Yearly Archives: 2008

The definitive proof that FOR-PROFIT prediction exchanges (like BetFair and InTrade) are the best organizers of socially valuable prediction markets (like those on global warming and climate change).

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Last year, I said that the BetFair prediction markets on global warming would fail.

I said:

My prediction is that the first two BetFair Global Warming prediction markets (HSBC Investable Climate Change Index and ECX CFI Futures Contract) will fail miserably.

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They failed, indeed. Remain only those two prediction markets, with ultra light volumes: Highest and Lowest UK Temperature.

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As for the InTrade prediction markets on climate change (USA agrees before end of 2009 to reduce CO2 emissions by 10% or more by year 2025), liquidity is more than thin.

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Now, ask yourself:

  • If BetFair and InTrade (which are for-profit prediction exchanges) encounter difficulties with those &#8220-socially valuable prediction markets&#8221-, why would not-for-profit prediction exchanges (like the Iowa Electronic Markets) be more successful at it?
  • Don&#8217-t you think that the American Enterprise Institute&#8217-s proposals (which would outlaw the for-profit prediction exchanges) are out of whack? I do. Let&#8217-s do something.

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2 MILLION TRADES LATER: Inklings play-money prediction markets are accurate -too.

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So, just like flipping a coin, if Inkling told you something has a 15% probability of coming true, you can&#8217-t just look at one outcome (i.e. one coin flip). You need to look at multiple scenarios where Inkling said something would happen 15% of the time. If those things actually come true, 15% of the time, Inkling is doing well at this.

COMMENTS TO THE CFTC: What to expect from Tom W. Bell and Jason Ruspini

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For those who are just surfacing from an Afghan cave: Tom W. Bell is a law professor at Chapman University (in California) and Jason Ruspini is a Wall Street professional (in New York).

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It seems that both will, independently of each other, write to the CFTC about the legalization of the &#8220-event markets&#8221- (here are the comments to the CFTC) &#8212-a bad term for the &#8220-non-hedgeable event derivative markets&#8221- (which is also, probably, a term that is quite awful to your ears :-D ). What to expect from them? (WARNING: This is highly speculative.)

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TOM W. BELL

  • He will state the libertarian point of view &#8212-laissez faire, laissez aller. – [DISCLOSURE: I am a mid-core libertarian myself, so I like that.]
  • Overall, he will try to put up a basket of legal hacks &#8212-to establish that the real-money prediction markets should be as free as possible.
  • In particular, he will try to make the point that &#8220-event markets&#8221- should be covered by the laws governing &#8220-notes&#8221- &#8212-not by the laws governing &#8220-contracts&#8221-.
  • By doing so, he will tell the CFTC to go fugging themselves &#8212-since the CFTC is allegedly about &#8220-contracts&#8221-, not about &#8220-notes&#8221-.

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JASON RUSPINI

  • He will state that all the real-money prediction markets should be covered by the CFTC.
  • He will navigate within the legal framework that the CFTC has established in their &#8220-concept release&#8221-. – [See this document from the Arnold &amp- Porter lawyers, if you wanna know what’s a “concept release”, in the mind of the CFTC regulators. – PDF file.]
  • He will be very careful not to offense those bureaucrats.

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TOM W. BELL vs JASON RUSPINI

  • It&#8217-s great that the libertarian point of view is elaborated and disseminated to these bureaucrats. However, the CFTC is an agency, not the US Supreme Court Of Justice &#8212-and the fact that Tom W. Bell is right does not mean that he will prevail.
  • Jason Ruspini&#8217-s approach is extremely reasonable: he adopts the enemy&#8217-s point of view, and, from within, tries to maneuver the regulatory barriers to create as much room as possible. Also, Jason Ruspini will address only the CFTC questions which he grasps well. (Contrast that with some who spread themselves too thin, and answer all the CFTC questions, even those where they have no expertise or experience. Their answers are, and, will be totally ignored. It&#8217-s not what you say that is important- it&#8217-s what you say in relation with who you are to say that.) I&#8217-m pulling for Jason Ruspini&#8217-s approach.

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TAKEAWAY

  • If Jason Ruspini does not fuck it up, he has the potentiality to influence positively the CFTC, and to become one of the great leaders of the field of prediction markets. Let&#8217-s wish for that. Our field needs courageous men (and women) with the right political compass and the sense of pragmatism.

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THE MIDAS ORACLE TAKES:

– CALL TO ACTION: Let&#8217-s fight so that the CFTC allows the FOR-PROFIT prediction exchanges to deal with &#8220-event markets&#8221-.

– In the for-profit vs not-for-profit debate, our prediction market luminaries, doctored by Bob, are on the wrong side of the issue.

– A young economist rebuts the American Enterprise Institute.

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BACKGROUND INFO:

– CFTC’s Concept Release on the Appropriate Regulatory Treatment of Event Contracts&#8230- notably how they define &#8220-event markets&#8221-, how they are going to extend their &#8220-exemption&#8221- to other IEM-like prediction exchanges, and how they framed their questions to the public. Here are the comments sent to the CFTC.

– The Arnold &amp- Porter lawyers explain the meaning of the CFTC&#8217-s concept release on &#8220-event markets&#8221-. &#8212- (PDF file)

– The Schulte &amp- Roth &amp- Zabel lawyers&#8217- takes. &#8212- (PDF file)

– The Sullivan &amp- Cromwell lawyers&#8217- takes. &#8212- (PDF file)

– What Vernon Smith told the CFTC.

– The American Enterprise Institute’s proposals to legalize the real-money prediction markets in the United States of America

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APPENDIX:

Paul Wolfowitz&#8217-s profile at the American Enterprise Institute

– How the neo-cons drove the United States of America into the unecessary Iraq war

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Prediction Markets TV – Will the controversial but indispensable Max Keiser (ex-HSX) stay true to his purpose, or will he f*** it up?

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Previously: VIDEO: Max Keiser’s attempt at predicting the future —subjectively

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External Link: Max Keiser blogs at the Huffington Post.

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Previous blog posts by Chris F. Masse:

  • The CFTC is going to close the comments in 9 days. We have 9 days left to convince the CFTC to accept FOR-PROFIT prediction exchanges (e.g., InTrade USA or BetFair USA), and counter the puritan and sterile petition organized by the American Enterprise Institute (which has on its payroll Paul Wolfowitz, the bright masterminder of the Iraq war).
  • Forrest Nelson valids Emile Servan-Schreiber.
  • Averaging One’s Guesses
  • Americans love rankings, but Americans hate to be assessed subjectively.
  • A libertarian view on the Internet betting and gambling industry in the United States of America
  • The CFTC is going to close the comments in 10 days. We have 10 days left to convince the CFTC to accept FOR-PROFIT prediction exchanges (e.g., InTrade USA or BetFair USA), and counter the puritan and sterile petition organized by the American Enterprise Institute (which has on its payroll Paul Wolfowitz, the bright masterminder of the Iraq war).
  • The Numbers Guy

Adam Siegel of Inkling Markets has computed that blogging is important to a small business.

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Inkling Markets:

Here are the jobs we&#8217-re currently looking to fill:

Director of Business Development
Take the reigns to plan and direct Inkling&#8217-s ongoing business development efforts. This includes everything from identifying and evaluating new market opportunities, working on public relations initiatives, forging strategic partnerships, initiating proposals, negotiating contracts with our enterprise clients, and helping to manage existing accounts. Our ideal candidate will have demonstrated the ability to sell software as a service to large enterprise clients or has proven to be effective at launching new product lines and developing new strategic initiatives for at least 5+ years.

Customer Support
Inkling provides technical support to all its clients. From the trader who has a question about their balance to a marketplace administrator who has questions about how to run a market properly, we&#8217-re looking for someone to be our interface for these types of questions. It&#8217-s ok if you don&#8217-t have an intimate understanding of prediction markets now, but our ideal applicant will have shown excellent communication skills, both verbal and written, will have effectively managed multiple work threads at once, and will not be afraid of venturing in to other activities going on in the company, i.e. supporting business development efforts, doing customer outreach and blogging, performing research, and even doing application testing when necessary. We&#8217-re particularly interested in recent college graduates [*] for this position.

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But you&#8217-ll notice that he would assign the junior employee (not the business development executive) to blogging.

[*] Yeah, fresh people are cheaper and more flexible.

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VIDEO – Bo Cowgill on Googles enterprise prediction markets – OReilly Money:Tech

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Using Prediction Markets to Track Information Flows: Evidence from Google – (PDF file – PDF file) – by Bo Cowgill, Justin Wolfers, and Eric Zitwewitz – 2008-01-06

Blip.TV

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I already published this video. The reason I do it again is that I found out a hidden function in WordPress to increase the dimensions of the embedded video player. I think it is useful in this particular case because Bo shows us some slides, in this video. So, my hope is that those slides will be more readable that way. Let&#8217-s try that. I am pressing &#8220-publish&#8221-&#8230- let&#8217-s see.

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Our previous blog post on the Google paper

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Previous blog posts by Chris F. Masse:

  • The CFTC is going to close the comments in 9 days. We have 9 days left to convince the CFTC to accept FOR-PROFIT prediction exchanges (e.g., InTrade USA or BetFair USA), and counter the puritan and sterile petition organized by the American Enterprise Institute (which has on its payroll Paul Wolfowitz, the bright masterminder of the Iraq war).
  • Forrest Nelson valids Emile Servan-Schreiber.
  • Averaging One’s Guesses
  • Americans love rankings, but Americans hate to be assessed subjectively.
  • A libertarian view on the Internet betting and gambling industry in the United States of America
  • The CFTC is going to close the comments in 10 days. We have 10 days left to convince the CFTC to accept FOR-PROFIT prediction exchanges (e.g., InTrade USA or BetFair USA), and counter the puritan and sterile petition organized by the American Enterprise Institute (which has on its payroll Paul Wolfowitz, the bright masterminder of the Iraq war).
  • The Numbers Guy

The CFTC is going to close the comments in 13 days. We have 13 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).

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PREVIOUSLY:

– CALL TO ACTION: Let&#8217-s fight so that the CFTC allows the FOR-PROFIT prediction exchanges to deal with &#8220-event markets&#8221-.

– In the for-profit vs not-for-profit debate, our prediction market luminaries, doctored by Bob, are on the wrong side of the issue.

–

BACKGROUND INFO:

– CFTC’s Concept Release on the Appropriate Regulatory Treatment of Event Contracts&#8230- notably how they define &#8220-event markets&#8221-, how they are going to extend their &#8220-exemption&#8221- to other IEM-like prediction exchanges, and how they framed their questions to the public.

– Arnold &amp- Porter lawyers explain the meaning of the CFTC&#8217-s concept release on &#8220-event markets&#8221-. &#8212- (PDF file)

– American Enterprise Institute’s proposals to legalize the real-money prediction markets in the United States of America

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APPENDIX:

Paul Wolfowitz&#8217-s profile at the American Enterprise Institute

– How the neo-cons drove the United States of America into the unecessary Iraq war

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The CFTC extends its regulatory arm to… the City of London.

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A CFTC Commissioner in the Financial Times:

So what effects do the Durbin legislation and the CFTC regulatory action have? Are they the kind of &#8220-excessive&#8221- regulation contemplated by the Balls Clause? Given the circumstances of the trading activity and entities involved, and the tailored approach to a work-able regulatory solution, the answer would appear to be No. The proposals are intended to provide authority to the US commodities regulator over US individuals trading certain products on a foreign board of trade. The idea is to ensure that foreign markets offering contracts that mirror energy products traded on US exchanges should have the same transparency requirements as the US market. The Durbin legislation would give the CFTC the ability to exercise power over manipulation, speculation and record-keeping by US citizens and instructs the US regulator to assess the foreign regulator&#8217-s ability to apply comparable regulatory principles prior to granting relief from US regulatory requirements. Similarly, the CFTC&#8217-s action would condition access to US customers on the ICE&#8217-s adoption of position limits and accountability levels on the WTI contract.

PREDICTION MARKETS: Robin Hanson & Justin Wolfers

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I have been chatting with a prediction market practitioner (I won&#8217-t tell you who, and no, it&#8217-s not whom you think of) &#8212-shooting the breeze, and talking about the current state of the prediction market industry&#8230- taking about things and people&#8230- talking up some people&#8230- and badmouthing others ( :-D ).

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At the end, the conversation barged on the issue of &#8220-advisory boards&#8220-. And he told me that Robin Hanson and Justin Wolfers have helped him TREMENDOUSLY &#8212-in terms of solving problems with new software features, case studies, applied research, etc.

Wow.

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