InTrade-TradeSports is not only an event derivative exchange, but also a webspot that non-trading people often consult to get the latest market-generated probabilistic predictions. Last Friday, in addition to the traders, many people visited InTrade just to see what their prediction markets were saying about who would be John McCain’s pick as Republican vice presidential nominee. InTrade-TradeSports CEO John Delaney has said that that Friday saw 10 times more web visitors than any usual peak day, and that their server bandwidth was not large enough to cop with all solicitations. It is well known in the media business that servers should be configured many times bigger than for the normal usage —so as to accommodate exceptional peak times, when some impacting news break. My sentiment is that the InTrade-TradeSports technical team has probably not fully anticipated the growth of the InTrade-TradeSports followers.

As the result of this black Friday, some traders complained. One trader (Todd) started a thread on the InTrade e-mailing list. Unfortunately, Todd spiced his message with sarcasm. Which immediately irked John Delaney, who responded to the complaint, but also added a twisted line in effect inviting Todd to close his InTrade account.

-

-

That remark offended another InTrade-TradeSports trader (Lucy Vega), who talked back to John Delaney:

-

-

BetFair and InTrade-TradeSports are de facto monopolies (with 95% of the total business on their geographical zone, according to my estimation), and their direct competitors have far less liquidity, thus making them uninteresting for the big traders like Todd.

If John Delaney were really sincere in his wish to see the US public prediction market industry becoming legalized and experiencing a big growth in the coming decade, he should refrain from making offending remarks to his customers —even when those clients started the feud with some sarcasm of their own. This kind of bullying behavior could attract the attention of the US regulators in a negative way, which is exactly the reverse of what is needed at this time.

I can understand that John Delaney is sometimes upset by some of his ultra-demanding and sarcastic customers. However, as I said, the real-money prediction exchanges are in a situation of being de facto monopolies, where their market-generated information is of high social utility, which creates a social responsibility for the executives and managers of these prediction exchanges. You don’t insult and castigate a blogger who exposes a scandal. You don’t censor the CNBC reports. You don’t ask a complaining customer to close his / her account. All those things are big no-nos.

-

UPDATE

I am re-publishing an old post of mine, as an appendix, to respond to some comments:

-

Dan Laffan of InTrade has just given me permission to republish his e-mail(s) to Todd Griepenburg:

Todd,

We will absolutely not continue to be part of or facilitate any further diatribe with you on these issues.

If you are not satisfied that we
1. Have listened to your comments
2. Have replied to same and
3. Will take or have taken whatever corrective action is within our power and/or appropriate
then we reluctantly suggest that you consider closing your account on the exchange (or cease using it until our service meets your expectations). We say “reluctantly” as we do not wish to see any member leave, but we seem to be causing you immense dissatisfaction which is not our intention.

We will promptly close your account and return any funds you have in your account at your request. We await your decision and instruction.

Best regards,
Dan

Previous: A Big Trader’s Open Letter to TradeSports-InTrade + Second E-mail to InTrade-TradeSports + Third E-mail to InTrade-TradeSports + InTrade-TradeSports to Todd Griepenburg: GO TO HELL.

Dan Laffan to Todd: #1 – #2

-

UPDATE #2

For the full information of my readers, InTrade-TradeSports’s behavior is not the worst behavior that a prediction exchange can have towards an annoying customer. I am aware of another real-money prediction exchange who does close the accounts of the customers whom they view as problematic (and that, without citing any reason) —as opposed to just asking somebody to leave.

-

UPDATE #3:

Todd’s new message to John Delaney

Previously: TRADESPORTS STOLE MY MONEY, claims trader Todd.

Todd’s trades on NHL games was reversed by TradeSports under Contract Rule 1.2 (“unrepresentative price”).

_NHL.CAL@SJS.OVER5.5_ (mailto:NHL.CAL@SJS.OVER5.5)

Sold 40 contracts at a price of 38.0 at: 05:32:27 AM GMT 01/04/08

Pre-game orders failed to cancel and were later filled at unrepresentative prices.

All pre-game market maker orders that were matched in-game were reversed for all customers – this included winning and losing trades.

Todd’s e-mail #1 to TradeSport:

Subject: Re: NHL Games – Reversed Trades
From: Todd73NJ—–aol—com
Date: Fri, 4 Jan 2008 19:54:40 EST
To: help@tradesports.com

TS -

Straight up – this is bullshit. No other way to put it.

You explain to me how this is an unrepresentative price?? The game is tied 2-2 at the 2nd Period intermission – The total is 5.5. I sold the over to someone at 38. Therefore more than 72% of the total has been achieved in 66% of the game. If ANYTHING the advantage was given to the person I sold the [event derivative] over to. In addition, as anyone who gambles knows, in 1 goal games – an empty net goal is a possibility of over 60% – giving a complete advantage to the person holding the over contract. Had ONE goal been scored in 19 minutes of action (After having 4 in 40 Mins of action) – there would have been a 60% chance of an empty net goal in the FINAL 1 MINUTE of play.

The only person who gets screwed here is me. I GAVE AWAY advantage selling this line because I wanted action in the final game of the night. And now your pulling this bullshit?? I want a $152 trading credit – and there is no alternative resolution. You are STEALING money from me that I won fair and square. I risked $248 to win $152 on a contract that should have been 50/50. Do the math yourselves.

If an NBA team leads by 3 going to the 4th qrtr and is a 4 point favorite – ask your MMers what the price should be. 75. If an even money pre game line is tied at half time or at the end of the 3rd qrtr and it right on pace for hitting the line – line is 50. THIS GAME WAS AHEAD OF PACE FOR THE OVER AND I SOLD THE OVER TO SOMEONE AT PLUS VALUE!

You need to change your action on this event immediately. This is a fraud to help your market maker - as had it gone the other way – first off, I would have NEVER asked for an over turn – and secondly this conversation wouldn’t even take place. I have never asked for a sports over turn on a misrepresentative price. Someone I’ll sell a position at a disadvantage just to have action and have something to watch – JUST AS I DID last night…

And now what happens? You take the $$ from my account. It’s fraud – it’s theft – call it what you want – but this is DEFINITELY NOT a misrepresentative price. And correct me if I’m wrong but doesn’t a misrepresented price need to be 20 points from actual??? So your saying actual value of this over was 17?? I’ve talked to many high volume traders and the price range they give me is from 55-80 as fair value.

This is straight up bullshit. Look at the facts. You STOLE money from me.

Todd

Todd’s e-mail #2 to TradeSports:

Subject: Re: NHL Games – Reversed Trades
From: Todd73NJ——-aol—com
Date: Mon, 7 Jan 2008 20:59:02 EST
To: help@tradesports.com

I don’t care about win or lose – $152 is meaningless to me.

So does this mean if I accidently leave up an order pre game that is matched in game I can get my trades reversed?

I’m not exactly sure what rational your company uses anymore. When I come onto live help to ask how to get a MMer to come back to a featured event – I am told “We have nothing to do with the market makers’ making markets”. So shouldn’t the same policy be in effect if a market maker leaves me hanging with a position I don’t want because YOU advertise it as inrunning. So does that mean youll refund me? You are so one-sided in these issues it’s disgusting.

I bought a position at a MORE than fair price. Canceling my trade is stealing money from me. I’ve lost before on markets that appeared to be left up – and those weren’t reversed. Tradesports owes me $152 and needs to clarify its rules so everyone understand the market maker protection.

And clarify this for me please. When I see a market posted at halftime in a game… how do I know if it’s from pre-game or not?? I sold my lots to someone for a bargain price – and now you screw me.

There is no rational to your decisions, and I do not plan to let this one go.

You and the MMers are either partners or you’re not. If you protect them – hold them accountable. Don’t just do it when it’s convenient for both of you.

$25,000 + in fees later – and I’m still getting screwed.

Todd

I’ve very slightly edited Todd’s e-mails.

[Human] Market Maker issues at Tradesports

My good friend Todd in the TS Forum (via Midas Oracle).

Market makers are not a substitute for liquidity. For instance, compare two $40 bil healthcare companies: BAX (Baxter Intl, NYSE w/ market maker) and GILD (Gilead Sciences, Nasdaq w/o market marker). GILD trades about $350 mil per day on average, vs. $190 mil for BAX.

Demand is the real key, some ingredients being:

trust
transparency
technology
transaction costs

Cost of carry is also an issue.

Chris Masse has Todd’s charts before me, as Chris blogs at the speed of light, and I blog at the speed of diaper changes.

Precision: It’s Todd himself who posted on Midas Oracle…

Todd73NJ on the TradeSports-InTrade forum:

If [] US is dead – like you seem to think – this site is dead.

The US is only dead to casual gamblers… but they dont make the site run.

My 1000 lots a days helps this site run, my $3000 a month in fees out weighs the 30 casual traders.

TS once before made an effort to bring in and keep those guys around – but now the emphasis needs to be put on how to increase volume and liquidty. And Ive brought the issues up.

TS doesnt need any more dead new contracts that trade 50 volume. They need to fix what they have before expanding.

Anyone who knows about business knows you need to handle your issues before expanding.

US market is dead to the casual gambler.

Focus on the people who want to be here.

Todd, the big trader, is probably disappointed by the absense of response from the TradeSports-InTrade management.