Legalizing Online Futures Betting 80
Did you have a strongly felt prediction about the 2012 elections that went against the conventional wisdom? Then you could have placed a bet at the Iowa Electronic Markets website (with real money); yet most people don't know the website exists. Indeed, it's only able to exist at all because of an exemption from U.S. laws that make other political betting websites illegal. The Irish-based online political betting site Intrade doesn't even accept American customers (you can't wire money to them from a U.S. based account), and their late CEO reportedly told John Stossel he was afraid of being arrested if he set foot in the U.S.
That's too bad, because I think that legalized Web-based betting on political outcomes could serve two valuable purposes in American politics: to provide forecasts of the relative merits of living under either of two candidates, and to force partisan blowhards to seriously consider whether they actually mean what they say. But in order to make this happen, in addition to the government lifting any legal restrictions on the ability of such sites to operate, I think a valuable additional feature would be the ability to place "if-bets", betting on particular events (the level of unemployment, for example) if a particular candidate were elected.
In September I happened to stop by the King County Republicans booth at the Puyallup Fair, and asked one volunteer, just for the sake of argument, what he thought was the best case against re-electing President Obama. (I'm a liberal, but I spend more time reading conservative blogs and opinion pieces than liberal ones, partly just to see what pieces I might agree with.) He said flatly that if President Obama were re-elected, unemployment could rise as high as 20 percent, and listed some other dire figures.
Well, I didn't consider that an "argument", but I asked him, "Would you be willing to bet on it?" -- not proposing that we actually wager, but asking him to think seriously about whether he would be willing to wager, if it were an option. In other words, if Obama is re-elected, and employment rises to 20 percent some time in the next four years (or perhaps if average employment over 4 years is above some designated threshold), then I pay my new Republican friend $100. If Obama is re-elected and no such thing happens, then the Republican pays me $100. If Obama is not re-elected, then the whole wager is void. After I spelled this out, the volunteer got a thoughtful look -- as if he were thinking, for perhaps the first time, whether he really believed what he had been saying. (Of course I've probably made similarly ill-thought-out predictions about politicians that I disliked, where the offer of a wager would have made me stop and think harder about what I actually believed.)
It would be easy for Intrade and similar companies to support these kinds of conditional "if-bets". Then their website could list data on, for example, what the bettors currently think are the odds of unemployment reaching 20% (or 15%, or 25%) if Obama were re-elected, or if Romney were elected. Ideally there would be a different betting market for each percentage point -- and you could aggregate all the market odds for those percentages into one simple graph, with a bell curve showing what the market thinks are the odds of employment hitting 10%, 11%, 12%, etc. under either Obama or Romney.
The first benefit of such a system would be obvious: to the extent that betting markets are an accurate predictor of political outcomes, this would be an easy way to see what conventional wisdom projected for unemployment, inflation, infant morality rates, or any other statistic that Intrade accepted bets on, if either candidate were elected. As long as either candidate had a realistic chance of winning, the people wagering on the "if-bets" would have to take them seriously. (If one candidate had virtually no chance of winning, then the "if-bets" conditional on that candidate's victory might not show anything useful, since everyone expects the bets will be declared void. So it wouldn't work for evaluating the merits of a long-shot candidate like Jill Stein - who might have some good ideas, but the "if-bet" betting markets wouldn't be able to tell us that.)
The second benefit would be that whenever anyone claimed projections that departed radically from the market odds, you could simply ask them, "Why not go to Intrade and bet on it?" If a person really believed that their dire predictions were more likely than the market seemed to think, then they could wager accordingly. Even if they don't think their prediction is likely to come true, as long as they think an event is more likely than the market seems to think, they should still believe that they could make money in the long run by betting accordingly. (For example, if you think there's only a 1-in-3 chance that Romney will win, but the market says 1-in-5, you should bet that Romney will win, at the 4-to-1 odds offered by the market. If you bet on lots of separate events where you think the probability of event occurring is 1/3 but the market says 1/5, then if you're right and the probabilities really are about 1/3, you'll lose 2 out of 3 times, but every 3rd time you'll make back 5 times the amount of your wager, and come out ahead. Assuming that you really are smarter than the market, of course.)
There could be rules and safeguards to prevent abuses of the system (rules that could be imposed by U.S. law, even if they're not enforced by overseas betting markets), such as not allowing individuals to bet more than $500. (This is already enforced by the Iowa Electronic Markets.) That's small enough to stop individual bettors from trying to manipulate the market through enormous wagers (although they might find ways to do that anyway). It's also small enough that it wouldn't be worth it for any one individual to try and influence a political outcome just to win a bet. You could try to enlist your friends to help you place a collective $10,000 bet on a single outcome, but the more people you rope into your coalition, the greater the chances of someone (a) turning you in for violating the betting laws, or (b) taking the $500 you lent them, and then refusing to pay it back if they win their portion of the wager.
At the same time, the $500 limit is large enough that anyone who makes a bold claim about the future, could not plausibly claim that it's not worth their time to go over to Intrade and make a wager. (Well, billionaires could claim it's not worth their time. We could have a higher limit for higher-income individuals, but the problem is that for someone like Donald Trump, any betting limit large enough to get him to take the wager seriously, would also be large enough to allow him to manipulate the market. So we might just have to get by on ignoring Trump the old-fashioned way.)
However, even if Intrade implemented "if-bets", and even if futures betting were made unambiguously legal under U.S. law, we'd have to overcome a certain amount of cultural taboo against betting on politics, especially for members of certain professions. When Joe Scarborough called Nate Silver a "joke" for saying that Obama had a 75% chance of winning, Nate Silver gave exactly the right response: "Wanna bet?" (for charity). However, the New York Times Public Editor (an office that I've dealt with in the past) rebuked Nate Silver for offering the wager, although in a 600-word essay, the Public Editor wrote only one sentence saying why she thought it was a bad idea: because it "[gives] ammunition to the critics who want to paint Mr. Silver as a partisan who is trying to sway the outcome". This doesn't make much sense, since Nate Silver had already staked his reputation on the outcome, which was worth astronomically more to him than the $1,000 (so to the extent that he had any conflict of interest, it would have already been in place anyway). Still, for anyone in a profession that placed a high value on "perceived objectivity", they might be able to use that as an excuse for not placing a wager.
Even for the rest of us not in danger of finger-wagging from the Times Public Editor, I think there would be one big obstacle to using the markets to tell blowhards to "place your bets or shut up": people would come up with dumbass excuses not to do it. I can't even anticipate the kinds of excuses that people might make, because I think I just think too rationally (at least by my own definition), so I tend to anticipate semi-logical objections like, "I think Romney will win, so I don't want to support a system that says he will lose." To that I would say: If you think the market odds are wrong, you should place the bet anyway, and if you win, you'll be taking money from the people who bet that Romney would lose, not "supporting" them. And in fact by placing the bet, you will slightly increase the market-reported odds of Romney winning. So you'll be taking money from the people who bet against your guy, and shifting the reported odds in favor of a Romney victory, which ought to be a win-win. Even better, if you're sure he'll win, you'll have winnings afterward that you can donate to the Republican Party.
So while I don't think that's a valid objection, it at least has the form of a logical argument, which is what makes it possible to answer it. The excuses that I think people would actually give, would be along the lines of, "I don't do that." Well, if you want to support your candidate and you're confident in your predictions, why not? Or, "I think it's wrong to bet against the future of our country." Hey, if you place a bet that unemployment will go up under Obama, then that will be reported in the aggregate forecasts of what the market thinks will happen under the two candidates -- which will actually slightly increase the chance of a Romney win (which is presumably what you want), right? Besides, you realize that if you have life insurance on your spouse, you're "betting" every month that they will die? How much more ethical is that?
But for everyone else who wouldn't come up with excuses not to bet on the outcomes, I wonder, in what might be hopeful naivete, if the available of online political "if-betting" might bring our partisan extremes closer together. When my Republican counterpart and I were discussing the future of the nation under Obama or Romney, if we were forced to confront the possibility of betting on the result (not betting on who would win, but betting on what would happen if a particular candidate won), I think several things would have gone through my mind. First, I might realize that despite any stridently partisan statements I had made, I didn't really know with much confidence what would happen. Second, the humility of realizing that I would want to check the online prediction markets, because I think the rest of the world collectively has more wisdom on the matter than I do. And third, if the online prediction markets showed projected similar outcomes (for unemployment, for example) no matter who is elected, then we could calmly accept the fact that neither candidate is going to be able to perform miracles, but neither candidate is going to destroy the country either, so we can accept the fact that the country will probably do OK no matter who wins, and go have a beer.
Assuming, of course, the other guy felt the same way. I can get along fine with people who don't agree with me, but I don't think I'd get along with someone who didn't even want to seriously consider whether he really believed the things he was saying. However, if the various competing futures markets would implement "if-bets", and if the U.S. government would just give the OK to online futures betting generally, I'd be perfectly happy to take the guy's money.
Wager (Score:4, Funny)
I bet that'll never work.
Re:Wager (Score:4, Insightful)
As usual, forethought is lacking.
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This year's election cycle had the Democratic Party buying up shares on InTrade as a PR move. In short, they realized that the amount of money needed to boost Obama's InTrade "stock" was actually fairly minimal as there was not that much stock issued to start with. With a relatively small investment, they boosted Obama's stock and were able to reap a PR coup in the process. In the future, I don't see this working particularly well as the Republican Party will in return start boosting up their candidates.
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Really? His 'stock' was hovering around $6-$7 on Intrade right up to the election, well past the point where Nate Silver and everyone else knew Obama was a lock barring something catastrophic. That means you could have made 30%+ returns on money in just a few weeks. If anything, Obama was undervalued at Intrade.
Not that I think this wouldn't be a brilliant strategy -- you are right, to buy up all of the Intrade shares for a candidate would probably be peanuts to an American political campaign, but I just
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I would hedge that bet by betting you'll lose the original bet.
Comment before reading (Score:1)
Always write your comment before reading the article. That way your mind will remain uncluttered.
Difference between derivatives and gambling (Score:5, Insightful)
I am not an economist, but I know there is a fundamental difference between futures markets and gambling. A futures market is for entities that want to buy a commodity anyway, and need a way to manage the risks of price fluctuations. Yes, one can speculate in the futures market, but that's not the reason a futures market exists.
In contrast, I don't see a political "futures market" providing any more economic benefit than betting on sports teams or horse races. I don't think it will make political pundits any more accountable than sports betting makes sports commentators accountable.
The idea that "markets" have a magical ability to predict outcomes is nonsense. If the market really could reliably predict the future, there would be no reason to bet against its "wisdom," and therefore no payoff for betting along with it, either.
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I would have been a winner on that one...
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Financial sector uses guise of political butthurt to dump stocks...film at 11.
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You could have – so why didn’t you?
You could have bought options or futures on any of the major indexes. The general consensus was that Obama was going to win. Nate Silver calculated above 80% - about as close to a sure thing as one could get.
Or do we just have a little 20/20 hindsight cognitive basis going here?
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Actually it will be gambling if it's limited to $500. It would be a futures market without the limits. I'll explain.
Let's imagine you own a coal power plant. If you think an Obama victory will cost you lots of money you could bet on an Obama win. That way if Romney wins you expect your business to do well. If Obama wins your business will decline but you make up for it with your winnings.
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Back in September, Intrade had Obama's odds at 80% chance of winning. With the possibility of an October surprise, I felt that betting on Romney at 4-to1 odds sounded pretty good. If I had, I could have doubled my money when Romney reached 40% chance a couple weeks later. It turns out a lot of other guys thought Romney at 20% was low, too, and there was a discussion about why. One of the best answers was from an investor who said he was hedging his bets by betting on Obama. If Obama wins, he will likel
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I am not an economist, but I know there is a fundamental difference between futures markets and gambling.
There's supposed to be a difference, or in other words, at one time there was a difference. These days the market is driven by speculation, i.e. gambling, and not to insure that you can sell your grain at a certain price.
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Future exists because people want to hedge the risk and uncertainty of the future. Farmers want to know if they should plant wheat to corn for next year’s crop. Miller’s want to ensure a supply of wheat at a know price for next year. Everybody’s a winner. Sure there is some (well, a lot) market making / speculation, but it serves a fundamental economic purpose.
What’s the natural market here? Let’s say I think candidate’s economic policy is crazy and will cost me my job. W
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What's the natural market here? Let's say I think candidate's economic policy is crazy and will cost me my job. What is the natural offsetting position? Who would want to hedge themselves against a booming economy?
I see no particular reason why there can't be a trade where one side is a hedge, and the other side is a gamble. It's usefulness as a hedge is independent of the other party's motives. Also, it is in the nature of political policies to harm some and benefit others (to a lesser extent), and both sides have reason to hedge their bets—one against the harm, and the other against the absence of the benefit. Finally, there can be disagreement over the likely result of a given policy; two people in similar p
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In contrast, I don't see a political "futures market" providing any more economic benefit than betting on sports teams or horse races. I don't think it will make political pundits any more accountable than sports betting makes sports commentators accountable.
To the contrary, the Intrade betting market warned me for many months that Obama was likely to win. That was economic value to me. There's not much use to taking big job or stock market-related risks, if things aren't going to improve for at least a couple of years.
Some Big Problems With This (Score:5, Insightful)
Likewise these markets are not going to reflect the way people vote or feel but they are instead going to reflect their calculated confidence of a political win or a trend. To turn betting on for political topics will tell you absolutely nothing about reality. Instead it's going to tell you what people with $500 to flush down the toilet think the rest of their country thinks. I grew up under the poverty line (you know, the 47%) and I will tell you right now that this system you propose would only reflect what rich people who are loose with their funds think that other people are thinking. It will not give you future insight -- especially if you're talking about an election.
Five hundred dollars is still a lot of money to the majority of this country -- no matter how little it matters to Bennett Haselton. This futures market would merely be a world of insanely rich people doing stupid things with money (so, a lot like Wall Street). As for quieting the blowhards, what's $500 to Glenn Beck? Probably nothing at all. And even if you did allow them to put their life savings on the line behind what they are selling to the public, they're not stupid. They don't need an excuse to not have to do that. I'm not dumping my life savings into Oracle stock just because I write Java for my employer! Do you discredit my logic on Slashdot when I claim some large company is doing something very stupid but I don't turn around and short their stock with all my liquid assets behind it?
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They didn't this time around. Nate Silver soundly beat intrade. Of course, that would be pretty funny if you were in the minority on Intrade who thought Nate Silver was realistic ;)
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predicting one election
Except that he has correctly predicted three elections.
p.s. Among many other superpowers, Nate Silver has this amazing ability to bring out the numerical ignoramuses such as the AC above.
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So while you may believe this type of opinion market is flawed, the current reigning champion disagrees.
Correctly predicting one election gives you such a nice title these days!
Well, it's not that he just predicted one election successfully, he essentially predicted fifty, since evidently every single one of his state-level predictions was accurate [slashdot.org]
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You forgot to name the biggest problem with this scheme: information
Can you imagine if people were making bets based on unskewed polls and information from the conservative mediabubble?
The betting market would bear no relation to reality and people would lose their shirts because they've been told day in and day out that [Candidate] is a sure thing.
I've also got some choice words for the rest of the news organizations as well.
It's to their benefit to portray a race as close, even if it isn't, just to keep p
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Some might say that's a symptom of an at least moderately naive person. Popular opinion is all well and good, but you should really understand the reasoning behind popular opinion and judge it sound on your own before committing your life savings to it.
I truly don't mean to kick you while you're down. I'm sorry this happened to yo
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Likewise these markets are not going to reflect the way people vote or feel but they are instead going to reflect their calculated confidence of a political win or a trend. To turn betting on for political topics will tell you absolutely nothing about reality. Instead it's going to tell you what people with $500 to flush down the toilet think the rest of their country thinks. I grew up under the poverty line (you know, the 47%) and I will tell you right now that this system you propose would only reflect what rich people who are loose with their funds think that other people are thinking. It will not give you future insight -- especially if you're talking about an election.
You acknowledge that people will have (financial) incentive to bet only the facts, not their biases, but then you suggest the rich will do stupid, non-fact-based things with their money. This might be, of course, but then that will drive the implied odds away from the actual odds, and you and other better-informed but poorer people can make a regular killing on small stakes. Such easy money will in theory attract many such small bettors, thus driving the implied odds more close to what's suggested by inform
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Judges of Reality (Score:1)
solved (Score:2)
The wording of the bet states the criterion for deciding the result. You'd be betting on what the department of labor says, not "reality".
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It's pretty easy. You tie it to official numbers. So you take the reported U-3. That way even those that think "they" are going to manipulate it can take that into account.
Right, um, no? (Score:2)
but also provide a tool for quieting partisan blowhards who think the opposing party's candidate is going to drag the country to hell
Baaaahahahahahahahahhahahahaha
You must be new here. Seriously. That's never going to stop, in fact it's only going to get worse. The problem is that there is a market force (to stick with the theme) at work specifically driving these blowhards; the TV/radio talk show circuit. The louder and more partisan they are, the more the ratings go up. No web site prediction/gambling market will change that one bit, only the viewers will (if they manage to turn it off). If there was a bet/product on that site ab
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It may not stop, but I think in the wake of the absolute ass-kicking the pundits faced at the hands of Nate Silver and other groups of statisticians, their coin has been pretty heavily devalued. This has been utter humiliation for the pundits.
The problem here isn't for the Rush Limbauhghs. They're audience is largely made up of paranoid hysterics, the types that are proof against any kind of logical, statistical analysis of anything. But for the slightly less foaming-at-the-mouth pundits who insisted that t
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It may not stop, but I think in the wake of the absolute ass-kicking the pundits faced at the hands of Nate Silver and other groups of statisticians, their coin has been pretty heavily devalued. This has been utter humiliation for the pundits.
The problem here isn't for the Rush Limbauhghs. They're audience is largely made up of paranoid hysterics, the types that are proof against any kind of logical, statistical analysis of anything. But for the slightly less foaming-at-the-mouth pundits who insisted that the math geeks had it all wrong, that you couldn't predict an election if national polls were too close, it's an utter repudiation of them. They well and truly had no bloody idea what they were talking about, that their intuition meant absolutely nothing.
In light of this exact circumstance, I would bet (on a futures market) that next election cycle there is simply a lot less hay made about polls and combo-polls and statistics and the like. You are right that they had their ass handed to them, the sad thing is there are plenty of other completely baseless things to talk about every election cycle; the way the last one ended will just push the loudmouths to ranting about something else instead. And to those that do remember, there will just be a half-senten
Way ahead of the curve (Score:3)
Apparently, Slashdot already lets the blowhards appear on the front page.
Get your own blog Bennett, or just submit the link FFS.
Betting on hurricanes (Score:2)
There's been an ongoing doctoral study in (at?) the University of Miami for about a decade now, it's a futures market where you can buy and sell futures of whether or not the hurricane will hit a particular region. I think it's still going on, but the idea was to see if the free market could accurately predict weather phenomenon among other things.
Why stop here? (Score:1)
Political futures options, collateralized political obligations, political swaps / swap options. We need to give these Harvard MBAs *less* things to sell, not more, for Christ! These dumb products allow banks to pull the money truck up to the discount window and spend it creating "assets" that blow us all up later instead of investing in something that's real!
Let's also not forget to mention that creating these markets affects the underlying, in this case, the elections themselves. Consider as an example ho
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Or perhaps we need to just stop bailing them out when they fail, and start jailing them when what they've done is simple fraud?
My experience (Score:2)
So the pool of traders is much smaller than it could be, which may increase the
Legalising corruption? (Score:2)
"You see, Your Honor, I only bet this politician that he won't reduce the taxes on my company. I lost."
another already exists... (Score:1)
Market forces and Hell. (Score:3)
The fact that a candidate may be doing well in a speculative futures market is no guarantee that he won't drag the country to hell when he wins. America has been heading towards disaster for 30 years under 5 different victorious presidents, and not one of them has done anything to stem the tide of corruption. No matter who won, the country was going to continue its descent into authoritarian plutocracy, and yes I'd bet on that.
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We have gone to hell, haven't you been paying attention? We blew a trillion dollars on wars no one needed. We jail more of our citizens than any other country in the world. Social mobility is lower than it's been since WWII, and among the lowest of developed nations. Nearly every regulatory agency has been captured by industry. Our education system, our health care system, are the most expensive in the developed world and provide pitiful outcomes for that expense.
Just because you lead a blessed life,
An Intrade-like site for US Customers (Score:3)
There's always a way to weasel out (Score:2)
If Kang wins the presidency instead of Kodos, that will tend be symptomatic of really bad voting by a tragically uninformed citizenry, and probably correlate with a bunch of other races too. If people are stupid enough to vote for Kang (holy crap, we're not really that stupid, are we?!) then they're probably also voting Kang's party into power in the House and Senate too. So Kang, an evil moron of a president, is probably going to have a Congress of evil morons putting bills on his desk, which he'll sign
works for winners too (Score:2)
BTW, this works for winning, too. Kodos is the 0% inflation candidate, over pro-inflation Kang. But if Kodos is elected and inflation doesn't fall, it's because of those Kangist obstructionists in the House. That doesn't mean I was wrong in my assertion that he was the anti-inflation presidential candidate; just that it's something I couldn't reliably bet on, due to concerns over external forces and events.
I can blame externalities for any failed prediction, and blame my lack of betting on fears of those
Securitization ... (Score:2)
Thankfully, after the mortgage security collapse, the next target was going to be health and life insurance (think of me shorting your grandpa). But Obamacare drove a coffin nail into that plan. So give them something to trade that was already being bought and sold under the table anyway. At least now we'll be able to see the movements of t
Submitter Doesn't Understand What Futures Are (Score:2)
Unless you're looking to buy a politician as a personal slave at some point in the future and want to protect yourself from price fluctuations, you are completely off-b
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TL;DR = Put your money where your mouth is. (Score:2)
Seriously, why was that term not even used once in this article?
why can't we have sports betting or even some thin (Score:2)
why can't we have sports betting or even some thing like pro line that is run by the lotto?
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Ask the Christians.
God damn, let the state lotto start doing horse and sports betting, if you don't want the private sector to be in it. It works well in most Asian countries.
Obvious odds to give: (Score:2)
"but also provide a tool for quieting partisan blowhards who think the opposing party's candidate is going to drag the country to hell"
My bet: I'll go three to two that the writer of this submission is a partisan blowhard who thought the opposing party's candidate was going to drag the country to hell.
Fundamentally flawed (Score:3)
But that is the fundamental flaw : betting markets are not an accurate predictor of any kind of outcome. The prices in a betting market are set and moved by the bookmaker according to the bets placed; the odds move according to what the bookie stands to win or lose based on the current bets. Sure, the bookie makes an educated guess when setting the intial price, but after that, the price is entirely driven by bets received.
Imagine that there were such betting at the last election. If Rove dropped hundreds of millions to back Romney, what do you think that would do the betting price? The odds would be "predicting" a Romney landslide, but it would be no more a predictor of reality than all those blowhard pundits.
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It's like croudsourcing. If "everyone" thinks Romney will win then his price goes up. Then people see that Obama's price has fallen people decide to buy in at that price. If Rove did drop hundreds of millions on Romney, then all the Obama supporters would have ended up with the money, so over a few generations people who are better at picking the president would get richer, while the people who back their party against the wishes of the greater population would lose money.
don't bet on things affected by murder (Score:1)
You shouldn't let people bet on things that are strongly affected by murdering one person such as election results or who wins american idol. Or if you allow this then the max bet needs to be well under the cost for a cheap hit.
Limiting bet sizes hurts accuracy of the market (Score:1)
The more sure you are about something the more you are willing to bet.
One of the reasons markets are more accurate than pundits is that some of them have inside information of sorts.
The reason intrade is useful for predictions is that the people who bet there do very careful research. For example when betting on American Idol vote-offs they look carefully at the data at dialidol.com. The people who don't look carefully quickly learn not to bet on intrade as they lose too much money. They also used to be