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Feds veto election-based trading by Nadex

Updated: May 4, 2012 8:13AM

Looking for a place to bet on the presidential election? Federal regulators said Monday you can’t do that at a Chicago-based exchange under their jurisdiction.

The Commodity Futures Trading Commission rejected an application by the exchange to list futures contracts tied to political outcomes. The North American Derivatives Exchange, called Nadex, wanted to offer contracts based on the 2012 presidential race as well as on which party will control the House and Senate.

The CFTC sniffed that the contracts “are gaming and are contrary to the public interest.”

There are other places that host the trading, however. The feds have allowed the University of Iowa to offer election-based contracts.

Intrade, which is based in Ireland, is a large Internet operator dealing in political event contracts. It is not known if the CFTC has any jurisdiction over Intrade, whose market has become a yardstick for popular opinion on upcoming campaigns.

Intrade markets currently show traders believe President Barack Obama has a 60 percent chance of re-election.

The Nadex plan was to offer “binary” futures contracts. They pay off a fixed amount, $100 under Nadex’s proposal, for a correct bet. Losers would pay whatever that contract cost them on the exchange.

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