Zitewitz: The folly of making political prediction markets like Intrade illegal

[elux]

Eric Zitzewitz on http://blogs.reuters.com/great-debate/ writes:

Why prohibit something so harmless? After all, U.S. policy already allows many forms of gambling that have significant social costs and produce no useful information. The real reason may be found in debate surrounding another recent setback for prediction markets, Congress’ last-minute modification of the Dodd-Frank financial reform bill in 2010 to prohibit markets on box-office receipts planned by the Hollywood Stock Exchange (HSX).

The plug was pulled after lobbying by the Motion Picture Association of America, which argued that a prediction market forecasting a poor movie box office could lend an “aura of financial authenticity to gossip.”

Translation: Even big-budget failures often have one big weekend before word of mouth kicks in, and information aggregated by prediction markets may deprive them of that.

Full text: http://blogs.reuters.com/great-debate/2012/11/27/the-folly-of-making-political-prediction-markets-like-intrade-illegal/

Hat tip: http://www.overcomingbias.com/2012/11/zitzewitz-the-wise.html

Thoughts?

[justusranvier]

The possibilities for ironic unintended consequences here is very high. I'd laugh when prohibiting US subjects from betting on Intrade causes Tor-hosted prediction markets to flourish, and those markets start to be used to bet on the lifespans of public figures, and somebody Jim Bells the head of the MPAA.

[Rudd-O]

The possibilities for ironic unintended consequences here is very high. I'd laugh when prohibiting US subjects from betting on Intrade causes Tor-hosted prediction markets to flourish, and those markets start to be used to bet on the lifespans of public figures, and somebody Jim Bells the head of the MPAA.

That's precisely what I was thinking would happen.