And I have just discovered it five minutes ago, by total chance.

#1. Kynikos Associates&#8217- Jim Chanos did not respond to my e-mail at the time.

#2. Nobody from Deal Breaker tipped me about this follow-up story.

#3. The Deal Breaker&#8217-s follow-up story did not mention &#8220-Midas Oracle&#8221- or &#8220-Steve Roman&#8221-.

#4. The Deal Breaker&#8217-s follow-up story did not link to the offending Midas Oracle blog post (written by Steve Roman).

#5. The Deal Breaker&#8217-s follow-up story did not link to the previous Deal Breaker blog post (which reported and commented on Steve Roman&#8217-s take).

#6. The original Deal Breaker blog post did not link (in an update) to the following Deal Breaker story (which sides with Kynikos Associates&#8217- Jim Chanos, and puts the Midas Oracle story in the consipracy theory camp).

CONCLUSION: Deal Breaker, before you teach journalistic lessons to bloggers like us, try to learn Internet conviviality.

Anyway.

&#8212-

DealBreaker: Jim Chanos: The Oracle of the End Of Online Gambling

Jim Chanos of New York’s Kynikos Associates was bearish on internet gambling sights long before Senate majority leader Bill Frist “ambushed” the industry with a bill making most internet gambling illegal. Contrary to claims detailed on a website [= Midas Oracle] yesterday, it didn’t take an elaborate scheme of inside information about the Senate’s legislative schedule to tip Chanos off on the dangers to internet gambling. For Chanos, the writing was on the wall, in the online gaming companies’ prospectuses and already built into various state laws. [&#8230-] In an interview today, Chanos described to DealBreaker three reasons, in addition to possible legal risks, that underlay his view of online gambling companies. “First off, we all believed that it was a cut-throat industry with no barriers to entry. Second, there was the faddish nature of poker. Television ratings were already down. Third, there was the silliness of the whole concept of Americans sending their money to off-shore companies with very little assurance about the way these operations were run,” Chanos said. [&#8230-] (The story on the website [= Midas Oracle] also made a big deal out of Chanos’ connection to former Nevada Attorney General George Chanos, Jim’s cousin. “I have never discussed internet stocks with my cousin,” George Chanos told DealBreaker. “And I never discussed the legislation with Senator Ensign.”) This seems more than decisive to us. Chanos didn’t need a conspiracy to tell him that online gambling was in trouble. He just needed to keep his eyes and ears open. So there you have the answer we asked in yesterday&#8217-s headline, &#8220-James Chanos: Genius Shortseller or Politically Well-Connected?&#8221-

None of the three reasons to be short on internet gambling stocks, stated by Jim Chanos, was a determining factor in the 2006 internet gambling crisis. Indeed, the determining factor was the unexpected passing of the Internet Gambling Prohibition and Enforcement Act of 2006. So maybe Kynikos Associates&#8217- Jim Chanos was just&#8230- incredibly lucky.

Next: The political intelligence research shops gather information from Capitol Hill and retail it to hedge funds and other money managers.

Previous blog posts by Chris F. Masse:

• “Annette 15”, the once-hot female poker star sponsored by BetFair Poker, does blog only twice a month on the official BetFair blog… when she blogs at all… if you call that blogging.
• Inkling Markets bring in awards, honors, advisors, and new clients —leaving competition in the dust.
• No need of enterprise prediction markets to boost intra-corporation communication
• Inkling Markets is included in the 2008 list of “Cool Vendors” by Gartner.
• BetFair-TradeFair has won its second Queen’s Award for Enterprise in its eight-year history.
• Inkling Markets is one of the “Hot Companies To Watch In 2008”, according to Forrester.
• Plenty of great news coming from Inkling Markets in the coming weeks

Finance Markets (article written by Khurram Naik):

[&#8230-] Futures exchanges are no longer simply markets, but for-profit businesses, and unlike most for-profit businesses or even most exchanges special considerations must be made. Futures contracts are not like stocks, which can be bought at one exchange and sold at another. Most futures contracts are not fungible between exchanges, and so the survival of a futures contract depends not merely on their utility but their ability to attract market share. Liquidity attracts liquidity, this is the social phenomenon known as network externalities. [*] Interest in commodity exchanges has surged as hedge funds have poured money into these markets and as China announces one of the largest investment programs in history to invest in “strategic assets” such as mining and energy resources. [&#8230-]

[&#8230-] Also, the CME has been approved to offer a credit-event futures, which taps into the enormous over-the-counter credit derivatives market that these banks make handsome profits on. CME and the CBOT both have designs for providing access to real estate derivatives, another large asset class that needs risk management. [&#8230-]

[*] Same can be said of event derivatives traded on our real-money prediction exchanges (betting exchanges) &#8212-they are, of course, a simplified sub-kind of futures exchanges.

NETWORK EXTERNALITIES: Applies to eBay, BetFair, Zopa, CME, NYSE, Economic Derivatives, InTrade-TradeSports, etc. &#8212-any exchange that doesn&#8217-t mess with its traders&#8217- transactions (via automated market makers or else).

Previous blog posts by Chris F. Masse:

• Is that HubDub’s Nigel Eccles on the bottom left of that UK WebMission pic?
• Collective Error = Average Individual Error – Prediction Diversity
• When gambling meets Wall Street — Proposal for a brand-new kind of finance-based lottery
• The definitive proof that it’s presently impossible to practice prediction market journalism with BetFair.
• The Absence of Teams In Production of Blog Journalism
• Publish a comment on the BetFair forum, get arrested.
• If I had to guess, I would say about 50 percent of the “name pros” you see on television on a regular basis have a negative net worth. Frightening, I know.

The Quartet:

For example, suppose a policymaker seeks a forecast of the likelihood of an avian flu outbreak in 2008. [He/she] may float a security paying $1 if and only if an outbreak actually occurs in 2008, hoping to attract traders willing to speculate on the outcome.

&#8220-hoping&#8221-??

As I wrote yesterday (much to the despair of mister Bo Cowgill ), if nobody trades on your socially relevant prediction market, then it won&#8217-t elicit any forecast. Goal #1 is thus to satisfy the traders, not the final users of the price info &#8212-in this case, allegedly, the &#8220-policy makers&#8221- (as if only the politicians were interested in crucial information!!).

I&#8217-m all for the socially relevant prediction markets, but they are not a special category of prediction markets (and thus don&#8217-t deserve a special terminology). As with everything in business, the marketing approach is the cornerstone.

Don&#8217-t expect to hear the words &#8220-marketing&#8221- and &#8220-BetFair&#8221- (the most successful commercial prediction exchange) at the second workshop on prediction markets, in San Diego, CA, in June 2007.

Triple alas.

Ivory Tower, you said?

Bird flu (H5N1) to be confirmed in the USA ON/BEFORE 31st Mar 2007

Avian flu will reach the EU before the US

And Forbes magazine has a streaming video posted on its website to explain why BoDog&#8217-s Calvin Ayre was listed in 2006, and why he was delisted this year. (Surprise, surprise: it has to do with the US executive government and the US Congress&#8217- crackdown on internet gambling and betting.)

– Forbes estimates that BoDog&#8217-s Calvin Ayre lost $500 million since last year. We pity him.

– BoDog&#8217-s Calvin Ayre has moved from Costa Rica to Antiga.

– BoDog&#8217-s Calvin Ayre will never come to the U.S. anymore.

Because prediction market traders generally rely more on skill than on chance to win, I&#8217-ve argued that they do not qualify in &#8220-gambling&#8221- as defined by U.S. law. I&#8217-ve also admitted, however, that over-ambitious prosecutors might see the matter differently. A recent email exchange I had with Prof. George R. Neumann, who serves on the Board of Directors of the Iowa Electronic Markets, confirmed my worries. I here quote him, with his permission.

&#8220-We have been threatened several times with suits by various states,&#8221- he wrote, &#8220-but so far the CFTC coverage [i.e., the two ‘no action’ letters that the CFTC gave the IEM] has been our trump card.&#8221- Prof. Neumann offered this example: When the IEM ran a market on Hilary Clinton&#8217-s run for the New York Senate seat, an N.Y.C.-based district attorney &#8220-contacted us (via a very nasty letter) to tell us that NY had a law that forbade gambling on elections in that state. He demanded a list of each and every NY State resident who was a participant in our market.&#8221- Wielding the CFTC&#8217-s &#8220-no action&#8221- letter in defense of the IEM, Prof. Neumann directed the DA to file suit in, um, a venue at once very local and yet very inconvenient.

Alas for those who would like to match Neumann&#8217-s feat of legal acumen, the CFTC&#8217-s treatment of the IEM so far looks like a one-shot deal. Or, rather, it looks like a big-shot deal- you would probably need some political help to squeeze another such letter out of the CFTC. While you&#8217-re at it, please ask the CFTC to issue an advisory opinion saying, &#8220-The CFTC has no rationale to regulate transactions or markets in which price discovery functions predominate over hedging functions.&#8221- It could state a market cap limit to make clear the limits on its discretion.

Such a &#8220-public no action letter&#8221- would give a great many useful prediction markets freedom to help us discern the future, just as the IEM has done. It would also, to judge from the IEM&#8217-s experiences, give new prediction markets a shield from state anti-gaming prosecutions.

[Crossposted to Agoraphilia.]

The Guardian:

The Vancouver-based ESI Entertainment, a rival firm which operates the payment processor Citadel, confirmed yesterday that it too was withdrawing from the US with immediate effect.

This is from TradeSports:

&#8212-

Former Blog Posts:

– NETeller people arrested. TradeSports people, next??

– Internet Gambling Crisis – AGAIN

– NETeller yesterday, TradeSports-InTrade tomorrow?

– Using NETeller for TradeSports-InTrade, no more

– Gambling Enabler Neteller Craps Out.

– NETeller alternatives

– Which will be the next major sportsbook to leave the US market? – REDUX

Business Week (mirror at Forbes):

FBI Assistant Director Mark J. Mershon said the multibillion-dollar online gambling industry was &#8220-a colossal criminal enterprise masquerading as legitimate business.&#8221-

Does the U.S. government put real-money prediction exchanges (e.g., TradeSports-InTrade) in the perimeter of the &#8220-gambling industry&#8221-? If yes, then TradeSports-InTrade is dead on arrival (D.O.A.). If not, as stated by TEN CEO John Delaney (who believes that they are after bookmakers and sportsbooks, only), then what we need is a statement from the U.S. government that it won&#8217-t touch the offshore, real-money prediction exchanges.

In the absence of such an exoneration, is it rational to predict the death of TradeSports-InTrade? If the U.S. government goes after TEN&#8217-s American shareholders (venture capitalists and angel investors), they will fly away like frightened pigeons &#8212-if that&#8217-s not done already (think &#8220-re-organization&#8221-). I may be wrong but I believe that TEN is not yet profitable &#8212-especially after the killing of their financial prediction markets, following the CFTC fine.

All this is very sad for us who believe in real-money prediction markets.

The arrest of TEN CEO John Delaney on U.S. soil (in a phone-booth conference room, for instance) could be interesting in that it would generate a wave of supportive statements from a bunch of American economists &#8212-including some of the IEM gang members (e.g., Ms. Berg). We could have a repetition of the DARPA&#8217-s FutureMAP PAM effect &#8212-a controversy on real-money prediction markets hitting the print Press, which, short-term, we would lose, but which, long term, would be beneficial to the whole industry. The economists yelling &#8220-fire&#8221- would attract the attention of the private decision makers reading the New York Times and Wall Street Journal, and the next step would be to turn these prospects into clients of prediction market software vendors.