Yearly Archives: 2007

Meet John Nafeh, the HedgeStreet brain.

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HedgeStreet:

Dr. John Nafeh – Director

John Nafeh is the Founder of HedgeStreet. He combined his expertise in decision analysis and risk management, his experience guiding Internet-related start-ups, and his vision of an Internet-based mass market for risk-hedging financial instruments [*] to create HedgeStreet. As Managing Director of Pareto Partners, a venture capital fund, Dr. Nafeh has demonstrated extensive expertise in start-up financing, strategic planning, marketing, and mergers and acquisitions. He was involved with Atari and Apple Computer during their start-up phases, founded PC and database software companies in the mid-1980s, and earlier held management positions with Ford Aerospace and General Electric. Along with a BS in electrical engineering, Dr. Nafeh holds an MS in management science and engineering and a PhD in decision and risk analysis from Stanford University.

John Nafeh

[*] a flawed vision?

Previous blog posts by Chris F. Masse:

  • The CFTC is going to close the comments in 15 days. We have 15 days left to convince the CFTC to accept FOR-PROFIT prediction exchanges, and counter the evil petition organized by the American Enterprise Institute (which has on its payroll Paul Wolfowitz, the bright masterminder of the Iraq war).
  • The CFTC is going to close the comments in 16 days. We have 16 days left to convince the CFTC to accept FOR-PROFIT prediction exchanges, and counter the evil petition organized by the American Enterprise Institute (which has on its payroll Paul Wolfowitz, the bright masterminder of the Iraq war).
  • Brand-new scientific report certifies that starting off the Large Hadron Collider is NOT going to destroy the Earth. Glad to hear that. It means that any bets entertained on the LHC issue will be able to be resolved and winnings to be collected in the end.
  • Small Business = GOOD — Big Business = BAD
  • The letter David Pennock will never send out —well, we hope.
  • Monitor the web traffic of TradeSports.com, InTrade.com, BetFair.com, Betdaq.com, NewsFutures.com, HubDub.com, etc. —thanks to Google Trends.
  • Here’s the way to promote innovation for entry-order and analysis software packages —separate the 2 functions.

Prediction Market History + Prediction Market Journalism

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The New York Times:

[…] Long before political prediction markets sprouted on the Internet, election bets — whether the stakes were money or embarrassing public spectacles — were a ubiquitous part of the American political scene. The practice, which began informally with petty stakes in pool halls in the late 19th century, was by 1900 a multimillion-dollar trade on Wall Street.

In the 1916 contest between Woodrow Wilson and Charles Evans Hughes, about $160 million (in current dollars) was wagered on Wall Street’s outdoor “curb exchange.” By contrast, the 2004 election saw less than $25 million in contracts change hands over the outcome on the Dublin-based InTrade.com market, the largest and most active for-profit market for odds on current American elections. […]

“Until the 1920s, New York would have been the center of gambling in the United States, what Las Vegas is today,” said Paul Rhode, a professor of economic history at the University of North Carolina, Chapel Hill. Technically, gambling on the result of an election was — and is — illegal, but the laws were not widely enforced, and newspapers routinely reported the names of prominent bettors and the Wall Street firms that held the stakes. […]

With the rise of polling in the 1930s and a decline in public approval of political gambling, election betting fell out of favor. The expansion of horse-track betting in 1939, giving people another arena in which to place their bets, also weakened interest in the markets.

Reporters, too, could get political forecasts from increasingly reputable polling agencies. While The New York Herald Tribune still reported on the betting as late as 1940, the odds were relegated to an occasional small paragraph on the financial page, and neither bettors nor stakeholders were named.

The online prediction markets that cropped up around 2000 were less a dot-com revolution than a road back to the earlier form of election coverage.

“In a few years, we may regard the second half of the 20th century as the aberration in which the press used polls rather than markets to track political races,” Justin Wolfers, a business professor at the University of Pennsylvania’s Wharton School, wrote in an e-mail message. “And in the 21st century, we may return to the habits of the early 20th century, reporting on political races through the lens of prediction markets rather than polls.”

Justin Wolfers is right that a new form of journalism may emerge (I call it &#8220-prediction market journalism&#8220-). However, my view is that it will be a minor &#8212-most news media will still be reporting polls rather than prediction market odds.

The Global Betting Exchange

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The company behind BETDAQ will launch a new exchange in the near future. It is backed by significant players in the global sports trading market. It will offer breath of markets and level of liquidity unsurpassed in the betting exchange sphere. It wil target the retail exchange bettor. It will not be purple in colour.

Main investor: Dermot Desmond

Alleged investor: J. P. McManus

Other investors: [One or two surprises to come…]

Signed: Deep Throat

&#8212-

The Global Betting Exchange

&#8212-

Note to the Midas Oracle readers: Actually, there are two brand-new, real-money prediction exchanges (betting exchanges) that will pop up onto the prediction market scene soon. (That is, Global Betting Exchange is only one of them.)

Once again, the BetFair legal department censors the traders.

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BetFair forum:

Postings in relation to ‘race-fixing’ trial
Betfair Customer Services 09 Oct 10:39

Whilst the criminal trial involving 3 jockeys and others is sub judice (i.e. being considered in court), comment on the case is inappropriate and could even be an offence in itself leading to contempt of court proceeding against those commenting. This is particularly true given the criminal charges being considered where publicly discussing such cases sub judice may constitute interference with due process (not least because jurors may be exposed to such public discussion).

As a consequence whilst this matter remains sub judice, forum postings discussing the matter will be removed as and when they come to Betfair’s attention. This also means we will have to revoke forum posting rights of customers who persist in commenting on the case on Betfair’s forums.

BetFair traders, come on Midas Oracle to post your comments on the Fallon case. Here, we do not censor anyone.

UPDATE: They talk about the Fallon case in the Chamber of Lords. (See next page.)

The Racing Post and TimeForm/BetFair are two competitors in the UK horseracing data publication business.

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The Racing Post and TimeForm compete in the same space- they make money from horse racing data. The Racing Post through its newspaper- TimeForm through its database publications. On the Web, they compete head to head in many respects &#8212-and both give away a certain proportion of their content for free.

The Racing Post model is heavily skewed towards the old betting market model- fixed odds bookmakers- price comparison etc- while BetFair (the new owner of TimeForm) is based on the Web. On top of that, BetFair does not need The Racing Post that much, whereas The Racing Post needs BetFair. The fact that BetFair&#8217-s prices are dynamic (and, 99% of the time, the best prices on offer) fucks up The Racing Post&#8217-s model.

Signed: Deep Throat

External Links: BetFair (the owner of TimeForm) + The Racing Post

Previously: In the UK, BetFair is pushing the bookmakers into the betting museum.

BetFair will soon announce plans to publish their own starting prices.

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Probably, in response to this.

In horse racing, starting prices (SP) are the odds prevailing in the on-course fixed-odds betting market at the time a race begins. The method by which they are set for each runner varies in different countries but is generally by consensus of an appointed panel on the basis of their observations of the fluctuation in prices.

Signed: Deep Throat

Scarce liquidity in the financial prediction markets run by InTrade-TradeSports

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The Daily DOW prediction markets are thin, and the Daily Nasdaq prediction markets are inexistent.

Here is the data for yesterday.

DOW:

DOW Oct 29, 2007

Nasdaq:

Nasdaq Oct 29, 2007

Previous blog posts by Chris F. Masse:

  • The marketing association between BetFair and TOTE Tasmania works better than expected.
  • The term “event markets” sucks —and the uncritical thinkers using this crappy term suck too.
  • CLIMBING HIS WAY TO THE TOP: Erik Snowberg is now Assistant Professor of Economics and Political Science at California Institute of Technology.
  • Unlike other countries, the United States of America defends the freedom to offend in speech.
  • The best research papers on prediction markets
  • 2008 Electoral Map
  • American Enterprise Institute’s Center For Regulatory And Market Studies (Policy Markets)

PurePlays Patented Legal Hack

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Some months ago, I noted that Betzip.com (since rechristened &#8220-PurePlay.com&#8221-) employs an intriguing legal hack to avoid anti-gambling regulations. It charges its customers a flat monthly fee, which qualifies them to win large prizes for winning online poker games. Non-paying customers can play the same games for free, too—though without qualifying for the largest prizes.

Why adopt that business model? Presumably, because it allows PurePlay to argue that it does not offer a gambling service. Specifically, PurePlay could claim that, because the amount players win has no relation to how much they stake, it dodges the &#8220-consideration&#8221- element of the legal definition of gambling. Query whether that claim would survive the devoted attentions of a prosecutor and court. I set that question aside, though, and here focus on PurePlay&#8217-s claim that they have patented their business model.

Curious about the scope of PurePlay&#8217-s patent, I searched its website for details. It offered none. I wrote to PurePlay asking for the patent&#8217-s number. PurePlay refused to say. So I put my able research assistant, Mr. Sherwood Tung, on the case. He found PurePlay&#8217-s patent, and more.

MMJK Inc., an entity located in San Francisco, California, owns PurePlay. It holds U.S. patent # 7,094,154. The Patentscope database of the World Intellectual Property Organization indicates that MMJK has also sought similar patent protection in many foreign countries. The patent&#8217-s abstract reads thusly:

A computer networked, multi-user game system utilizing subscription based membership and alternative methods of entry, as well as the award of prizes of immediate value to the winner is described. A game tournament is hosted by a game server computer coupled to client computers operated by participating players. The games offered are games that involve elements of both skill and chance and require active player participation and decision making. A subscription-based membership is established for each player by charging a fee for a pre-determined membership time period. An alternative method of entry is provided to allow non-subscription players to participate in the tournament without payment of the fee. The non-subscribing players receive equal access to the games and at least the same chance of winning as the subscribing players, but are limited to a single entry per game or tournament. The game server hosts at least one game or tournament within the period, and players are potentially eliminated until a winning player and any runner-up players are determined. A prize pool is disbursed to the winning players in the form of cash, cash-equivalent notes, or prizes that have inherent and immediate value.

That of course offers only a shorthand description of the patent. You must carefully read its claims to know its actual scope. Or, I should say, its supposed scope- any patent can fall to a legal challenge, and business method patents prove especially susceptible to failing &#8220-non-obvious&#8221- inquiries.

[Crossposted to Agoraphilia and The Technology Liberation Front.]

Inkling Markets = Business Processes + Prediction Markets

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Inkling Markets - Business Processes

Adam Siegel:

Two years ago the only way to run a prediction marketplace was to roll your own or call a vendor/consultant and have them set up software and run markets for you. It took many weeks, often months. Today with Inkling Markets it take seconds. […]

[#1] Improve forecasting of key performance indicators
Track and raise awareness of key success metrics to identify and mitigate risk factors before it&#8217-s too late.

[#2] Expose product quality problems early
Identify design and production anomalies before a product (physical or virtual) is brought to market to avoid expensive repairs and recalls.

[#3] Predict risk to your supply chain
Run a &#8220-web&#8221- of markets about the risk factors to your supply chain to predict internal and external events that would cause inefficiencies or disruptions.

[#4] Foster a culture of innovation
Determine which new ideas and process improvements will have real business impact vs. the &#8220-nice to have.&#8221-

[#5] Create new interactions with users
Build a dedicated community of users around a marketplace of questions relevant to your business area and brand. […]

Previous blog posts by Chris F. Masse:

  • The marketing association between BetFair and TOTE Tasmania works better than expected.
  • The term “event markets” sucks —and the uncritical thinkers using this crappy term suck too.
  • CLIMBING HIS WAY TO THE TOP: Erik Snowberg is now Assistant Professor of Economics and Political Science at California Institute of Technology.
  • Unlike other countries, the United States of America defends the freedom to offend in speech.
  • The best research papers on prediction markets
  • 2008 Electoral Map
  • American Enterprise Institute’s Center For Regulatory And Market Studies (Policy Markets)