In my last post, I puzzled over why a prediction exchange might want to qualify as an EBOT (exempt board of trade). The benefits: relatively light federal regulatory burdens and preemption of state laws. (On the latter point, which I ignored to make earlier, see CEAct, 7 U.S.C. § 7a-3(e).) The large cost: Narrow limits on who can trade; only a "eligible contract participant" can. I doubt that a prediction market open only to, say, multimillionaires or registered brokers would do very well at quantifying the current consensus about future events.
But maybe I dismissed the EBOT status too quickly. Look again at CEAct § 1a(12)(C). It defines an eligible contract participant as "any other person that the Commission determines to be eligible in light of the financial or other qualifications of the person," (emphasis added). That suggests two legal hacks.
First, I could get the CFTC to allow a market in science claims open only to a large group of presumptively qualified commentators. That group of "eligible contract participants" might, for instance, include all faculty of accredited institutions of higher learning. And maybe their students, too. And what about mere high school graduates? Would you really want to exclude the likes of Bill Gates? Well, anyhow, you get the idea: Use § 1a(12)(C) to set up a usefully open EBOT.
Second, I could get the CFTC to define "other qualifications" relative to the market itself. In other words, I'd have the CFTC say, "Any person is qualified to trade on an EBOT that deals only in claims fitting the following description: . . . ." (More likely, the CFTC's statement would refer to a supplementary document, as defining the proper sort of claim would prove tricky.)
That second hack stretches the law a bit. Recall that the relevant statutory language reads, "other qualifications of the person," (emphasis added). Does the nature of the market you play constitute one of your qualifications? Arguably not. It looks more like a qualification of the market.
At all events, I've written to the CFTC to see how it reads §1a(12)(C).