INTRADE, a Dublin-based “prediction market” where punters could bet on the probability of events such as elections or awards, had a strong claim to be the favourite website of economists. While seeking to outsmart each other, its clients collectively generated free forecasts of the future used by many academics, businesses and journalists. When America’s Commodity Futures Trading Commission (CFTC) sued Intrade in November for offering illegal contracts on the price of goods regulated by the agency, critics complained that the decision would strip the economy of a highly valuable source of information.

The regulators now appear to have been vindicated. Last month the site abruptly shut down, offering only “financial irregularities” by way of explanation. On April 5th Ronald Bernstein, an Intrade director, announced that it needed $700,000 immediately to avoid liquidation. It turned out that the firm had followed in the footsteps of MF Global, a derivatives broker, and Worldspreads, a spread-betting outfit, which both collapsed in 2012 after committing the cardinal sin of dipping into their clients’ accounts. In particular, an audit revealed that in 2010-11 Intrade had made suspicious payments of $2.6m to its founder, John Delaney, who died nearly two years ago while climbing Mount Everest.

The company’s clients will probably suffer hefty losses. Their accounts have been frozen for a month, and Intrade is begging them to accept just half their money back now, in the hope that the rest can one day be returned if the firm survives. Mr Bernstein said that Intrade plans to sue two unnamed parties for at least $3.5m. But even if it has a winning claim, it must stay solvent for long enough to see the cases through.

In contrast, those who have relied on its predictions on everything from the unemployment rate to the weather have plenty of alternatives. Bookmakers in Britain and Ireland offer odds on most of the same events, and their lines reflect punters’ aggregate views just as well. New entrants could easily replicate Intrade’s peer-to-peer betting system.

However, Intrade’s fall from grace is likely to discourage American participants from sending money to offshore firms. In the past the CFTC has rejected requests from companies under its jurisdiction to offer non-financial contracts. The agency could ensure that Americans have a safer place to wager by granting prediction markets its blessing. That would please economists, too.