Gambling for the Good, Trading for the Future: The Legality of Markets in Science Claims

Abstract

Good ideas do not always lead to legal acts. Setting up a prediction market in science claims, for instance, certainly sounds like a good idea. Such a market could effectively open a shortcut to the future, answering crucial questions more quickly, accurately, and cheaply than extant institutions. Notwithstanding those salient benefits, however, U.S. law does not clearly permit markets in claims about science. Such a market would not fit neatly into any common law, statutory, or regulatory category, and courts have yet to clarify the matter. This paper aims to dispel some of the legal uncertainty surrounding prediction markets in science claims and, by so doing, to help chart a path toward their implementation. The paper begins with a concise introduction to markets in science claims. It then compares them to their closest analogs in U.S. law: gambling and commodity futures trading. That comparison finds the letter of the law somewhat less congenial to markets in science claims that the policies behind it. Both forms of legal analysis leave room to argue that markets in science claims should escape the limits imposed on gambling and commodity futures trading. Ill-fitting laws threaten to hinder well-meaning acts, however, so the paper concludes by describing a few strategies for implementing fully functional, if somewhat less than fully public or legal, markets in science claims.

Keywords: prediction market, prediction exchange, idea futures, science claims, gambling, commodity futures, CFTC