Hahn and Tetlock argue that presidential betting would pass their economic purpose test, and that sports betting would not pass their test. However, one can argue that sports teams, local sports bars, and even city governments could use sports betting markets to hedge risk. I believe that, as a practical matter, sports betting would simply have to be called out as an exception in any such test.
My Remarks: If I understood well Paul Architzel’s take in FI magazine, under a broad reading of the excluded commodity concept, “high-visibility” sports prediction markets could be offered by designated contract markets (such as HedgeStreet). As for presidential prediction markets, I did report on this blog that the CFTC is rumored to have already given its green light.
David Pennock’s second point:
Executives at TradeSports argue that these distinctions put them in safer legal territory than more typical online gamling operations. I’m not sure that US prosecutors would agree. The argument can sound like Napster’s argument that they were not directly responsible for users of their service who were violating the law.
My Remark: Betting market expert Niall O’Connor agrees with David Pennock:
The company [managing TradeSports/InTrade] continues to accept bets from US citizens, somewhat in denial of the scope of the new act, perhaps, not least the provision that a bet is “the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance.” Trade Exchange Network is a privately held company. The company’s principal banker is believed to be the Allied Irish Bank.
