2006 North Korea Missile prediction market - InTrade-TradeSports

NKM Scandal

The North Korean Missile contract floated by TradeSports / InTrade in the summer of 2006 generated a huge controversy. Here are the links:

John Delaney of inTrade-TradeSports: The North Korea Missile prediction market was a P.R. disaster.
InTrade-TradeSports is still plagued by the North Korea Missile scandal. - by Chris Masse - 2007-09-04
INTRADE-TRADESPORTS: John Delaney LIED in his Freakonomics interview. - by Chris Masse - 2007-07-15
2006 North Korea Missile prediction market: a scandal signed TradeSports-InTrade - by Chris Masse - 2007-04-11
The TradeSports’s NKM scandal vs. the BetFair’s 2006-Senate case - by Chris Masse - 2006-11-09
How the Korean missile punters lost out — by Mike Smithson — 2006-08-11
A Predictions Markets Mess — by Lance Fortnow — 2006-08-10
To the Pink Sheets! Tradesports’ Bad Call — by Barry Ritholtz — 2006-08-09
A bump in the road for prediction markets — by Steve Levitt — 2006-08-09
Tradesports’ Bad Call — by Donald Luskin — 2006-08-04
The TradeSports / InTrade’s North Korean Missile prediction market, in Nicholas Edmunds’ own words — (Followed by my short take) — by Chris. F. Masse — 2006-08-09
The TradeSports / InTrade’s North Korean Missile contract was poorly crafted and/or has been interpreted in a psycho-rigid way, and the end result is a P.R. debacle for TEN, the market leader for public, real-money prediction markets in the Americas. — by Chris. F. Masse — 2006-07-22

About 750,000 readers have been informed by these stories (and other pieces not listed here), overall.

In two words, here’s the story. In writing their NKM contract, TradeSports / InTrade instituted the US DOD as the exclusive source of the official outcome for the NKM prediction market. After the missile launches, the US DOD issued minimal statements saying that the North Korean missiles ended up “in the Sea of Japan”. In parallel, of course, the US DOD amply informed the rest of the US government, which in turn fully informed the media and the public. The US DOD did not provide details directly to the media and the public, since North Korea’s matters have always been classified. This US DOD’s policy was not new, and TradeSports / InTrade should have known it, had they been more professional. Because the management of this prediction exchange was expecting a more detailed statement from the US DOD (which never came), they ruled out that the North Korean missile launches did not happen (if you can believe it). Which meant that the “yes” speculators (who correctly predicted the missile launches) lost their money. So, the bottom line is that TradeSports / InTrade made an error (relying on a source of information that has always been silent on North Korea’s matters), but refused to acknowledge its mistake, and screwed up the traders who correctly predicted the NK missile launches while compensating the traders who wrongfully predicted the opposite outcome.

TEN CEO John Delaney (who manages TradeSports / InTrade) retaliated against Chris Masse, who was the first blogger to air the NKM scandal. He did so by claiming that Chris Masse was bound to be the beneficiary of a $10,000 check (as the recipient of a prediction market award), but that some recent changes in the rules meant that, surprise, surprise, Chris Masse was no longer the upcoming winner of the prize.

Note To The Readers: Only the bloggers did cover this NKM scandal. The mainstream media were mum. And few the economists (if any), who are usually extremely verbal on the topic of prediction markets, came out in the defense of the “yes” speculators screwed up by TradeSports / InTrade. Economists are dependent for their research on data provided by the prediction exchanges (TradeSports and BetFair). Would American economists dare critizing TradeSports?

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