It’-s not the motivation that is important to assess —-it’-s the liquidity that counts. The more trades, the better. Liquidity leads to statistically accurate probabilities predictions. Liquidity, liquidity, liquidity, doc.
One proposed distinguishing criteria includes the size of an individual trader’-s stake, and the number of traders. The Iowa Electronic Markets are limited on both of these parameters. Such limits do succeed in preventing large hedging markets from masquerading as info-motivated event markets. But they do little to prevent generic gambling markets from masquerading as info-motivated event markets.
UPDATE: Robin Hanson comments…-
Again, important for what purpose? The CFTC was clear that they are concerned about how to keep generic gambling from slipping in via whatever they might approve. I was addressing that concern. I don’t see how you can read anything I said as arguing against liquidity.