The Electric Commentary

Wednesday, September 21, 2005

ProTrade update

In the comments section of the previous post Mike asked why this was not gambling. I figured that they had probably copied a futures market model and that they would be OK under US law, and I compared it to the Iowa Electronic Market. I may have overstated my case a bit, as Christine Hurt writes at The Conglomerate:

Initially, participants will be given play money, but the site plans to eventually charge a fee, keep fees in escrow, and distribute 97-98% in prizes. I would suggest charging an "administration fee" and offering stated, non-fluctuating prize amounts, similar to other fantasy sports sites. Or, get a no-action letter from the SEC like the Iowa Electronic Markets. In time, the distinction between illegal sports gambling and recreational fantasy sports and information markets is going to get blurrier and blurrier. I hope so -- then the federal government may have to make a decision as to what is legal and what is not, and back that up with a consistent policy statement.

Read the whole thing, including the comments where guestblogger Mike Madison raises an IP issue.

Apparently it is far from clear what legally constitutes gambling v. investing.


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