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Intrade.com is a website that provides an online Prediction Market trading exchange. Intrade.com's members "trade" contracts between each other on the probabilities of various events occurring.
Intrade was founded by Ron Bernstein, and two other New York futures and options floor traders in 1999 (http://www.computerweekly.com/feature/Sport-in-the-City). Intrade was later acquired by Tradesports in 2003. John Delaney; the VP of Finance at Intrade, was appointed as the CEO of Tradesports during the acquisition of Intrade by Tradesports. In 2004, Tradesports was re-organized into Trade Exchange Network Limited (who operated the websites Intrade.com, Tradesports.com, WallStreetSports.com, Prediction-X.com and other websites using the Intrade trading platform and technology). In 2007, Trade Exchange Network Limited was re-organized into three new corporate entities; Intrade the Prediction Market Limited (currently operating Intrade.com) Tradesports Ltd (previously operating Tradesports.com, which closed in 2008) and Prediction Exchange Services Limited, a technology company (which never initiated operations).
Intrade's system utilizes a prediction market trading exchange which allows members to take positions (trade 'contracts') on whether future events will or will not occur. An example event is a political election, which is almost always settled in a well-defined and verifiable manner. The contract might be "Mitt Romney to win 2012 U.S. presidential election." Other possible events include financial predictions, such as "the NASDAQ Average to close higher today", or current events predictions such as "Will Adele win the Grammy Award for Best New Artist?" Intrade facilitates trading between members, charging a monthly fee, but does not participate in trading itself.
Trading positions are described in the common trading nomenclature of long (will happen--bullish) and short (will not happen--bearish). The trading unit is a contract with a notional settlement value of $0 if the event does not occur or $10 if the event does occur. The contract may trade in the range of 0–100 where 1 point equals US$0.10 in value. So, if the event specified in a given contract occurs, the contract settles at 100 points or $10; otherwise, the contract settles at 0 or $0 in value. Profits and losses are calculated by tabulating the differences between where contracts are purchased against where they are either sold (at any price set by the open market between 0 and 100) or what price they finally expire at (0 or 100) when the event itself is concluded. Utilizing this contract structure, the current price of a contract can be imputed as "the market's" global opinion of the probability that the specified event will occur.
Because events take place over a well-defined time span and have a well defined outcome, traders can trade both before and during an event.
Intrade provides both real money and play money Prediction Market trading. The minimum deposit for opening a real money account is US$25.00, but US$100 is recommended to "fully appreciate the trading experience".
The 2012 US Presidential Elections was a bell-weather media event for Intrade, garnering the company high levels of web traffic (greater than 50 million monthly page views in October and November, source; Google Analytics) and hundred's of media mentions related to the accuracy of the Intrade markets and the correct market predictions of the outcomes of all US state electoral contests except Florida and Virgina.
On November 26th, 2012 the Commodity Futures Trading Commission brought a suit against Intrade for unregulated trading in traditional commodities, such as gold. On December 23rd, Intrade closed all US based member accounts. Trading volumes suffered a dramatic decrease without participation from US customers. On 10 March 2013 Intrade suspended all trading. In their announcement, Intrade said they are investigating potential financial irregularities.
Intrade allows bets on a wide range of future outcomes: political events (in the US, India, Germany, Israel etc.), climate change, current events (bird flu, earthquakes etc.), entertainment (Academy Awards, American Idol, Dancing with the Stars), science (will the Higgs boson be observed?), technology (web browser market share, Google Lunar X Prize, Apple iPad unit sales), finance (DJIA, S&P 500, NASDAQ-100, gold price), but does not predict stocks or sports competitions. However, Intrade does operate markets on sports-related events that do not involve athletic competition, such as bids to host an Olympics. Sister site intrade.net (since closed) allowed the creation of custom markets.
Intrade has offered since 2002 the widest range of markets for political events, such as the outcomes of U.S. presidential, senatorial, and gubernatorial elections, as well as for a diversified range of international political events.
Since 2011, Intrade has charged users a flat fee of $4.99 per month, charged on the first day of the month. The fee is charged to all accounts with a balance even if the account was inactive and executed no trades during that month. Accounts with no balance are not charged. In addition, accounts inactive for 18 months or longer are assessed a $5.00 dormant account fee which is deducted from the account's available balance.
For customers requesting a check withdrawal, Intrade issues a banker's draft, which is similar to a Cashier's check in the United States. For the first check in a given month, there is no fee. However, customers are required to pay the cost to issue the check which is deducted by the bank from the amount of the withdrawal. The current cost to issue a check is €4.00. If an account holder wishes to make more than one check withdrawal within a calendar month, they will be charged an additional $10.00 fee for each check after the first. There is no cost for standard delivery. For customers requiring expedited delivery, Intrade will ship checks via FedEx with a tracking number for a $30.00 fee.
In addition to check withdrawals, account holders may withdraw funds via wire transfer. Intrade charges a $20.00 fee for each wire transfer. Customers must also pay any and all fees incurred during the wire transfer, regardless of whether those fees originate from the initiating bank, the receiving bank, or any intermediary bank.
While the vast majority of the thousands of markets listed have had easily verifiable outcomes, some have not, and disputes have arisen over the wording of some contracts.
In July, 2006, TradeSports, (closed now, but previously related to Intrade), conceded  that one of these contracts was problematic. The contract allowed speculation on whether North Korea would, by 31 July 2006, successfully fire ballistic missiles that would land outside its airspace. On 5 July 2006 the North Korean government claimed a successful test launch that would have satisfied the prediction, a launch widely reported by world media. Tradesports declared that the contract's conditions had not been met, because the US Department of Defense had not confirmed the action, and this confirmation was specifically required by the contract. (Other government sources had confirmed the claim, but these were not the sources referenced in the contract.) Traders considered this to be in strict compliance with the stated rule but contrary to the intention of the market (which was to predict the launch event, and not whether the US Defense Department would confirm it).
On 3 January 2012, Intrade settled contracts related to the 2012 Iowa caucus in favor of bettors supporting Mitt Romney, on the basis that Iowa Republican Party chairman Matt Strawn (incidentally a Rick Santorum supporter) had declared Romney to be the winner by a narrow margin of 8 votes, adding that there would be no recount. The contracts specified that
- "Expiry will be based on the officially declared winner of the Iowa caucus, as reported by three independent and reliable media sources."
However, the normal process of certifying the vote count (not recount) revealed simple arithmetic errors which resulted in Santorum being declared the winner (by 34 votes) on 20 January. Intrade, having already paid out winnings to Romney supporters, maintained that its original decision had been correct, since at least three reliable media sources had reported a Romney victory (though it is debatable whether they reported him to be the "officially declared winner").
Intrade offers its market data to prediction market researchers. At one time it assisted the U.S. Department of Defense in a controversial scheme (ultimately canceled) to assess probabilities of future terrorist attacks. Intrade supplies market data at significantly discounted fees or free to academics.
While Intrade operates legally from the Republic of Ireland, it does not comment on the legality of trading for customers in other countries.
Legal status in United States
In July 2008, not having an official decision, Intrade sent a letter to the Commodity Futures Trading Commission asking for clarification of the legal status of intrade.com and its executive leadership in the United States, saying "While Intrade serves a global community and has registered members from 162 countries, our 82,000 plus membership are predominantly resident in the United States ... it is perversely unclear as to whether Intrade, and indeed myself, are considered persona gratis by the United States."
Due to banking regulations that came into force in 2010, American customers were prohibited from funding their accounts with credit or debit cards issued by a US bank.
On November 26, 2012, the U.S. Commodity Futures Trading Commission filed a civil suit in federal district court in Washington, D.C. seeking an injunction against Intrade allowing U.S. citizens to trade on their site. The US CFTC claimed that Intrade's operation interfered with the CFTC's role "to police market activity and protect market integrity". Shortly thereafter (though not explicitly in direct response), Intrade announced it would no longer allow U.S. customers to participate in the real-money version of the site. Intrade announced that all existing U.S.-based accounts would be suspended on December 23.
Death of CEO
- Intrade Fee Structure
- Intrade Exchange Rules - The agreement
- Intrade Exchange Rules - Depositing funds
- Philips, Matthew (2013-03-11), Markets & Finance, "What’s Behind the Mysterious Intrade Shutdown?", Bloomberg Businessweek, retrieved 2013-03-16
- "BBC News - Intrade shuts amid investigation". Bbc.co.uk. 1970-01-01. Retrieved 2013-03-11.
- "Intrade Fees". Intrade. Retrieved 15 October 2012.
- "Intrade Rules". Intrade. Retrieved 15 October 2012.
- "Withdraw Funds from Your Account". Intrade. Retrieved 15 October 2012.
- "Expiry of North Korea Missile Test Contract" http://www.tradesports.com/aav2/news/news_58.html.
- "Storm of Protest Forces Pentagon to Pull Plug on 'Terror Futures'," Evening Standard, July 30, 2003.
- "Legality of trading" topic on Intrade's GetSatisfaction board
- U.S. Demand Spurs Dublin Firm's Exchange Bid," Irish Independent, May 9, 2005.
- The 2008 letter to the CFTC from the Intrade CEO, John Delaney
- "Deposit by Card". Intrade.com. Retrieved 27 March 2011. "If your credit or debit card was issued by a US bank then we are very sorry to have to inform you that due to US banking regulations that came into force in 2010 you will almost certainly not be able to use it on Intrade.t/deposit/card/"
- "CFTC Charges Ireland-based "Prediction Market" Proprietors Intrade and TEN with Violating the CFTC’s Off-Exchange Options Trading Ban and Filing False Forms with the CFTC". U.S. Commodity Futures Trading Commission. 2012-11-26.
- "Government Crushes Innovative Online Prediction Market".
- "ATTENTION U.S. CUSTOMERS". Intrade. Archived from the original on 2012-11-28.
- "Climber dies after third child born". BelfastTelegraph.co.uk. 2011-05-24. Retrieved 2013-03-11.
- Julie Creswell (May 26, 2011). "John Delaney, Founder of Intrade, Dies at 42". The New York Times.
- Intrade - How Does it Work?
- Intrade - Fees
- Intrade - Withdrawing funds
- Tim McLaughlin, "Tired of betting on Wall Street? Web site turns events, even Cardinals playoff chances, into futures trading," St. Louis Post-Dispatch, Oct. 15, 2005.
- Ben White, Web Sites Mimic Commodities Exchanges Washington Post, Oct. 23, 2004.
- Matthew Ericson, "Page Two: July 6–12; Gambling on a Candidate's Future(s)," New York Times, July 13, 2003.
- Tom Kohn, "You can bet, literally, on when Saddam will be gone," Pittsburgh Post-Gazette, Feb. 11, 2003.
- Donald Luskin, "Who's Behind the Bush-Futures Attacks?", National Review, Oct. 18, 2004.
- Peter John, "Intrade offers online way for punters to play," Financial Times, July 31, 2001.