Betting on the Presidency

By: Lisa Sylvester
By: Lisa Sylvester

WASHINGTON 12/27/2011 -- You can bet on your favorite team. You can bet if you think the price of oil is going to rise or fall you can even bet if you think the unemployment rate is going to go up or down. In the near future you may be able to win big if you accurately predict who will win the next presidential race.

The North American derivatives exchange or Nadex in Chicago has filed an application with federal regulators to offer trading on political events. Nadex says the trading would be similar to the way a farmer might trade for the future price of wheat or corn.

"Whether you're talking tax policy or health care costs or energy policy elections matter and have a significant economic effect on people. We think it fits squarely within the traditional functions performed by the futures exchange," said Timothy McDermott of Nadex.

You can place political bets currently through the Iowa electronic markets and an exchange in Ireland called Intrade. But the big difference with Nadex - is you could have big money on the line. These markets can be a good predictor of not only who sits in the White House, but also which party controls the House and the Senate.

The value of contracts would rise and fall before the election as a candidate's fortunes ebb and flow. The commodity futures trading commission- which regulates futures trading- can reject Nadex's application and at least one of the five commissioners opposes the proposal.

Bart Chilton notes that federal law prohibits contracts on other events like terrorism acts or political assassinations. "I'm not sure that we want to throw our political process into the trading pits, where just a few well-heeled speculators could theoretically wager on the outcome of an election, and thereby take away the power of actually people who vote. So - even in Vegas they don't allow gambling on elections, and they know something about election gambling." said Chilton.

But Nadex insist political outcomes trading has a public merit and it hopes to have the options list January 4th

If the CFTC doesn't act by January 4th then the application is automatically approved. Three of the five commissioners would have to vote to stop the trading from going forward. Another option is the commissioners could ask for more time to review the Nadex proposal.

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