11/26/2012 5:38PM

U.S. regulators sue Intrade over wagers on commodity future prices

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A U.S. financial regulatory commission on Monday filed a lawsuit against Intrade, claiming that the Ireland-based betting company violated federal commodities law by offering U.S. customers the chance to wager on the future prices of gold, oil, and other commodities.

The lawsuit, which seeks an injunction on illegal conduct by the company, was filed by the Commodity Futures Trading Commission. The lawsuit claims that Intrade had assured the regulatory agency that it would not offer wagers on the future prices of certain commodities by U.S. customers, but that it did so from 2007 to 2012, despite a warning issued by the agency in March.

The suit states that the bets were technically options, which are required to be traded on regulated exchanges.

“Today’s action should make it clear that we will intervene in the ‘prediction’ markets, wherever they may be based,” the CFTC’s enforcement director, David Meister, said in a statement released by the agency.

Intrade, which was launched in 2005, offers a wide variety of bets on its site, including wagers on elections and popular awards like the Oscars. The site’s odds for the early November presidential election were widely cited.

The CFTC action could have a bearing on plans by companies to begin operating betting exchanges in the United States. Legalized by California and New Jersey, but not yet in operation in either state, betting exchanges offer customers the ability to lay or back horses.

U.S. officials of the largest betting-exchange operator, Betfair, did not immediately return phone calls late Monday afternoon. Betfair, which owns TVG, is seeking agreements allowing it to launch a betting exchange in California after the state horse racing board authorized rules for their operation at a meeting several weeks ago.