This week, the CFTC finally decided to crack down on the scourge of the futures world, the terrible villain that has besmirched the reputation of the industry for far too long…

Just kidding, they went after the online prediction market Intrade.

Maybe the CME is getting ready to launch their own prediction markets, and pushed for the CFTC to do this? After all, volume is down. Maybe a new set of Intrade-type products is just the thing they need. Sheldon Adelson sure could have used some election futures to hedge his $50 million election bet…

Or perhaps it’s just that, you know, Intrade was breaking the law. This isn’t the first time Intrade has run into trouble with the CFTC – last time, in 2005, they paid a fine and agreed to stop offering contracts on things that were already covered by futures trading regulations: commodities, interest rates, currencies, etc. This time around, the CFTC doesn’t seem to be joking, and Intrade would rather shut down than limit its offering to US customers.

We don’t have a dog in this fight, but the prediction market concept is certainly interesting: hedging against the outcome of an election or a box office flop, or even serving as a public good by identifying bad policies before they’re put into place. The predictions tend to be fairly accurate, too, but Intrade unfortunately blurs the line between gambling and investable markets… both of which are prohibited in US unless properly registered (especially online gambling, which is itself still caught in a shifting legal gray area). It’s not surprising that they’ve run into regulatory trouble – but it remains to be seen if they can figure out a legal way to operate in the US.

If only there was somewhere we could go to bet on whether or not they will…