The second feedback I have received about my speculative post goes like this: …-If some believe that the CFTC might rule that “-event markets”- should be treated only by not-for-profit, IEM-like, prediction exchanges…- …-while some others think that’-s not the case…- …-even though a powerful American think tank is advocating that only not-for-profit prediction exchanges be allowed to organize “-event markets”-…- …-then all that means that this issue is probably still up in the air…- …-and worth fighting for.
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I’-m told people who favor for-profit prediction exchanges (and in their wicked mind, that includes the author of this post) should write to the CFTC.
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UPDATE: NOT-FOR-PROFIT…- or…- FOR-PROFIT…- That is the question.
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UPDATE: In the for-profit vs not-for-profit debate, our prediction market luminaries, doctored by Bob, are on the wrong side of the issue.
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BACKGROUND INFO:
CFTC’s Concept Release on the Appropriate Regulatory Treatment of Event Contracts…- notably how they define “-event markets”-, how they are going to extend their “-exemption”- to other IEM-like prediction exchanges, and how they framed their questions to the public.
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The relevant question here is, who or what are the CFTC trying to protect ? If we get an answer to that one, we can then determine it’s effectiveness.
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Or is this not about offering protection, but merely an attempt to make a distinction between “gambling” and other forms of trading, as witnessed by some people’s determination to only offer what they perceive to be ”socially valuable” prediction markets ?
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@Medemi: Excellent remarks.
Actually, I was hoping for an answer, but I suppose it’s there implicitly.
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I don’t need some religious fanatic (and an ordinary church-going citizen easily regresses to that definition in my book) to point out to me which markets are “socially valuable” and which are not. Certainly not waiting for their ignorance in these matters to be a determinant in which markets I will be allowed to trade on, should I want to.
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As for for-profit organizations, they are an essential part of any self-respecting economy and there shouldn’t even be debate about this.
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Make no mistake about it though, it’s a minefield out there and we have to take it one step at a time (that doesn’t mean we can’t make significant progress btw, we can do that by making the right decisions now). Which brings us to regulation. Legalisation and regulation.
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Soft drugs are legal here in Holland, and I don’t need some religious fanatic to tell me that drugs can be dangerous, because we all know that here, we all know that because it is regulated ! The taxes collected are used to inform the public of the dangers and help the addicts. Result? We have the least number of drug addicts in the whole of Europe, AND we get to smoke a joint whenever we want to. But it seems most countries prefer to sweep the problems under the carpet. It’s all politics really – “what the eye doesn’t see, the heart doesn’t grieve” – unfortunately that isn’t very helpful for the people who really need some help…
Back to gambling, and unfortunately the policy on gambling here is just as idiotic as in the US. As far as the UK goes, they don’t know what the hell they are doing (except for the focus on gambling addiction, which does receive the attention it deserves) and they certainly aren’t fully aware of the consequences.
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It really shouldn’t be hard to make the right decisions going forward, once you acknowledge that a lot of our beliefs are culturally-determined or simply based on prejudices. Legalization and proper regulation will solve most of our problems and make this a better world, even for the religious fanatics out there, given time.
medemi – I disagree, legalisation and regulation just seem to make the issue more socially acceptable if anything. Take the problem of alcohol in the UK, which is fully legalised and regulated, yet the problem is gradually getting worse, with more and more teenagers becoming alcoholics.
I find it hard to see how anyone can justify making gambling socially acceptable, especially part-time or full-time gambling, which is what betting exchanges may be promoting. The problem with online gambling in particular is that it has much lower barriers to entry than other forms of addiction.
I should add that it’s the legalisation and regulation of online betting in particular which I’m not sure about. In the UK, there was a change in law regarding legalising and regulating the advertising of gambling on Sep 1st 2007 and as a result of this there are now a lot of adverts on TV and in the papers for online betting companies (too many, I should add), and it’s debatable whether this change in law was a good move.
medemi – I disagree, legalisation and regulation just seem to make the issue more socially acceptable if anything.
One of the worst things that can happen is when people lose faith in (the effectiveness of) regulators.
I don’t know where you’re from, but this seems to be the general consensus in the UK.
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Take the problem of alcohol in the UK, which is fully legalised and regulated, yet the problem is gradually getting worse, with more and more teenagers becoming alcoholics.
I heard about that, can’t pinpoint the cause exactly, but it could have something to do with a lack of education/prospect which is driving them to the bottle. Drugs could be next.
You won’t find this sort of thing in Scandinavian countries IMO. Maybe it’s the absence of mutualness in what I call a “rip-off society”, in which case the politicians and traditional bookmakers are to blame.
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I find it hard to see how anyone can justify making gambling socially acceptable
It can be fun and exciting. There is a whole wide range of online games, from socially valuable markets (like “the temperature 5 years from now”) to the skilless casino type games.
I’m not interested in most games, but it’s not for me to decide which games should be offered, thereby restricting the freedom of some people and taking away their enjoyment.
Besides, it can’t be stopped. It makes more sense to me to be very wary and try to make the best of it.
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especially part-time or full-time gambling, which is what Betfair are promoting.
Not sure if that is the case, but one does get that impression when hanging around their forum, at least some years ago. I’m strongly against this, and I was one of the first to acknowledge the dangers of “going full-time”, and giving it the proper attention.
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The problem with online gambling in particular is that it has much lower barriers to entry than other forms of addiction.
True, especially for the skilless online casino games. Not so much in the betting arena, because you usually have to wait a certain amount of time before another opprtunity to bet arises.
And then there are the FOBT’s, which are pure evil. Designed to stimulate addictiveness.
Extensive research has been done and publicized recently by the Gambling Commission. The results did not show an increase in the number of gambling addicts over recent years. They even gave a plausible explanation, but I have forgotten.
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I’ve been a gambling addict, long time ago. My closes friends too. And my brother.
Yet despite all I saw, and felt, I cannot justify putting a ban on online gambling.
Mainly because it is impractical, wrong, it just doesn’t make sense.
What’s so very disappointing about betfair in specific, is their lack of attention for a level playing field.
They should be fighting hard to convince the world that betting can be done at least in a fair way.
There’s a lot going on in Europe, to try and keep online gambling out. And I have to say, where things stand now, should my Government put a definite ban on it, I will accept that decision.
We simply have to do better. And betfair are not helping.
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I used to be unconcerned about the CFTC only allowing non-profit exchanges, but I have thought about it, and I now realize it’s actually fairly important to have for-profit exchanges. I am also concerned about the AEI wanting to limit exchanges to only charging a “modest” fee as it may limit how much exchanges can subsidize their markets.
I will be posting a letter about this to the CFTC soon.
@jsalvati: Great. Looking forward to it.
[…] UPDATE: This econ guy will write to the CFTC, too. […]
One of the worst things that can happen is when people lose faith in (the effectiveness of) regulators.
I don’t know where you’re from, but this seems to be the general consensus in the UK.
I am indeed from the UK. I think one of the problems is that the advertising of gambling is now getting a bit out of hand in this country. Most of the newspapers have way too many gambling adverts – the sports sections of some of the papers regularly contain more than 75% gambling adverts (sometimes it’s close to 100%). When sport is on TV, some channels seem to show a gambling advert quite literally every 2 or 3 adverts.
It has been this way for quite a while, so I’m guessing that it’s cost-effective for the advertisers, which is a bit worrying as it implies that we may be turning into a nation of gamblers. I’m not sure if the regulators have the power to limit the number of adverts shown, but if the advertising continues at the current rate (or even grows), then I fear that gambling will become even more socially acceptable and a very serious problem.
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It can be fun and exciting. There is a whole wide range of online games, from socially valuable markets (like “the temperature 5 years from now”) to the skilless casino type games.
I’m not interested in most games, but it’s not for me to decide which games should be offered, thereby restricting the freedom of some people and taking away their enjoyment.
I’m not sure how socially valuable the climate markets are, or indeed any other betting market in general. I think the main aim is to be a form of entertainment – I can’t see governments or companies making decisions mainly based on information provided from prediction markets. It’s quite different from financial markets such as foreign exchange markets, or futures markets where farmers need to lock-in a certain price of wheat, or airlines need to lock-in a certain price of fuel.
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Besides, it can’t be stopped. It makes more sense to me to be very wary and try to make the best of it.
Very true, but at the moment, it doesn’t really seem like enough is being done to keep it under control and if anything it’s just becoming more and more socially acceptable, certainly in the UK anyway.
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True, especially for the skilless online casino games. Not so much in the betting arena, because you usually have to wait a certain amount of time before another opprtunity to bet arises.
Well where do you draw the line between skill and skilless? Online poker is in a grey area and has probably created a lot of problem gamblers. Even blackjack arguably has a significant “skill” element in order to minimise the house edge.
Betting exchanges are always keen to advertise current markets which are in-play, or the next horse race which is about to start, and thus convey the impression that there is always an opportunity to bet on.
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And then there are the FOBT’s, which are pure evil. Designed to stimulate addictiveness.
Extensive research has been done and publicized recently by the Gambling Commission. The results did not show an increase in the number of gambling addicts over recent years. They even gave a plausible explanation, but I have forgotten.
Here is the report: http://news.bbc.co.uk/1/hi/uk_politics/7001329.stm
However, I think that online gamblers are much harder to keep track of than this report suggests. Plus, this report was done before the massive influx of gambling adverts on TV from 1st Sep 2007.
Also, an independent charity providing support for gamblers reported that gambling problems are on the rise:
http://news.bbc.co.uk/1/hi/uk/5009274.stm
Many of the figures in that report are pretty alarming.
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I’ve been a gambling addict, long time ago. My closes friends too. And my brother.
Yet despite all I saw, and felt, I cannot justify putting a ban on online gambling.
Mainly because it is impractical, wrong, it just doesn’t make sense.
Sorry to hear that gambling has affected you and your family. It’s true that a ban would now be completely impractical, but clearly something has to be done about the advertising situation in the UK which I fear is getting out of hand.
Gambling tax is a regressive tax, but is hugely attractive to the govt because of the low political cost in extracting it compared to other forms of direct/indirect taxation. The negative externalities of gambling are also hard to quantify/measure.
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The spread of gambling is here to stay until there is a public backlash against it (see, the daily mail does have the potential to be good for something
).
I am indeed from the UK. I think one of the problems is that the advertising of gambling is now getting a bit out of hand in this country. Most of the newspapers have way too many gambling adverts – the sports sections of some of the papers regularly contain more than 75% gambling adverts (sometimes it’s close to 100%). When sport is on TV, some channels seem to show a gambling advert quite literally every 2 or 3 adverts.
I wouldn’t know about that, I’m from Holland. I watch the BBC sometimes (1and 2) and I suppose it’s not on there. It’s all sex here after 11 or so on the commercial channels. 6 or 7 channels. If there were some eroticism involved I could dig that, but it’s cheap women – cheap everything.
We used to have games (where people can phone in and win a price) all through the night, but we now have laws against it (or it’s still under review) as there was some fraud involved.
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It has been this way for quite a while, so I’m guessing that it’s cost-effective for the advertisers, which is a bit worrying as it implies that we may be turning into a nation of gamblers. I’m not sure if the regulators have the power to limit the number of adverts shown, but if the advertising continues at the current rate (or even grows), then I fear that gambling will become even more socially acceptable and a very serious problem.
I’m not sure how we should react to that level of advertising. Personally I’m watching television less and less. More and more people are turning to the internet. At some point, in a free economy, there should be a balance. And TV advertising could become a lot more expensive as a result.
I don’t see how gambling could become more socially acceptable as a result of advertising because
1. People are not stupid, and a lot of people are against what is being shown on TV (here anyway).
2. You are already a nation of gamblers IMO.
The focus should be on the message in these ads, make sure no-one is telling porkies.
Betfair are telling porkies IMO when they’re suggesting/implying that they are a P2P betting exchange.
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I’m really not sure how socially valuable the climate markets are, or indeed any other betting market in general. I think the main aim is to be a form of entertainment – I can’t see governments (or anyone else) making any sort of decision based on information provided from prediction markets. It’s quite different from financial markets which do serve a useful purpose such as foreign exchange markets, or futures markets where farmers need to lock-in a certain price of wheat, or airlines need to lock-in a certain price of fuel.
oh, climate markets can be extremely valuable. I for one am fed up with the debate of so-called expert scientists on whether the temperature will rise or drop significantly. All I need is the numbers from the prediction market. But people have to be allowed to put their money where their mouth is. I believe there is a bet of 10K going now between certain scientists. A first step.
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Well where do you draw the line between skill and skilless? Online poker is in a grey area and has probably created a lot of problem gamblers. Even blackjack arguably has a significant “skill” element in order to minimise the house edge.
I’m not saying we should draw a line. We should be very reluctant to do just that. Because usually ignorance is the real motivator. Plus, we’ll run into a lot of practical problems again.
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Here is the report: news.bbc.co.uk/1/hi/uk_politics/7001329.stm
However, I think that online gamblers are much harder to keep track of than this report suggests. Plus, this report was done before the massive influx of gambling adverts on TV from 1st Sep 2007.
Yeah, I went quickly through the 130-page or so document the GC released.
I was impressed with how the experiments were performed. I’m not easily impressed on this front I should add.
That includes the two professors who were supposed to teach me something.
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Also, an independent charity providing support for gamblers reported that gambling problems are on the rise:
http://news.bbc.co.uk/1/hi/uk/5009274.stm
That’s what I mean. Possibly the effect of recent developments (that article is from 2006 btw) is that people will come forward with their problems more easily.
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Sorry to hear that gambling has affected you and your family. It’s true that a ban would now be completely impractical, but clearly something has to be done about the advertising situation in the UK which I fear is getting out of hand.
We should remain vigilant, but that’s exactly what the Gambling Commission intend to do.
They deserve some credit, here at least.
I’m not sure how we should react to that level of advertising. Personally I’m watching television less and less. More and more people are turning to the internet. At some point, in a free economy, there should be a balance. And TV advertising could become a lot more expensive as a result.
I don’t see how gambling could become more socially acceptable as a result of advertising because
1. People are not stupid, and a lot of people are against what is being shown on TV (here anyway).
2. You are already a nation of gamblers IMO.
The focus should be on the message in these ads, make sure no-one is telling porkies.
Betfair are telling porkies IMO when they’re suggesting/implying that they are a P2P betting exchange.
Well I don’t think you can underestimate the power of the media, certainly not in the UK anyway. TV Adverts for Ladbrokes feature several respectable soccer pundits and TV presenters:
http://youtube.com/watch?v=7W3_3i-bz1A
TV adverts for Betfair show a community of lots of virtual people who appear happier because they can set their own odds with each other:
http://youtube.com/watch?v=JEfvb69-zmo
Although betting is widespread in this country, there is still the potential for it to be much larger I think. Especially with betting exchanges – many people in this country are still baffled by the concept (I know when I first started using betting exchanges, backing and laying and decimal odds didn’t seem that intuitive to me to begin with, and I come from a mathematical/computing background)
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oh, climate markets can be extremely valuable. I for one am fed up with the debate of so-called expert scientists on whether the temperature will rise or drop significantly. All I need is the numbers from the prediction market. But people have to be allowed to put their money where their mouth is. I believe there is a bet of 10K going now between certain scientists. A first step.
Perhaps, but surely bookmakers provide good enough estimates of this, why are exchanges needed? I personally don’t subscribe to a future where everyone should use their own money to calculate an accurate estimate of the chance of an event occurring.
Also, the climate markets for global warming related predictions would surely need to be on a 20+ year scale? I thought the general consensus was that if global warming is happening, it’s going to be over a longer period than just a few years. Can you suggest any other prediction markets which provide genuinely useful information?
TV adverts don’t have to be annoying, boring etc.
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Betfair – 3,400,000 hits on Google – Advert 3,500 views
Centraal Beheer – 489,000 hits on Google – Advert 104,000 views
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Both added at the same time. Centraal beheer is an insurance company, btw.
They have a whole series of funny adverts, and companies can learn a lot from them.
Here’s the advert I was referring to.
http://video.google.nl/videopl…..&hl=en
(I had to remove another couple of links because I’m supposedly spamming again)
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I don’t expect betfair to be funny. Manipulation seems more like their way.
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Especially with betting exchanges – many people in this country are still baffled by the concept (I know when I first started using Betfair, backing and laying and decimal odds didn’t seem that intuitive to me to begin with, and I come from a mathematical/computing background)
I’d prefer Binary odds. Not just for me, but in general.
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Perhaps, but surely bookmakers provide good enough estimates of this, why are exchanges needed?
Bookmakers are counter-productive because they close winning accounts – people with superior knowledge.
And because I don’t like them.
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I personally don’t subscribe to a future where everyone should use their own money to calculate an accurate estimate of the percentage chance of an event occurring.
You don’t have to participate, and still get a reliable reading.
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Also, the climate markets for global warming related predictions would surely need to be on a 20+ year scale?
There are other respectable theories which suggest we could hit an ice age any moment. Just google “gulf stream ice age”. The point is, I would like to see all theories/opinions and their weight represented in one place – the prediction markets. I don’t care about one scientist or bookmaker’s opinion. There’s simply too much information out there for one (or a few) people to handle. And there’s a good chance it will not be an objective opinion, even in science.
http://video.google.nl/videopl…..&hl=en
http://video.google.nl/videopl…..&hl=en
@Medemi: “I’d prefer Binary odds. Not just for me, but in general.” Glad to hear that.
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“You don’t have to participate, and still get a reliable reading.”
Exactly. You can also opt for play-money prediction markets.
@Medemi: “Betfair – 3,400,000 hits on Google – Advert 3,500 views
Centraal Beheer – 489,000 hits on Google – Advert 104,000 views”
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Interesting point.
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medemi – note that I provided the links to the youtube version of the adverts purely so that you could see the content of them, those 2 adverts will have been seen by many millions of people in the UK on TV.
Regarding binary odds – I agree, and this is one of the advantages of my product, but at the moment I’m having serious doubts about whether to continue running the company, as I don’t think I can really promote full-time (or even part-time) gambling/betting/trading any more.
medemi – note that I provided the links to the youtube version of the adverts purely so that you could see the content of them, those 2 adverts will have been seen by many millions of people in the UK on TV.
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Yeah, I know, and sorry for wandering off.
But I already said i’m not sure how to deal with that level of advertising.
The GC seems to be on top of things, and when it turns out that the number of gambling addicts will rise significantly in the coming years, the only thing I can say is, that you were right.
Perhaps we should have a prediction market about that, so we can see the effects before they materialize !
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