The United States and the European governments will default on their debt, eventually – dixit Marc Faber. [PREDICTIONS]

Singapore is the safest.

2:15 into

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Via Joe Weisenthal

The United States War against Online Gambling – An analysis of how the US sought and failed to stamp out Internet gambling.

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&#8220-The United States&#8217- War against Online Gambling&#8221- &#8211- An analysis of how the US sought and failed to stamp out internet gambling.


Safe and Secure Internet Gambling Initiative

Right 2 Bet

Barney Franks Payment System Protection Act (HR6870)

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&#8230- is a shitty bill&#8230- since it excludes sports betting.

RELATED: A news article (in French) implies, between the lines, that BetFair (who always respected the US laws) should be later granted a license to operate in the US, the day it becomes legal, while InTrade-TradeSports (who didn&#8217-t) should not be granted a license. Hummm&#8230-


THANKS: Tip via mister Emile of NewsFutures

Regulated U.S. election markets might not be so hard.

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Based on the arguments Hedgestreet presented in its response to the CFTC on event markets, the exchange has a fairly strong justification to self-certify and begin trading election futures, soon. While most event markets trade as binary options, and the CFTC has flexible discretion over options per 7 U.S.C. § 6c(b), the Commission does not have direct discretion over approving DCM futures that conform to the Commodity Exchange Act, by 7 U.S.C. § 7a-2(c)(3). Therefore, a vote-share or electoral college future is more feasible at this moment than a winner-take-all option, although the latter is more useful as a hedging vehicle.

The major question here is what degree of trading restrictions the CFTC considers appropriate in order to fulfill the CEA&#8217-s &#8220-beyond the control&#8221- criterion of excluded commodities. There is little doubt that low position limits alongside candidate death contingencies and prohibitions on trading by candidates, their staffs, members of the electoral college, and their proxies would not satisfy the CEA in this respect. The challenge lies in enforcing such trading prohibitions. I hope that Hedgestreet is in the process of developing a framework to do so. The CFTC could also issue an interpretive letter on this specific point, without addressing the more general, challenging issues related to their jurisdiction over event markets.

If Hedgestreet&#8217-s trading restrictions are conservative and rigorous, it is improbable that such a self-certification would put Hedgestreet in bad graces with the CFTC. Alternatively, Hedgestreet could submit the futures (or options) for approval under CFTC regulation 40.3. If they do so, the CFTC has 45 days to review the products, at which point they could render a decision or extend the review process. In the meantime, however, Hedgestreet could be in communication with the CFTC and NFA concerning the development of trading restrictions, which again should be the main point of contention here, as there is no doubt that such event markets are associated with an &#8220-economic consequence&#8221-. Note that CME does not even believe that trading prohibitions are necessary, citing the role of the Fed in determining interest rates and the lack of problems there with respect to manipulation. I tend to believe that the Fed and interest rates is a special case, not to mention that it is treated differently in the CEA, and that it is prudent to impose special trading restrictions on political event contracts. Those restrictions, however, can remain flexible and be loosened over time, especially the position limits, as the market grows.

Given the current political climate in which the CFTC operates, the Commission may welcome such an active stance from Hedgestreet and other DCMs on this issue, as it will allow them to take a more passive role in the process. In the case of vote-share, electoral college and tax futures with appropriate trading restrictions, the Commission would simply be complying with the CEA by allowing such contracts. Allowing winner-take-all options would be incrementally more sensitive for the CFTC given their additional discretion in such cases. In any case, I think we have passed beyond the point where there is any material doubt that such markets are bona fide excluded commodities.

[Previously, my response to the CFTC, where I take a broader view with respect to jurisdiction and issues like gaming law preemption. Cross-posted from Risk Markets and Politics]

Prediction Market History + Prediction Market Journalism

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The New York Times:

[…] Long before political prediction markets sprouted on the Internet, election bets — whether the stakes were money or embarrassing public spectacles — were a ubiquitous part of the American political scene. The practice, which began informally with petty stakes in pool halls in the late 19th century, was by 1900 a multimillion-dollar trade on Wall Street.

In the 1916 contest between Woodrow Wilson and Charles Evans Hughes, about $160 million (in current dollars) was wagered on Wall Street’s outdoor “curb exchange.” By contrast, the 2004 election saw less than $25 million in contracts change hands over the outcome on the Dublin-based market, the largest and most active for-profit market for odds on current American elections. […]

“Until the 1920s, New York would have been the center of gambling in the United States, what Las Vegas is today,” said Paul Rhode, a professor of economic history at the University of North Carolina, Chapel Hill. Technically, gambling on the result of an election was — and is — illegal, but the laws were not widely enforced, and newspapers routinely reported the names of prominent bettors and the Wall Street firms that held the stakes. […]

With the rise of polling in the 1930s and a decline in public approval of political gambling, election betting fell out of favor. The expansion of horse-track betting in 1939, giving people another arena in which to place their bets, also weakened interest in the markets.

Reporters, too, could get political forecasts from increasingly reputable polling agencies. While The New York Herald Tribune still reported on the betting as late as 1940, the odds were relegated to an occasional small paragraph on the financial page, and neither bettors nor stakeholders were named.

The online prediction markets that cropped up around 2000 were less a dot-com revolution than a road back to the earlier form of election coverage.

In a few years, we may regard the second half of the 20th century as the aberration in which the press used polls rather than markets to track political races,” Justin Wolfers, a business professor at the University of Pennsylvania’s Wharton School, wrote in an e-mail message. “And in the 21st century, we may return to the habits of the early 20th century, reporting on political races through the lens of prediction markets rather than polls.

Justin Wolfers is right that a new form of journalism may emerge (I call it &#8220-prediction market journalism&#8220-). However, my view is that it will be a minor &#8212-most news media will still be reporting polls rather than prediction market odds.