Regardless of the *policy* behind the scope of the CFTC’s authority, it must have legislative authority to act. That is why I start with the language of the CEA. Policy matters, but only at the margin. The margin does matter, here, I grant, given that the CEA speaks so abstractly. But textual arguments matter, first and foremost.

Ditto the example afforded by past practice. I think it most reasonable to understand some of the CFTC’s regulations over event markets as questionable but as-yet unchallenged (indeed, probably even *welcomed*) extensions of its authority. What the CFTC has gotten away with by no means establishes the proper scope of its authority.

What’s your take on the delay in judging this case, as reported by JC Kommer?

http://www.midasoracle.org/200.....continued/

JCK seemed to imply that it was bad omen.

The earlier paper also proposes without any real discussion that rights are being delivered in the CEA’s definition of CFTC jurisdiction — what I called the crucial interpretation of the second paper. And as I argued last time, “Delivery could instead refer to delivery of a thing, or of cash, the amount of which is conditional.”

It just confuses many readers to write as you did that, “The CEA does not cover contracts intended to effectuate future delivery, much less contracts that effectuate immediate delivery.” All this means, I think, is that the CEA would not have jurisdiction over a furniture delivery contract, for instance — in which there is little risk or room for speculation anyway. This idea is orthogonal to whether or not event markets fall under CFTC jurisdiction. Even if you liken the furniture delivery contract to a science claim contract in form, the latter still carries risk and is conducive to the type of speculation the CEA sought to curb as described by Lynn Stout’s paper, so it is not all obvious that they lie outside the CEA — quite the opposite, by that line of logic.

Even accepting the likely crippling “eligible contract participant” requirement of an excluded commodity, science claims (or at least their use to reward innovation) might not qualify since outcomes would not be “beyond the control” of researchers. Likewise, a hybrid (future/security) instrument designation might invoke insider trading laws.

Although I am not familiar with all of the court decisions and opinions relevant to CFTC purview, the actions of the agency in approving the single-event catastrophe future and hedgestreet’s payroll market suggest that they do consider themselves to have jurisdiction over event markets. Their opinion on CME’s credit event and Nymex’s property damage futures will probably only reinforce this.

I agree that a bottom up strategy of navigating state laws is a much-neglected option in “the literature”, and I look forward to more discussion on this. Thanks again for educating the prediction market sphere on all of this.