Spot the red line. The future of prediction market journalism is on blogs -not on dead-tree media. (((Well, all dead-tree media have blogs, now.)))
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Yearly Archives: 2008
Using enterprise prediction markets too early in the innovation process is BAD.
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Jed Christiansen:
I don’-t think that prediction markets need to be the incentive.
I think that when it comes to generating ideas, you need to be as open and inclusive as possible. The process should allow anyone that submits or helps develop an idea to share in any rewards from that idea. Once it’-s developed, then it can move to a stage where you can do forecasting via a prediction market.
Using a prediction market too early can do two things:
1- Poor forecasting due to social influence.
2- Limit revolutionary new ideas. It’-s too easy to short an idea that looks strange, when in fact it looks odd because it’-s revolutionary. The idea process should foster and develop ideas, not make them compete against each other.
I’-m glad to have sparked a little discussion here.
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Previously: Innovation Mechanism = Voting Mechanism + Prediction Market Mechanism
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BetFairs message to the UKs Gambling Commission on betting and the integrity of sports
Via Medemi (109 comments on their thread, and still growing), BetFair (PDF file):
3 August 2007
Integrity in Sports Betting Issues Paper Consultation Co-ordinator Gambling Commission Victoria Square House Victoria Square Birmingham B2 4BP
Dear Sir/Madam,
INTEGRITY IN SPORTS BETTING ISSUES PAPER – BETFAIR RESPONSE
I am writing on behalf of Betfair in response to the Commission’s “Issues” paper of May 2007 but have restricted this response to those questions in the paper on which Betfair has a strong view. The questions from the Commission’s paper are reproduced below in italics, followed by the Betfair response.
• What evidence is there of the incidents giving rise to concern about the integrity of sports betting in Great Britain?
• Are additional measures necessary and appropriate to uphold integrity in sports betting in Great Britain and if yes what are they?
• What is the detailed breakdown of their cost?
The evidence suggests that incidents giving rise to concern about the integrity of sports betting in Great Britain are few and far between. This is perhaps contrary to the perception created by the media and skewed somewhat by the ‘purge’ that is taking place in British horseracing.
Betfair believes that the internal measures it has in place, together with its formal agreements with sporting regulators are necessary but sufficient to uphold the integrity of betting through the Betfair exchange. The cost of ‘policing’ a sport is not something Betfair is able to comment on, but by way of comparison, Betfair’s integrity department (which covers all sport globally) is 7 strong with an annual budget of around ?250,000.
• Should each type of bet in each sport be risk-assessed? If so, by whom?
• Do you consider some types of betting to present a greater risk of the integrity of sport than others?
• If you consider some types of bets to be riskier than others, should further measures be taken to regulate them?
• Should the Commission require the gambling industry to offer only certain categories of betting opporunities?
A risk assessment of each bet type is something which any betting operator would carry out as a matter of course. A betting exchange is reliant on the confidence of its customers that the markets it offers are fair, so will not want to offer a market which is perceived as open to corruption.
Some types of bet do present a greater risk to the integrity of a sport and they are generally those bets that occur within a sporting event as opposed to the outcome of the event itself.
In these cases it is perhaps the performance of one player that could be influenced for commercial gain. However, the vast majority of these types of bet have historically been offered by the spread betting firms (‘player performance’ indices most obviously) who will not be regulated by the Commission.
It is Betfair’s stance not to offer markets which pose integrity and/or perception concerns for sporting regulators. What might constitute such a market can be established through consultation with the sports and historically Betfair has taken the decision not to offer certain markets after such consultation. Betfair would always advocate a voluntary code of conduct between betting operators and sports governing bodies in this matter.
Restrictions imposed on betting operators in this area by the Commission (or any veto given to the sporting regulators) would obviously put UK licensed operators at a competitive disadvantage against operators not licensed by the Commission. In addition such restrictions would be undermined by the fact that they would not apply to spread betting firms and nor would they apply to betting operators in other EEA States who (pursuant to s.331 of the Act) would be allowed to advertise a betting market into the UK that a UK operator was not allowed to offer.
• Would integrity in sports betting be improved if there was a single source of results for each UK sport and if so, how do you suggest this might operate?
In short, no. The final result of any event is almost always taken from the governing body. The collection, presentation and distribution of sports results is an entire industry in itself. The speed with which results are available has to be balanced by accuracy and Betfair considers the data providers in place now, to be more than adequate. In Betfair’s experience customers do not have concerns with the sources used to settle markets providing the details of those sources are clearly stated within the operator’s rules.
Please let me know if you have any questions or require further clarity in relation to any of the above.
Yours faithfully,
David O’Reilly Legal Counsel
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The UK’-s Gambling Commission is keeping this issue under review. (PDF file)
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Previous blog posts by Chris F. Masse:
- Become “friend” with me on Google E-Mail so as to share feed items with me within Google Reader.
- Nigel Eccles’ flawed “vision” about HubDub shows that he hasn’t any.
- How does InTrade deal with insider trading?
- Modern Life
- “The Beacon” is an excellent blog published by The Independent Institute.
- The John Edwards Non-Affair… is making Memeorandum (twice), again.
- Prediction Markets = marketplaces for information trading… and for separating the wheat from the chaff.
ABC 20/20 featuring InTrade on May 9, 2008 – 10:00 pm ET
ABC 20/20 featuring InTrade on May 9, 2008 —- 10:00 pm ET
Foretelling the Future: Online Prediction Markets —- (4 pages in all)
Now Intrade is more than just a place where people win or lose money making bets. It turns out that the share prices on Intrade can be accurate predictors of the future. Intrade attracts a large and diverse crowd of bettors, and because each participant puts their money on the line, they may be more likely to make careful decisions. As a result of the collective intelligence of more than 77,000 bettors on Intrade [*], the prices on the site may be a good way to predict the outcome of current events —- more accurate than some polls and pundits.
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[*] and thanks to InTrade’-s market mechanism…- 
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UPDATE:
ABC video
YouTube video
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Previous blog posts by Chris F. Masse:
- Become “friend” with me on Google E-Mail so as to share feed items with me within Google Reader.
- Nigel Eccles’ flawed “vision” about HubDub shows that he hasn’t any.
- How does InTrade deal with insider trading?
- Modern Life
- “The Beacon” is an excellent blog published by The Independent Institute.
- The John Edwards Non-Affair… is making Memeorandum (twice), again.
- Prediction Markets = marketplaces for information trading… and for separating the wheat from the chaff.
Frances Nicolas Sarkozy – One year later, the French economy is still in the mud.
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No good.
- Nicolas Sarkozy has become the most unpopular French president ever —-primarily due to his personal behavior.
- France’s public finances deteriorated in 2007, hovering close to the Maastricht 3% mark.
- Public spending (54% of gross domestic product) is the highest in the European Union.
- Nicolas Sarkozy has launched some reforms, which were needed, but which will not suffice.
- He created a bureaucratic body supposed to propose economic reforms, but will the French politicians act on them?
- The free-market philosophy is still view as devilish (and the Americans and the British are viewed as evil, since they are the ones who push for free markets and free trade) —-even by the French people who vote for the Right.
- I don’-t see much emphasis made on the virtues of working, inventing, innovating, creating startups, spreading modern knowledge, etc. I see people talking about how to take longer vacations (to the point that the French economy comes to a halt, each year, in the month of May, on top of July, August and December) and how to retire early (at the expense of the youngsters).
- Unlike urban China or the Silicon Valley, France is not vibrant —-the French are consuming their future, instead of planning it.
- Overall, my sentiment is negative.
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Don’-t expect more posts about Sarkozy from me, in the future, here. I did this post because one betting Irishman in London keeps querying Google for “-midas oracle sarkozy”-.
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For more info, see The Economist, Bloomberg, or CNBC. But the best link to visit is the first one I published in the text above.
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Previous blog posts by Chris F. Masse:
- Prediction Markets
- Meet professor Justin Wolfers.
- Become “friend” with me on Google E-Mail so as to share feed items with me within Google Reader.
- Nigel Eccles’ flawed “vision” about HubDub shows that he hasn’t any.
- How does InTrade deal with insider trading?
- Modern Life
- “The Beacon” is an excellent blog published by The Independent Institute.
James Lemieux, whom Koleman Strumpf plugged to us, is a marketing professor researching on, among others, decision analysis. Quite on target. Take a look at his website by right-clicking on the image posted below.
Previous blog posts by Chris F. Masse:
- A second look at HedgeStreet’s comment to the CFTC about “event markets”
- Since YooPick opened their door, Midas Oracle has been getting, daily, 2 or 3 dozens referrals from FaceBook.
- US presidential hopeful John McCain hates the Midas Oracle bloggers.
- If you have tried to contact Chris Masse thru the Midas Oracle Contact Form, I’m terribly sorry to inform you that your message was not delivered to the recipient.
- THE CFTC’s SECRET AGENDA —UNVEILED.
- “Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S & P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.”
- Meet professor Thomas W. Malone (on the right), from the MIT’s Center for Collective Intelligence.
Chris Masses pragmatism
- Supporting the development of big, for-profit, generalist prediction exchanges (which get most of their revenues from sports prediction markets)-
- Asking the biggest prediction exchanges to organize socially valuable prediction markets.
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Don’-t you rate me as a “-pragmatist”-, doc?
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Prediction Markets in the Classroom: Inkling Markets
hile prediction markets have been in the spotlight this year, they are still unfamiliar to many folks. As one small step towards improving their visibility, along with my colleague James Lemieux I ran a prediction market at the University of Kansas School of Business. The markets ran for three and a half months and almost all traders were undergraduate business majors (you can see the very end stages of the market at: http://kufin400.inklingmarkets.com, username: myfoxkc and password: myfoxkc).
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These markets were quite popular. The 475 traders made over 27,000 transactions in the 139 available markets. As a matter of reference, that is about 200 transactions per market while in Google’-s market this ratio is 260.
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There was a mix of both socially redeeming topics (issues of interest to the Business School such as how many internships the undergrads would get this school year) and others designed to attract interest (politics, sports, entertainment, finance). I was surprised to see that passions–- and trade volume–- ran quite high even in the more serious markets. For example, one contract’-s expiry was based on whether the XM-Sirius merger would be consummated by March. When the DOJ announced its approval at the end of that month, there was only a small price increase. As the comments below suggest, this was not because the traders were asleep at the wheel but rather because they had a good understanding of the regulatory environment.
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Inkling Markets provided the platform for our markets (if you are unfamiliar with Inkling, they have active public markets which you can sample). Inkling’-s software and support is really ideal for classroom markets. There are nice features for both the people running the markets (James and I) as well as for traders (the students).
For the market admin:
– it is a snap to set-up and administer new contracts
– Adam Siegel and Nate Kontny are very responsive to questions, often responding within the hour
For traders:
– an intuitive trade interface, which is accessible even for those without experience with financial markets (though this can be a drawback if you would also like students to become familiar with order books)
– lots of goodies (customizable profile pages, market-specific discussion boards, graphs) leads students to visit the market a lot
– the daily/weekly top traders list encourages participation
I would strongly recommend others give prediction markets in the classroom a try. I found them to be both a great pedagogical tool and also one which the students really, really like. Students learned first hand about the role of information discovery as well as the biases often seen in prediction markets (though I will add it was difficult to illustrate the home town bias given the success of the athletic teams at my school this year). Feel free to get in touch with me if you have questions about how to set-up your own classroom markets.
WISDOM IN CROWDS COMMENTS: Who cares about the accuracy of the prediction markets when the polls (or the exit polls) are giving us the primary information that is, a bit later, reflected in the prediction markets?
BetFair is experimenting a phenomenal revenue growth with sports prediction markets, as I am typing this post. Maybe our good friend the pragmatist could look into that, and report his research findings to the CFTC. Im sure hell do. The delicious sound of a red-hot cash register, with the dollars (o
BetFair’s bet matching process stopped for one full hour on May 7, 2008, and their P.R. people are over-apologizing for it. They are apologizing for the problem, and for their slow response to affected customers —-good move. They are also giving out 10 bundles of ?1,000 each to 10 affected traders chosen at random —-a move I have mixed feelings with.
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OK. Now, the beef.
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During the same period we’ve continually seen record volumes of bets. For example, the value of bets placed on Betfair last week was greater than for any previous week including Cheltenham or Aintree [which are big British horse racing events].
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