The fact that Inkling needs five bullet points and a graph to explain short selling is a good indication it’s too complicated.

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That was Jason Trost&#8217-s comment.

But see, first, Chris Hibbert&#8217-s comment:

My main complaint about using the “short-selling” terminology in prediction markets, is that it uses a term from finance that describes a complicated scenario to describe a simple scenario it doesn’t apply to. In financial markets, short selling means that you accrue money in order to take on a conditional obligation. When you bet against a proposition (on InTrade, Foresight Exchange or (I think) Inkling), you spend money and gain a conditional asset. In the prediction market case, you don’t have any further obligation- there’s no possibility of a margin call. The asset has a non-negative value.

I actually think the way NewsFutures describes binary outcomes is the simplest. They never talk about selling unless you already own the asset. If you don’t own any of the asset, you can either buy it, or click a button to see the opposite view, which you can also buy. They don’t have “yes” and “no”, they just have complementary wordings and titles for opposing outcomes.

Go reading all the comments, there.

InTrade should ditch their prediction markets on the InTrade prediction markets, and run a continuing series of 5-minute prediction markets instead.

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I don&#8217-t like the concept.

It has received criticism.

I don&#8217-t spot much volume.

I think that TradeFair&#8217-s 5-minute prediction markets are based on a much, much better concept and usability.

Time for John Delaney to act decisively. There is a reason the trash can was invented: to ditch the bad products.

2008 US Presidential and Congressional Elections Prediction: The Sarah Palin effect has partially evaporated, but its remains point to a close race, come Tuesday, November 4, 2008.

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#1. Explainer On Prediction Markets

Prediction markets produce dynamic, objective probabilistic predictions on the outcomes of future events by aggregating disparate pieces of information that traders bring when they agree on prices. Prediction markets are meta forecasting tools that feed on the advanced indicators (i.e., the primary sources of information). Garbage in, garbage out&#8230- Intelligence in, intelligence out&#8230-

A prediction market is a market for a contract that yields payments based on the outcome of a partially uncertain future event, such as an election. A contract pays $100 only if candidate X wins the election, and $0 otherwise. When the market price of an X contract is $60, the prediction market believes that candidate X has a 60% chance of winning the election. The price of this event derivative can be interpreted as the objective probability of the future outcome (i.e., its most statistically accurate forecast). A 60% probability means that, in a series of events each with a 60% probability, then 6 times out of 10, the favored outcome will occur- and 4 times out of 10, the unfavored outcome will occur.

Each prediction exchange organizes its own set of real-money and/or play-money markets, using either a CDA or a MSR mechanism.

More Info:

– The Best Resources On Prediction Markets = The Best External Web Links + The Best Midas Oracle Posts

– Prediction Market Science

– The Midas Oracle Explainers On Prediction Markets

– All The Midas Oracle Explainers On Prediction Markets

#2. Objective Probabilistic Predictions = Charts Of Prediction Markets

Put your mouse on your selected chart, right-click, and open the link in another browser tab to get directed to the prediction market page of your favorite exchange.

2008 US Elections


2008 US Electoral College

2008 Electoral Map Prediction = InTrade – Electoral College Prediction Markets = Probabilistic predictions for the 2008 US presidential elections based on market data from InTrade =

– This is a dynamic chart, which is up to date. Click on the image, and open the website in another browser tab to get the bigger version.

The prediction exchanges that have fully embraced the prediction market approach

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These prediction exchanges present prices as probabilities (expressed in percentages):


– InTrade .NET &#8230- [*] &#8230- would get the full point if they were to switch the label &#8220-price&#8221- for &#8220-probability&#8221- on their charts.

– NewsFutures &#8230- gets half a point. No mention of &#8220-probabilities&#8221- on their charts.

– Inkling Markets &#8230- gets a quarter of a point.

– TradeFair &#8230- gets an honorable mention, but won&#8217-t show its charts to the non-registered public. :(

[*] Which prefigures what InTrade .COM is going to be, soon, if I understood well my Deep Throat&#8217-s tip.

As for the ultra innovative YooPick, is it yet another case of &#8220-do what I say, not what I do&#8220-?&#8230- :-D

APPENDIX: Lance Fortnow is PMA compatible:

UPDATE: See the comments&#8230-

Chris Masses second comment to the CFTC on event markets (prediction markets)

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Chris F. Masse
Midas Oracle
cfm &#8212-&#8212- midasoracle &#8212-&#8212- com
chrisfmasse &#8212-&#8212- gmail &#8212-&#8212- com

July 6th, 2008

Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st St. NW
Washington D.C. 20581

Office of the Secretariat- [email protected]

Concept Release on the Appropriate Regulatory Treatment of Event Contracts
73 FR 25669

Just a technical note, before I give you my thoughts. In the following, I call &#8220-prediction market&#8221- the specific market where one particular event derivative is traded. (For instance, the &#8220-Barack Obama will be elected US President in November 2008&#8243- prediction market.) And I call &#8220-prediction exchange&#8221- the general marketplace where many prediction markets (on political elections and other events) are traded. (Hence, I call HedgeStreet a &#8220-prediction exchange&#8221-).

Please, allow me to give you my thoughts on the subject of real-money prediction exchanges:


The information aggregation mechanism functions well only if there are enough traders. Probabilistic predictions (which are of interest of the economists cited in the CFTC&#8217-s concept release) are generated only when there is enough liquidity, that is, when many traders come speculating on an event derivative market (e.g., on the topic of the next political election). Just because forecasters are interested in a topic and want to generate a market-based probabilistic prediction does not mean that traders will flock en masse. Market-generating forecasting is an offspring of the trading activity- if you have too little liquidity, you don&#8217-t have any trustworthy probabilistic prediction.

The socially valuable prediction markets should meet 3 criteria:
– their contracts should be very well drafted, so that the probabilistic predictions generated would be useful to society-
– a sufficient number of traders should like the topic-
– there should exist advanced, primary indicators which traders can follow to get early information (e.g., polls, among other sources of information, in the case of prediction markets on political elections).

Here&#8217-s a counter example. Yahoo! Research scientist David Pennock (one of the most active and well regarded researchers in this field) has created a set of prediction markets regarding the percentage share of web searches made in the US in 2008, for each Internet search engine (Google, Yahoo!, etc.) That would be extremely valuable, on the paper. Unfortunately, those sets of prediction markets have attracted only a fistful of traders:
Hence, no trustworthy probabilistic predictions were generated.

The CFTC should take with a grain of salt the 2008 petition organized by the American Enterprise Institute
that states that &#8220-not-for-profit research institutions&#8221- and &#8220-government agencies&#8221- should be allowed to run US-based, real-money prediction exchanges, for the good of society. Just because an organization is smart and fascinated by the prediction markets does not mean that its executives and managers will be capable of drawing traders. Obviously, prediction exchanges should be run by trading specialists and event derivative professionals, and properly regulated. No good will be done by the CFTC if amateurs are allowed to run un-regulated, real-money prediction exchanges.

I see 2 important keys for the development of socially valuable prediction markets.

a) The socially valuable prediction markets (which are not very popular, other than the ones on political elections) should be organized by the generalist prediction exchanges that draw traders en masse because they offer prediction markets on very popular topics.

Sports is a popular topic. If the CFTC go to the website of TradeSports , they will see that TradeSports links, on its frontpage, to the InTrade prediction markets at and, thus, send the TradeSports traders to the InTrade prediction markets, which is obviously good for InTrade&#8217-s liquidity in general, and especially good for InTrade&#8217-s socially valuable prediction markets. In the same manner, the prediction markets on political elections organized by BetFair UK are located within their central prediction exchange that is mainly devoted to sports.

The hard fact is that the most popular topic among individual traders (the retail customers of the prediction exchanges) is sports. As long as US laws and regulations won&#8217-t allow US-based, real-money prediction exchanges to organize prediction markets on the topic of sports, many US event derivative traders will give their business to offshore, real-money prediction exchanges who accept to take money from US residents (as it is the case with TradeSports-InTrade Ireland).

I understand, though, that the CFTC is working under a jurisdiction that presently outlaws prediction markets on sports.

b) The executives of the popular, real-money prediction exchanges should be willing to create socially valuable prediction markets by collaborating with outside researchers who specialize in certain verticals.

As of today, InTrade is the only real-money prediction exchanges that fill these 2 criteria &#8212-a) and b). InTrade&#8217-s executives and managers have deployed a considerable effort to create and run an impressive number of socially valuable prediction markets.

BetFair UK have chosen not to develop socially valuable prediction markets, alas &#8212-other than those on UK politics, which are well developed and of high social utility. And HedgeStreet does not have yet the CFTC&#8217-s stamp of approval to run markets of event derivatives non-financial topics, since that&#8217-s the purpose of the May 2008&#8217-s concept release.

The economists Justin Wolfers, Eric Zitzewitz, Robin Hanson, Koleman Strumpf and David Pennock (among others) have collaborated with InTrade Ireland to frame interesting questions. Obviously, the research institutions which those economic scientists are affiliated with (e.g., universities, colleges, business schools) have no business running real-money prediction markets.

If the &#8220-not-for-profit research institutions&#8221- and &#8220-government agencies&#8221- want to develop socially prediction markets, then they should do it in cooperation with established, popular, regulated, real-money prediction exchanges, who know what they are doing.

(In passing, I fully support Tom W. Bell&#8217-s point made in the 5th paragraph of his petition. The CFTC should not favor the not-for-profit prediction exchanges at the expense of the for-profit prediction exchanges. Tom W. Bell&#8217-s comment to the CFTC has not yet appeared on the CFTC website, as I type this. )

As I said, I follow the prediction market industry since 2003, and the 2 most common mistakes I see made by
the people proposing brand-new socially valuable prediction markets are that:
– they forget that the event derivative traders should have fun-
– they forget that, for each prediction market, there should exist advanced, primary indicators that traders should rely on to inform their trades.

I want to tell the CFTC that most people who talk about creating brand-new socially valuable prediction markets are totally unaware of these 2 basic rules.

In the beginning of this comment, I said that prediction markets are forecasting tools (and, hence, decision-support tools) if, and only if, there is sufficient liquidity. I also noticed that the world&#8217-s most liquid socially valuable prediction markets are offered by 2 exchanges (TradeSports-InTrade and BetFair) who use popular prediction markets (on sports, the fact is) to support the marketing of less popular, socially valuable prediction markets. (After making that argument, I acknowledged that the CFTC currently works for a legal environment that prohibits prediction markets on sports.)

My point here is to emphasize the uber importance of liquidity on socially valuable prediction markets. In my view, the best situation is when a big, generalist, real-money prediction exchange organizes socially valuable prediction markets and helps them to thrive. Only InTrade Ireland has done that, so far. My suggestion to the CFTC would be to create a legal environment such that their liquidity could be &#8220-repatriated&#8221- to the US, on a &#8220-InTrade USA&#8221- real-money prediction exchange.

A related issue is that the CFTC should be concerned about HedgeStreet&#8217-s financial health. After its third round of funding, HedgeStreet raised a total of $24.9 million.

Lately, HedgeStreet was aquired by an offshore investor for $6 million.

Obviously, there has been destruction of wealth, here.

The CFTC did a great job in 2004 when it approved HedgeStreet&#8217-s application as a Designated Contract Maker (DCM). The CFTC should now finish the job by creating a legal environment favoring the profitability of HedgeStreet and of other non-intermediated DCMs (e.g., InTrade USA, or BetFair USA, or TradeFair USA) &#8212-which I hope will be started up in the future in the US.

What I am afraid with the May 2008&#8217-s concept release on &#8220-event markets&#8221- is that the CFTC does not look into the real issues: the liquidity of socially valuable prediction markets, and the profitability of US-based companies operating real-money prediction exchanges (non-intermediated DCMs).

I&#8217-m afraid that all the solutions consisting in &#8220-exemptions&#8221- and &#8220-no-action&#8221- letters are false solutions that do not address the real issues.

Finally, for the issue regarding the protection of retail traders, I suggest that the CFTC looks into the worst scandal that occurred in the field of prediction markets &#8212-the &#8220-North Korea Missile prediction market&#8221- scandal. I am sad to say that InTrade Ireland acted in the worst way possible, and, thus, have indelibly tarnished their reputation, alas.

Thanks for listening,

Chris F. Masse
Panorama B, Green Side
305, avenue Saint Philippe
Les Templiers, Sophia–Antipolis
06410 Biot, Alpes-Maritimes
France, European Union



– Chris Masse&#8217-s first comment to the CFTC on &#8220-event markets&#8221- (prediction markets)

– What the CFTC is asking.

What I said to BusinessWeek

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BusinessWeek&#8217-s Ricky McRoskey:

Experts expect the initial reaction to CFTC regulation to be more low-cap, nonprofit markets like the one created by the University of Iowa. Some doubt the forecasting power in these small-scale markets, since there wouldn&#8217-t be enough monetary incentive for traders to seek and discover information. &#8220-We do not need nonprofit prediction exchanges,&#8221- says Chris Masse, editor and publisher of the prediction market blog He says that [offshore] exchanges like Intrade and Betfair, which are for-profit, have the capital to continually offer more cutting-edge pricing systems and additional contracts while nonprofits like the IEM have not.

I meant that real-money prediction exchanges that make profits do support innovation (see BetFair&#8217-s new bet matching system and starting-price system) and are well positioned to foster socially valuable prediction markets (see the huge effort that InTrade is making in this direction).

Voila. :-D

Psstt&#8230- You&#8217-ll notice that I am the only one in that story to mention and speak favorably of InTrade-TradeSports and BetFair-TradeFair. :-D

BetFair-TradeFair and the National Security Agency (among others) are giving away $260,000 in tournament prizes to attract the worlds best nerdy geeks (who cant fry an egg, cant get a Friday night date, but can decipher a computer algorithm).

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The 2008 TopCoder Open @ Las Vegas, Nevada, U.S.A. – 2008-05-11~15

BetFair Corporate – Jobs &amp- Careers

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.
  • “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.

HubDubs Nigel Eccles pinches Henry Blodgets nose (like trumpetist Miles Davies did for one of his musicians, on stage, one day), and the damn result of that, believe or not, is that the valuation of The Sporting Exchange (BetFair-TradeFair) drops from $5 billion to $3 billion. So, either Nigel shoul

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Nigel Eccles:

How did you forget yadda yadda yadda. [ Hilarious. :-D ]

Nice list, roughly makes sense but lots to disagree with (as you would expect). However one clear mistake is BetFair. They should be valued at $3 billion. They just did a recapitalisation which distributed 10% of the company in cash to shareholders (I got the check this morning). It was at a valuation of ?1.5 billion, so unless you are even more bearish on the exchange rate that works out at $3 billion.

Henry Blodget:

Thanks for the info on Betfair&#8211-that&#8217-s exactly the sort of concrete detail we&#8217-re especially looking for. We&#8217-ll see if we can confirm, and, if so, the valuation will drop to $3 billion.

And there&#8217-s another interesting comment, on the other page:


why the gratuitous &#8212- and painfully ignorant – -swipes at the USA?

can&#8217-t you do your job without the silly &#8212- and, again, factually incorrect &#8212- morals lectureds and editorializing?

actually the U.K. is one of the few countries in the world where online gambling is essentially legal (though the U.K. still hasn&#8217-t sorted out all the laws it is creating to govern online betting)

many EU countries are literally at each others throats about how/when to tax internet gambling (principally because state-run lotteries are specifically carved out of the E.U. free trade agreements)

japan, australia and china have sever and horrible and harsh punishments for internet gambling

of course, pretty much all of the islamic world puts people to death or dismemberment for breaking qu&#8217-ran-ic law – and gambling is totally and utterly forbidden under the qu&#8217-ran

it is you who are &#8220-of arbitrary morals&#8221-. stick to blogging.

Insider&#8217-s comment sounds informed, but he/she should have avoided the nasty last line.

&#8220-Stick to blogging&#8221- is an insult I was served with, recently, (by a UK-based financial trader), so I can relate. But that&#8217-s never helpful. Educate that blogger, instead. You&#8217-ll get a better ROI, believe me.