[...] It took y-e-a-r-s for HedgeStreet to get approved as an exchange. IG will be off and running in a few weeks. IG Group is a great company, when they get moving, even you will start to get a sense of what kind of bozos the HedgeStreet/TradeSports of this world are. They will be buried comprehensively. Wanna bet ?

And by the way, I doubt that will be a peer-to-peer baloney thing. Old fashioned market-making by pros instead, me thinks.

Indeed, spread bets (via a spread-betting bookmaker or via a spread-betting exchange) are high risk products, where the bettors/speculators need to deposit only a small percentage of the value of the bet. That is not the case with BetFair, which is a classic betting exchange. Here’s what is stated by BetFair:

Betfair do not offer credit facilities to our customers. Unlike some spread betting firms, we are not regulated by the Financial Services Authority in the UK. The reason that we do not offer credit is that the concept of the exchange relies on the fact that you must have the funds that you are staking in your account. When you place a bet, that money is secured by Betfair until the bet is settled and the funds paid out to the winner.

So the Gambling Commission survey report (cited like crazy by all the gregarious British media today) goes directly in my trash can. It’s a pity since we really need to know whether our beloved classic betting exchanges generate “problem gambling”. We can’t know that for sure reading this survey report, since they mixed up oranges and apples.

—

WHAT THEIR SURVEY FORM READ:

11. Betting exchange – (This is where you lay or back bets against other people using a betting exchange. There is no bookmaker to determine the odds. This is sometimes called ‘peer to peer’ betting.)

15. Spread-betting – (In spread-betting, you bet that the outcome of an event will be higher or lower than the bookmaker’s prediction. The amount you win or lose depends on how right or wrong you are.)

—

HERE ARE THE GENERAL FINDINGS OF THE SURVEY REPORT:

Betcha.com has given that question a lot of thought. Its FAQ explains “(1) we spent thousands of man hours analyzing this and point and related ones, (2) our analysis encompassed U.S. federal law and the law of all 50 states, and (3) we are betting our very freedom that our analysis is spot on . . . .” As Betcha.com’s management realizes, however, even that effort cannot guarantee certainty; the quoted passage continues “. . . . [but] it isn’t as though some Almighty Power came down from the heavens and deemed us ‘legal.’ That’s not the way the law works.” (I have to think that Betcha.com’s founder, Nick Jenkins, wrote that bit. He describes himself as a “journeyman lawyer,” after all.)

Query whether Betcha.com can avoid the fate of the P2P betting service, BetBug.com, the owner of which at one time touted it as “the only legal way to offer online sports betting in the US.” Now, of course, BetBug has gone on hiatus, explaining that “[w]hile we continue to believe that BetBug’s true peer-to-peer software does abide by all major Federal gaming laws in the United States, the current legal environment seriously deters our chances of success.”

Betcha.com would doubtless argue that its honor-based payment system distinguishes it from BetBug.com. “If you don’t absolutely have to pay,” Betcha.com would explain, “it’s not gambling.” Note, however, that to say you don’t “absolutely have to pay” on a losing bet is not to say that you would risk nothing by so doing. To the contrary, you would risk seriously hurting the “Honor Rating” that Betcha.com assigns its users.

As Betcha.com’s FAQ explains, “A person’s Honor Rating is a measure of his trustworthiness on the Betcha Platform. Think of it as akin to a cross between a credit rating and a reputation score.” We might likewise analogize it to commercial goodwill—an asset that, while intangible, can be worth quite a lot. Someone with a poor Honor Rating on Betcha.com would, like someone with a low reputation score on eBay, effectively end up out of business.

The chink in Betcha.com’s legal armor thus lies in how authorities regard the Honor Rating. If they think it constitutes an intangible asset, one lost by customers who don’t pay off their bets, then Betcha.com might lose its gamble against the law. I’d regret that, naturally; we all lose when the law prevents us from peacefully disposing of our property as we alone see fit. But I have to say that, were I betting on legal hacks, I’d favor BetZip.com’s over Betcha.com’s.

[Crossposted to Agoraphilia and The Technology Liberation Front.]

ABOUT BETCHA: I wish Nick Jenkins the very best.

BetBug (which billed itself as the “Kazaa of betting”, and thus thought that it was above the law):

Dear BetBug User,
It is with deep regret that BetBug has voluntarily chosen to stop publishing its peer-to-peer software and will stop populating the software’s wagering menu with events. The effect will be that users will no longer be able to use the software to find others with whom they can make personal and direct bets. As always, to process a withdrawal or other financial transaction, please login to your account at www.payp2p.com click on “Pay Out Money” and select the withdrawal method of your choice. Alternatively you can login to your BetBug application, click on “My Wallet” and select “Withdraw”. While we continue to believe that BetBug’s true peer-to-peer software does abide by all major Federal gaming laws in the United States, the current legal environment seriously deters our chances of success. We hope to be able to reintroduce the software to the public at a later date.
BetBug Management

Previous: Nick Jenkins welcomes you to Betcha.com, America’s first person-to-person betting site.

UPDATE: Betcha.com’s Hack of Anti-Internet Gaming Laws – by law professor Tom Bell

Dear BetBug User,

It is with deep regret that BetBug has voluntarily chosen to stop publishing its peer-to-peer software and will stop populating the software’s wagering menu with events. The effect will be that users will no longer be able to use the software to find others with whom they can make personal and direct bets.

As always, to process a withdrawal or other financial transaction, please login to your account at www.payp2p.com click on “Pay Out Money” and select the withdrawal method of your choice. Alternatively you can login to your BetBug application, click on “My Wallet” and select “Withdraw”.

While we continue to believe that BetBug’s true peer-to-peer software does abide by all major Federal gaming laws in the United States, the current legal environment seriously deters our chances of success. We hope to be able to reintroduce the software to the public at a later date.

BetBug Management

#1. John O’Malia, the BetBug founder, is a U.S. citizen.

#2. It was a special kind of betting exchange (real-money prediction exchange). All the payment administration business was outsourced to an offshore “escrow bank”.

“Another one bites the dust”, as the band Queen sang. (YouTube links: Video clip + Live at Wembley in 1986.)

Will TradeSports-InTrade, too, pull out of the US market? What is the real motivation behind the TradeSports-InTrade splitting up?

—

John David Lefebvre, Neteller co-founder, was arrested and charged with transferring billions from U.S. citizens to overseas gambling companies.

Photo Credit: Artist’s Rendering By Shepard Via Bloomberg News Photo

—

Wash Post:

Neteller, which had provided payment services to more than 80 percent of worldwide gaming merchants, watched its business swell after PayPal and parent company eBay agreed to leave the business and forfeit $10 million to settle civil charges three years ago over financial transfers to offshore and online gambling firms.

Now, however, with the arrest of two of its founders, the British Web site is scrambling to exit the U.S business. Neteller is besieged with requests from frustrated bettors who want to recoup billions in deposits and winnings. The money is being held in trust accounts while the company holds conversations with the Justice Department about the status of its executives and other board members.

“The answer is, it’s a bit confused at the moment,” Neteller spokesman George Cazenove said. “I’m sure they will get their money back. You’ve got to give Neteller a bit of space.“

SportBooks Review – 02.01.2007 – (07:45 PM CST)

Neteller cuts off remaining withdrawal options for U.S. citizens. Six days after the Neteller debit card service was discontinued, U.S. users find they are unable to transfer to peers in other countries. Non-U.S. users currently have the ability to move funds normally. Neteller’s FAQ page was updated today.

Why can’t I perform Peer-to-Peer transfers anymore?
In order to ensure that US members do not use NETELLER with the intent to gamble online, NETELLER is no longer offering its Peer-to-Peer service in the US.

Although Neteller assures players that funds are safe and will be paid after an undisclosed period of time, large balance holders are aggressively pursuing the use of non-US bank accounts to withdraw funds.

Abacus:

Posted Fri January 26 2007 10:49 AM

I requested 3 checks from 3 different offshore gaming entities within a two hour span on Wednesday. I paid the $30 fee for TS to ship it via FedEx and received it at 9 AM this morning. I also opted for airmail with the other firms. The other firms said they had large backlogs due to large numbers of customers requesting funds. TS never said if they were experiencing larger than normal payout requests but judging by remarks in the forum and elsewhere on the net one could reasonably assume they were.

I think they did a hell of a job processing my withdrawl in such a speedy manner. I was only adjusting my balance and did not request all my funds.

This message has been edited [i.e., censored]. Last edited [i.e., censored] by: Trade Exchange Network, Mon January 29 2007 06:10 AM

Intellectual Ventures is an invention company. We conceive and patent our own inventions in-house through a world-renowned staff of internal and external scientists and engineers. We also acquire and license patented inventions from other inventors around the world. Our network of invention sources includes: large and small businesses, governments, academia, and individual inventors. These inventions span a diverse range of technologies including: software, semiconductors, wireless, consumer electronics, networking, lasers, biotechnology, and medical devices. Our current focus is on developing our invention portfolio. Over time, we intend to market our portfolio on a broad and non-exclusive basis through a variety of channels including spin-out companies.

In the November issue of IP Investor (PDF), it is said that Intellectual Ventures has filed about 400 patents, and Nathan Myhrvold slams eBay for having filled only “10 patents or 11 patents” —big companies need patents “for the future”, he says. It would be interesting to know how many patents BetFair has filled —BetFair, like eBay, is a peer-to-peer exchange.

Here’s a graphical representation of how Intellectual Ventures practices the difficult transition from “invention” to “innovation“:

[Image published with permission from Intellectual Ventures.]

Of course, once you have transitioned from “invention” to “innovation”, the road does not end there: more than 75% of new products fail.

—

All this to come back to Robin Hanson‘s invention, the concept of decision markets (a market-generated automatism to extract the wisdom of crowds and make it a better decision tool than managers or politicians), which he spams at each conference he is invited in. As I wrote two times, it’s a solution in search for a problem. I would see only two applications (last time I said “only one”, but I got a new idea):

- As I said, series of decisions that are NEVER taken by senior executives.

- In the coming two decades, imaginary universes (like Second Life) are going to meet with prediction markets. Once we are there, we can imagine a Second Life sub-universe filled with libertarians, playing with imaginary prediction markets. Then, yes, if the gamers agree, imaginary decision markets could rule —both at the macro and micro levels.

—

More Resources On Innovation:

- The Business Innovation Insider blog – (highly recommended, especially to my marketing guru Guy Kawasaki)

- Innovators share the lessons they’ve learned during 2006 – (a hodgepodge of ideas taken from various thinkers)

X Bets

X Bets are events that customers request for betting among themselves. They can only be graded based on results reported by the person who requested the market.

Create A Market

Create Your Own Betting Event

NOTE: You must be logged in to submit an X-Bet request and reply to an e-mail confirmation sent to your registered address.

Event name
Provide a brief description of the event:

Name the event participants, or the possible outcomes of the event:
Does your event have a starting time?
Day Hour

Is there a time when betting should close?
Day Hour

Would you like us to post any additional information or details about your event on the site?

Matchbook can e-mail a description of your event to anyone you like. Please the provide e-mails of interested parties below:

Note: Bizarre, MatchBook does not have any “About Us” webpage or “Contact” page. I believe that they are located in Ireland, E.U., but I could be wrong. (WhoIs database was down at the time of writing.)

Addendum: Of course, the Foresight Exchange is the “longest continuously operating” marketplace that organizes user-created prediction markets.

Addendum (October 31): Mystery solved (via betting market expert Niall O’Connor).

4/27/2005 10:32:00 PM
SBR initiates coverage of MATCHBOOK at B-. MATCHBOOK is a new betting exchange that is funded by the ownership of WSEX (SBR rating A). The exchange aims to offer the American sports bettor the ability to wager via peer-to-peer with the same ease of making a wager at a regular sportsbook. MATCHBOOK has developed its own software and says they have focused on simplicity and functionality. Like all betting exchanges, the quality of the playing experience will be dependant on MATCHBOOK’s ability to attract players and an active trading market. This operation is still in its infant stages.
Player funds are backed by the same investment group behind WSEX and players are able to make transfers between MATCHBOOK and WSEX at no charge. However, MATCHBOOK holds its own gaming license and has separate operational, customer service and management teams.