Intrade Shuts Down
Online betting site Intrade, which became famous for the political side of its betting operations, has shut down operations amid hints of a major scandal:
The online betting site Intrade announced late on Sunday that it had halted trading and frozen customer accounts after the company said it had discovered potential financial irregularities.
The firm, which is based in Dublin and allowed consumers to bet on world events like the pending selection of a new Catholic pope, already has faced scrutiny from regulators.
In November, Intrade shut its Web site to United States residents when the Commodity Futures Trading Commission filed a civil complaint accusing the Irish company of offering the contracts outside traditional exchanges and without regulatory approval.
A spokesman for the Central Bank of Ireland, which polices the country’s financial industry, said local regulators were not involved in the most recent problems confronting Intrade because the company was not regulated by the Irish central bank.
In its latest step, Intrade said it would close all outstanding bets after the company had discovered potential “financial irregularities” under Irish law. The company said it also had ceased trading, settled all outstanding customer contracts and stopped users’ banking transactions from the Web site.
“We will investigate these circumstances further and determine the necessary course of action,” Intrade said in a brief statement.
A representative for the company was not immediately available for comment.
There’s no indication of what might be going on here, but the fact that they completely shut down suggests it’s something major. Especially sine there’s no indication that this is temporary. Indeed, it looks for all the world like they’ve shut down for good.
Neil Irwin laments Intrade’s passing:
It’s a shame, and this is why. We live in a world of punditry in which there are large amounts of, to put it nicely, horse manure. Those of us who write and talk about what will happen inevitably rely on vague predictions, full of qualifications. I’m guilty of it myself, and often find myself writing things like “this ought to be an OK year for the economy, iffiscal austerity isn’t too severe and there isn’t a return of the European crisis.”
On Intrade, by contrast, the traders who participate and collectively set market prices, are forced to choose—and put money where their mouths are. Will the United States enter a recession in 2013? Before it shut down, the prices for that contract on InTrade implied a 16.9 percent chance that the answer was “yes.” In a world in which people hold their pundits to a higher standard, people spouting off on the economy (or politics, or foreign affairs, or the selection of the pope) would be forced to make specific, testable predictions, and attach probabilities to those guesses.
What if there were a new, CFTC-authorized, fully legal version of InTrade up and running. And what if every columnist and TV commentator put some of their own money in an account and put money on outcomes—fully disclosed and public, for all their readers to see.
That way, when someone on TV says, “Hillary Clinton is a shoe-in to be the Democratic nominee in 2016,” they would also have to make another judgement: Is the 49 percent probability of that outcome priced into Intrade (RIP) too high, too low, or just right? Whatever their answer, how strongly do they believe it? Enough to put $20 on it, or $100, or $500?
Done right, InTrade, or a successor that has more of a clear legal status and regulatory oversight, can be a vehicle for accountability in punditry, not just a way to make baseball playoff games more exciting. And that would truly be something new under the sun.
Personally I’ve never been all that convinced of Intrade’s value as predictor of political events. For the most part, it seemed to merely follow the polls and didn’t appear to be any more accurate than the polling averages that most major political sites have been running for the past several election cycles and it was far less insightful than Nate Silver’s analysis. Could an Intrade like site make pundits more accountable for their predictions? It’s possible I suppose, but it strikes me that most of these people are so shameless that it really won’t have much of an impact at all.