Prediction markets

Business

7 rabbit holes · 5 people exploring

Common starting questions

• How can markets 'know' things nobody has said publicly?
• If prediction markets work, why doesn't every company use them?
• How is a university allowed to run a betting market?

Rabbit holes

1. the stock market figured out who caused the Challenger disaster within hours

   Tomás Rinaldi · 7 sources

2. whatever happened to Intrade?

   In the 2000s Intrade prices got quoted on the news almost like polls. Then the CFTC sued it in 2012 for taking US customers, and in early 2013 it halted trading, citing possible financial irregularities. Its founder had died on Everest two years before.

   Priyanka Sethi · 5 sources

3. people bet on papal elections until a pope banned it in 1591

   Betting on who'd be the next pope was a whole scene in 16th century Rome. And in the US, betting on presidential elections around Wall Street was huge and openly reported in newspapers from the late 1800s until around 1940.

   Tomás Rinaldi · 6 sources

4. why did companies stop running internal prediction markets?

   HP ran small experiments in the 90s where employees traded on future printer sales and apparently beat the official forecasts more often than not. Google, Ford and others ran internal markets in the 2000s. Most of them quietly disappeared. My guess: a market saying the VP's project will ship late is accurate and nobody wants it.

   Pete Lindgren · 5 sources

5. the Pentagon's 'terrorism futures' market lasted about a day in public

   In 2003 DARPA planned a market where traders would bet on political and military events in the Middle East. Once a couple of senators described it as betting on terrorism, it was cancelled the next day.

   Yuki Tanabe · 6 sources

6. Hollywood Stock Exchange, and the real box office futures Congress banned

   HSX launched in 1996 as a fake-money market for movies and turned out to be decent at predicting box office and Oscars. In 2010 regulators approved real-money box office futures, and a few months later Congress banned them in Dodd–Frank after the film industry lobbied against them.

   Tomás Rinaldi · 5 sources

7. a university has run a real-money election market since 1988

   The University of Iowa's business school, tiny stakes (accounts capped at $500), started for the 1988 presidential election. It's a research and teaching tool and has been running for decades.

   Arjun Pillai · 5 sources