The Commodities Futures Trading Commission is suing Intrade, Reuters reports.
The suit was filed in D.C. this morning, and alleges that, since 2007, the Ireland based company is violating a 2005 agreement not to offer trades on commodities like gold and oil.
The CFT also accuses Intrade of soliciting retail customers to buy options on future events — Another violation of their 2005 agreement, which was made, because the CFTC accused Intrade of violating these same rules.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today filed a civil complaint in federal district court in Washington, DC, charging Intrade The Prediction Market Limited (Intrade) and Trade Exchange Network Limited (10), Irish companies based in Dublin, Ireland, with offering commodity option contracts to U.S. customers for trading, as well as soliciting, accepting, and confirming the execution of orders from U.S. customers, all in violation of the CFTC’s ban on off-exchange options trading. The CFTC’s complaint also charges Intrade and 10 with making false statements concerning their options trading website in documents filed with the CFTC, and charges 10 with violating a 2005 CFTC cease and desist order (see CFTC Press Release 5124-05, October 4, 2005).
Intrade and 10 jointly operate an online “prediction market” trading website, through which customers buy or sell binary options which allow them to predict (“yes” or “no”) whether a specific future event will occur, according to the CFTC’s complaint.
Specifically, according to the complaint, from September 2007 to June 25, 2012, Intrade and 10 operated an online “prediction market” trading website, which allowed U.S. customers to trade options products prohibited by the CFTC’s ban on off-exchange options trading. Through the website, Intrade and 10 allegedly unlawfully solicited and permitted U.S. customers to buy and sell options predicting whether specific future events would occur, including whether certain U.S. economic numbers or the prices of gold and currencies would reach a certain level by a certain future date, and whether specific acts of war would occur by a certain future date.
The CFTC’s complaint also charges Intrade and 10 with knowingly filing false “Annual Certification” forms with the CFTC stating that Intrade limited its options offerings to eligible market participants. Contrary to these representations, the complaint alleges that Intrade unlawfully solicited and permitted retail U.S. customers to buy and sell off-exchange options on the website.
In addition, the complaint alleges that 10 violated an order issued by the CFTC in 2005 that found that 10 had previously engaged in similar conduct and ordered 10 to cease and desist from violating the Commodity Exchange Act and CFTC regulations, as charged.
David Meister, the Director of the CFTC’s Division of Enforcement, stated: “It is against the law to solicit U.S. persons to buy and sell commodity options, even if they are called ‘prediction’ 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 ‘prediction’ markets, wherever they may be based, when their U.S. activities violate the Commodity Exchange Act or the CFTC’s regulations.”
In its continuing litigation the CFTC seeks civil monetary penalties, disgorgement of ill-gotten gains, and permanent injunctions against further violations of federal commodities law, as charged, among other relief.
The CFTC acknowledges the Central Bank of Ireland for its assistance in the CFTC’s investigation of Intrade and 10.
CFTC Division of Enforcement staff members responsible for this case are Kathleen Banar, David Slovick, Jessica Harris, Erica Bodin, Girum Tesfaye, Elizabeth Padgett, Rick Glaser, and Richard Wagner.
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