Intrade Advised U.S. Customers to Close their Accounts and Withdraw Funds after Regulators filed a Lawsuit against the Company for Violating the Ban on Off-exchange Options Trading.
Intrade will no longer allow customers in the United States to participate in its real-money prediction market after the Commodity Futures Trading Commission (CFTC) filed a complaint against the Ireland-based online prediction market.
According to the announcement of Intrade in its website, U.S. customers must close their accounts and withdraw their funds by December 31. The company said, “We are sorry to announce that due to legal and regulatory pressures, Intrade can no longer allow US residents to participate in our real-money prediction markets.” The Ireland-based prediction market added, “We understand this announcement may come as a surprise and a disappointment, and we apologize for the short notice and haste required to deal with this.”
The CFTC alleged that Intrade and Trade Exchange Network Limited (TEN) violated its restrictions on off-exchange options trading and that the company knowingly filing false annual certification forms with the commission, that its options offering were limited to eligible market participants.
Based on the lawsuit, Intrade and TEN operated an “online prediction”market trading website from September 2007 until June 2012, and illegally solicited and allowed customers in the United States to buy and sell trade options products such as gold prices and currencies prohibited by the CFTC.
CFTC Division of Enforcement Director, David Meister emphasized that Intrade and TEN violated its regulations, even if the company’s consider its trading activities on commodity options as “prediction” contracts.
Meister said, “It is against the law to solicit U.S. persons to buy and sell commodity options, even if they are called “predictions” 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. Today’s action should make it clear that we will intervene in the “predictions” markets, wherever they may be based, when their U.S. activities violate the Commodity Exchange Act or the CFTC’s regulations.”
The CFTC wants the court to order Intrade and Ten to pay civil monetary penalties, disgorge its ill-gotten gains, and to order permanent injunctions to prevent both companies from violating the federal commodities law further.