been much written 17 about the United States losing 

its edge in global financial markets. Often cited is that burdensome and inflexible regulations, most 

notably the Sarbanes-Oxley legislation passed by Congress in 2002, are driving business to London, 

Hong Kong, Frankfurt and elsewhere. In this regard, the CFTC has an opportunity to be a world first 

and embrace event markets. In so doing the CFTC will ensure the United States' leadership position is 

encouraged for the important and growing event market industry. 

The greatest challenge in bringing about an appropriate and successful embrace of event markets by the 

CFTC is unlikely to be identifying and agreeing that the public good will be served, or that risks may 

be better managed. The challenge for the CFTC may well be the uncertainties relating to legal and 

jurisdiction issues. In these matters there are experts far better versed then Intrade to opine. 

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The financial events of the last six months in which virtually the entire world financial system stopped 

functioning to a greater or lesser extent has highlighted what can happen when many of the world's 

largest financial institutions make concurrent similar mistakes. Such systemic contagion has led 

commentators 18 to suggest a more fundamental approach to how and what we regulate. Where event 

markets are concerned we are hopeful that this is the case and that the level of regulation is such that 

the evolving stage of the event market industry is not stifled. 

We are proud to be at the forefront of the development of the event market industry. We are 

determined to continue providing the best information on relevant event markets to the widest 

audience. We wish to solidify our regulatory position in the U.S. and elsewhere. 

We strongly encourage the CFTC to clarify the situation with regard to event markets for the benefit of 

all, even if there are costs to Intrade. We are highly optimistic that the CFTC '":'ill grasp this 

opportunity to benefit all society and we wish to serve our own most important role in an industry 

niche that we have been privileged to help shape. 

Respectfully Submitted on behalf of the entire Intrade Team by 

John Delaney 

Chief Executive Officer 

CC to Fax 202.418.5521 and e-mail: secretary@cftc.gov. 

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1 "lntrade ... isn't just an entertaining Web site. It is the latest iteration of one of the most important economic developments 

of modern times." David Leonhardt, Economics Reporter, The New York Times, February 14,2007 

2 Costs of regulation are high in the U.S., "that's a key reason the leading commercial prediction market, lntrade, is based in 

Ireland" Prof Paul Tetlock, Wall Street Journal, May II th 2007 

3 "On Dec. II, 2003, lntrade's contract on Saddam Hussein's capture suddenly began to move .... Two days later, Saddam 

was in custody." Bill Saporito, Time Magazine, October 24, 2005 

4 "At FORTUNE we often write about the latest hot company, but it's rare that we get a chance to introduce you to an 

entirely new market... lntrade is the only efficient market system around for investing in, well, almost anything" Andy 

Serwer, Managing Editor, Fortune, August 8, 2005 

5 78% of traffic to lntrade.com in the period I January to 30 June was from the U.S. 

6 "lntrade futures market- the greatest time-saving invention of this century." John Tierney The New York Times 

7 The Uncertainty Stress Scale: its development and psychometric properties. Can J Nurs Res. 1994 Fall;26(3): 15-30, 

PMID: 7889446 

8 As of June 30 2008 

9 For many people, lntrade is the king of the prediction markets." Stephen Dubner, Freakonomics, The New York Times 

July 5 2007 

10 http://www.whitehouse.gov/homelandlbook/sect5.pdf. 

11 http:/ I feedroom.businessweek.com/?fr _ story=5a3aa8086dbd52b35ae21 c7 f5abe94 f85 fa0a8ab&rf=sitemap. 

12 http://www.energy.gov/news/5920.htm 

13 "Want straight answers on what will happen in politics and current events? Answers without partisan bias or wishful 

thinking? You can't do much better than the prices at lntrade." Professor Robin Hanson, Professor of Economics, George 

Mason University 

14 "My forecast? Prediction markets will become ever more important to business and public policy. And lntrade are 

running the most interesting markets around." Professor Justin Wolfers 

15 http://www. whitehouse.gov/news/releases/200 1/06/200 I 0611-2.html 

16 "Analysts can debate about a recession as much as they want, but talk is cheap. It's great to have [lntrade] futures trade 

where people put money behind their beliefs!" Professor Mark J. Perry, University of Michigan-Flint 

17 http://www.international-economy.com/TIE_Sp07 _Baker. pdf and http://knowledge.emory.edu/article.cfm?articleid= I 015 

18 "Regulatory Underkill," Arthur Levitt Jr., Wall Street Journal, March 21, 2008 

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