Intrade Shuts Down, Prediction Site Cites Financial Irregularities
Predicting the future is a tricky business, but it’s even more difficult when there’s regulation involved, which is why the online prediction website Intrade is shutting down, citing financial irregularities. Intrade allowed its clients to place bets on the occurrence of particular events in sports, politics, economics, and beyond. Its correct calls have been numerous: the site’s users have predicted everything from Barack Obama winning the 2008 election to Saddam Hussein’s capture in 2003. Intrade’s model has been floated by many experts as “a pioneering gauge of public opinion.” Regardless of Intrade’s own success, it innovated a new model of online entertainment, as well as a way to predict the future (and perhaps control it) that’s not going away anytime soon.
Intrade’s success as predicting events is somewhat mythologized. Justin Wolfers, a professor at the University of Michigan who studies gambling, sees Intrade as "more accurate than pundits … more accurate than polls, and in the past it's even more accurate than very sophisticated poll-watchers like the New York Times' Nate Silver at FiveThirtyEight.com." Since the site let users bet on everything from gas prices to Oscar wins, its sway was expansive.
However, things changed last year, when the site blocked all American users due to lawsuits brought by U.S. regulators. Though Intrade is based in Ireland, the U.S. government has jurisdiction over American activity online. Since American users were a large part of the user base, it seems that Intrade faced major financial barriers without access to that market.
But what was so dangerous about Intrade? “Novelty betting” seems to be less stigmatized in Europe, and plenty of people internationally as well as in the country placed bets on the results of U.S political races.
The power of Intrade as a public barometer was great. As Joe Weisenthal wrote in response to the shutdown: “The point of Intrade was not to be 'right.' The point of Intrade was to create a market where popular thinking was quantified.”
However, some are concerned that the predictive power of such markets would be damaging to wider spheres. Rumors abounded during the 2012 presidential election that Romney supporters were placing significant bets on his winning in order to sway pundits and voters to see his candidacy as viable. Though there’s no true way to track the veracity of this, the rumors show the dangers of predictive models. In a relatively small pool of investors, it’s easy for a few people to manufacture public opinion through use of capital. Of course, in a democracy where political candidates accept incredible amounts of money in order to get elected, such a small scale imposition of capital into the democratic process is positively refreshing.
While this may be the end for Intrade (though the site does plan to revamp), the future of this type of betting is bright. Other sites like Betfair, much larger than Intrade and thus harder to skew predictions, will continue to make predictions, and the “crowdsourcing” model of prediction won’t disappear. The question of how the U.S. government will handle these sites, and the advantages and detriments of their predictive power, will continue to challenge us into the future.