How does TEN propose to win legality under U.S. law? By obtaining the CFTC's permission to set up shop as an exempt board of trade ("EBOT"). Happily for TEN, the CFTC approved its application. TEN now qualifies as one of four EBOTs.
That certainly ought to clear TEN to operate legally under U.S. law. Indeed, qualifying as an EBOT looks like a pretty sweet deal so far as avoiding regulations goes; an EBOT need only conform to the anti-fraud and anti-manipulation provisions of the Commodity Exchange Act ("CEAct"), 7 U.S.C. § 1 et seq. (2005).
Still, though, I don't quite understand what TEN has in mind. Why am I puzzled? Consider this: An EBOT must limit trading to "eligible contract participants," as defined by § 1a(12) of the CEAct. That section contains a variety of ways to qualify as such, but none appears to allow average folks to trade on an EBOT. This definition of "eligible contract participant" is about as helpful as it gets:
(A)(xi) an individual who has total assets in an amount in excess of--(I) $10,000,000; or
(II) $5,000,000 and who enters into the agreement, contract, or transaction in order to manage the risk associated with an asset owned or liability incurred, or reasonably likely to be owned or incurred, by the individual . . . .
Alternatively, maybe this section of 1a(12) would help:
(C) any other person that the Commission determines to be eligible in light of the financial or other qualifications of the person.
Those sorts of limits are exactly why I've never seriously considered seeking EBOT status for the Simon Exchange. What good is a prediction market open only to a very few rich people? Unless TEN has some pretty neat legal tricks up its sleeve, therefore, it hardly looks as if opening an EBOT under U.S. law will solve its problems. TEN's typical customer—the average punter—will hardly qualify as the sort of "eligible contract participant" authorized to trade on an EBOT. But, then again, maybe TEN does have some neat legal tricks planned. Fans of prediction markets may stand to learn a lot from this developing story.