For example, on Monday the site gave "Argo" a 28.5 percent chance of winning the Oscar for best picture and assigned a 19 percent chance that the United States or Israel would launch an airstrike against Iran by June 30.
The Commodity Futures Trading Commission said in a complaint in federal court that Intrade and its operator, Trade Exchange Network (TEN), sold investment contracts that technically are options. Options must be traded on approved, regulated exchanges.
"Today's action should make it clear that we will intervene in the `prediction' markets, wherever they may be based, when their U.S. activities violate" laws and rules enforced by the agency, CFTC enforcement director David Meister said in a statement.
By requiring that options be traded on approved exchanges, Meister said, regulators are able to "police market activity and protect market integrity."
The CFTC oversees markets for futures and options, investments that allow people to bet on the future prices of commodities like grain and oil. Those contracts help farms, airlines and other businesses to protect themselves against unexpected price swings.
In the complaint, the CFTC alleged that a website run by Intrade, based in Ireland, had illegally solicited everyday U.S. investors to use the website between September 2007 and June 25 of this year.
Intrade and TEN falsely claimed in annual reports that the contracts were not being sold to everyday customers, the CFTC said. Regulators want the companies to pay fines and return profits that were obtained illegally.
TEN settled similar charges of soliciting U.S. investors in 2005. In that complaint, the CFTC said that U.S. customers accounted for up to 40 percent of Intrade's total customer base. TEN paid $150,000 and agreed to halt further violations.
Monday's complaint includes charges that TEN violated that earlier settlement.