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Regulation Looms for Prediction Markets

The Commodity Futures Trading Commission is likely to become involved in regulating event futuresand it just may boost these markets

Here's a prediction: Prediction markets are about to become federally regulated.

On July 7, the federal agency that regulates futures markets will begin reviewing two months' worth of responses to a question the agency posed to the public in May: "Should the Commodity Futures Trading Commission regulate prediction markets?" If the public's responses thus far—or the language in the CFTC's request for comment—is any indication, it's likely that the agency ultimately will. When it does, get ready to see more small-stakes prediction markets like the experimental, $500-maximum-bet Iowa Electronic Markets, or IEM, that forecast things like Presidential elections or future monetary policy.