Why doesn’t Intrade just obey the complicated law and become a licensed exchange? They tried, but the CFTC won’t give them a license. When an established, licensed U.S. commodity exchange applied for permission to do what Intrade does, the CFTC turned them down, too.
Most importantly, in rejecting Nadex’s application to trade “political event derivatives contracts” the CFTC said this:
As a result of reviewing the complete record, the CFTC determined that the contracts involve gaming and are contrary to the public interest…
Thus the CFTC’s attack on Intrade is not about following or not following a particular regulation; it goes much deeper, the CFTC is arguing that all such markets are against the public interest.
Addendum: Kenneth J. Arrow, Robert Forsythe, Michael Gorham, Robert Hahn, Robin Hanson,
John O. Ledyard, Saul Levmore, Robert Litan, Paul Milgrom, Forrest D. Nelson,
George R. Neumann, Marco Ottaviani, Thomas C. Schelling, Robert J. Shiller,
Vernon L. Smith, Erik Snowberg, Cass R. Sunstein, Paul C. Tetlock, Philip E. Tetlock,
Hal R. Varian, Justin Wolfers, and Eric Zitzewitz disagree with the CFTC (among others).