Announcement from the Prediction Markets group at LinkedIn:
Hello dear members,
We all love prediction markets. We are [286] on this group. Please, do forward this e-mail to one or two of your friends who love the prediction markets, so they can join us.
http://www.linkedin.com/e/gis/152133
The issues that are up in the air, these days:
- Are prediction markets really more accurate than the other forecasting mechanisms? “Sightly more accurate”… or… “in theory, but not in practice”… are the two kinds of answers you would get from the research scientists. In any case, do notice that their modest and humble claims are a far cry from the 2003–2008 hype, where the prediction markets were marketed as crystal balls.
- Is the elaborateness of prediction markets necessary? For the public, real-money prediction markets (InTrade and BetFair), yes, because the traders pay (thru the transaction fees) for this complexity, not the probability seekers. Plus, the public, real-money prediction markets are real quick at integrating new info. Contrast that with the other information aggregation mechanisms, which have a cost, and takes time. (Ask Gallup how much would cost you a nation-wide poll, and how much time is needed.) On the other hand, for the enterprise prediction markets, there are 2 churches: one headed by Robin Hanson and Inkling Markets, who insist on using prediction markets; the other one, headed by NewsFutures and CrowdCast, who say that simpler input mechanisms are necessary if we want to implement the concept of “collective intelligence that predicts” inside commercial companies.
- Will real-money prediction markets be legal, one day, in the United States? We are waiting for the answer from the CFTC. That said, the CFTC will never legalize TradeSports-like exchanges, so any CFTC ruling won’t solve the general problematic of legalization.
Those are 3 issues, among many others. You should really subscribe to Midas Oracle to get fully informed.
Copy this URL:
http://www.midasoracle.org/feed/
Paste it in the “Add a Subscription†box at Google Reader:
http://www.google.com/reader/
And, yes, we are on Twitter:
http://twitter.com/midasoracle
Here is the list of the prediction market resources:
http://www.chrisfmasse.com/
http://www.midasoracle.org/predictions/
http://www.midasoracle.org/best/
http://www.midasoracle.org/links/
http://en.wikipedia.org/wiki/Prediction_Markets
http://www.predictionmarketjournal.com/
http://www.forecastingprinciples.com/PM/
http://www.pmindustry.org/
http://www.reg-markets.org/policymarkets/
Here is the list of the prediction market blogs:
http://www.midasoracle.org/
http://blog.oddhead.com/category/prediction-markets/
http://blog.mercury-rac.com/
http://freakonomics.blogs.nytimes.com/tag/prediction-markets/
http://www.overcomingbias.com/prediction_markets/
http://torontopm.wordpress.com/
http://wiserthanthecrowd.com/
http://predicts.betfair.com/blog/
http://blog.inklingmarkets.com/
http://newsfutures.wordpress.com/
From any of the links above, you will be directed to the good resources and websites on prediction markets. As for the research papers, do use Google Scholar:
http://scholar.google.com/advanced_scholar_search
If you know a great website, blog, research paper, or prediction market company that should be indexed, feel free to tip us:
- cfm |-at-| midasoracle |.|-com-|
- chrisfmasse |-at-| gmail |.|-com-|
- chrisfmasse |-at-| yahoo |.|-com-|
A final note. Beware the $400-a-seat vendor conferences on prediction markets. They are not worth the price, and some speakers have “regrets” participating in them.
Best regards,
Chris Masse
Midas Oracle
Addendum to this blog post:
A great blog should have a great name and a great tagline.
- Midas Oracle = Prediction Markets = Collective Intelligence That Predicts — That’s this blog.
- CFM = Prediction Markets = Information Aggregation Mechanisms
- Midas Oracle = Everything But Prediction Markets 
— That’s the other blog, the one nobody but moi cares about.
As I told you the other day, I am spending a lot of time overhauling the websites, making them leaner and cleaner, and preparing for the new 2.0 strategy I will tell you about later on.
“Are prediction markets really more accurate than the other forecasting mechanisms?”
Yes, we need more diversity and greater incentives. Be patient.
“Is the elaborateness of prediction markets necessary?”
Both market based and simpler mechanisms have value right now. With very few participants, Crowdcast may be best (I have not seen their stuff.) With many participants, I’d prefer Inkling and a market based approach. In the long run, market based mechanisms are best for large scale markets, with many participants. I’ll bet the big winner, that is, the company who has the biggest public facing prediction market five years from now, will be using a model based on the stock market.
“Will real-money prediction markets be legal, one day, in the United States?”
No doubt. The question is when? I’ll bet in less than five years some level of online gambling will be legal and regulated. Whether this is poker, casino, and sports remains to be seen. But the wheels are in motion, the momentum is there, it’s only a matter of time. Major land based casinos (e.g. Harrahs, MGM) can no longer afford to lose revenue to offshore companies. And you know Betfair wants a piece of the U.S. action as well.
(And certain states, like Delaware, are legalizing sports betting, so things are starting to change on that front as well)
“(And certain states, like Delaware, are legalizing sports betting, so things are starting to change on that front as well)”
ONLINE sports betting/gambling will never be legal in the US unless the brick & mortars or tracks decide to enter that space (witness the exception in NY state law for betting on horses with handheld internet devices) The established lobbies are too strong.
Prediction markets will be legalized only in limited contexts, if at all. For example as internal tools for corporations, as google, Yahoo and HP want. Large public markets will NOT be legal.
In special cases, narrow-focus regulated markets will emerge, like the ACE.
I hope I am wrong on some of these, but the ingrained attitudes towards gambling in US are extreme. And the market efficiency argument, for better or worse, is underwater at the moment.
Thanks, Daniel.
Is there a prediction market industry?
From what I can see we have a host of companies seeking to run internal corporate prediction markets, and we have a number of betting companies, that believe that the predictiion market label provides them with some sort of competitive advantage.
There is nothing that I can see that persuades me that these entities constitute a holistic whole that can be called the prediction market industry.
As to the legalisation of online gambling in the US – three years will probably see the introduction of online poker; sports betting and casinos. The Governor of Delaware, Jack Markell, inked a bill into law on Thursday that reactivated the legalization of sports betting at the state’s racinos. Whilst there were historical reasons as to why Delaware was able to do this, financial considerations, such as the death of the Vegas casinos will likley act as a catalyst to ensure that online gambling is eventually allowed in other states in the US. When this does happen, it will be the incumbent players (casinos) that will benefit most, with the likes of Facebook and MySpace also likely to compete in the online poker sphere, and, perhaps, online sports betting. Google and Yahoo will become big players in the online sports betting market, and have the scale and scope to capitalise upon any law that would legalise so called prediction markets/betting exchanges.
Intrade and PartyGaming will be also rans, when the floodgates do open. They will not have the scale, scope or cash to compete and quite frankly there is no logic to a strong branded company buying them and diluting their core brand. Arguments that they will be bought for their databases are also somewhat far fetched.
InTrade has a small number of active traders. Any US company will do better.