Polity: A hazy, intriguing crystal ball
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What they were doing was running a small stakes online casino. Personally, I have no problem with that, but Parliament did some years ago, and they gave TAB and the National Lottery a monopoly of such things.
To get round this, they got the FMA to license them as a futures market. Which worked fine, except that such markets fall roundly inside money-laundering law. The law doesn’t really allow for small-stakes futures markets, because they don’t really exist, except as a way to get around gambling laws.
There's a reasonable argument for allowing small-stakes online gambling, (especially as there isn't any way to stop NZers using offshore sites) but not on a basis that one company gets an end-run round the law by being a university / mates with the National Party.
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BenWilson, in reply to
There’s a reasonable argument for allowing small-stakes online gambling
Particularly when no small part of the purpose is for the information that it provides, because the bets aren't about which dice or card will come up, or which horse gets thrashed across the line first, but majorly important issues of the day.
That source has simply been switched off. Goodbye experiment, research possibilities, threads like this one.
one company gets an end-run round the law by being a university / mates with the National Party.
Was there someone else who tried to set something like this up? It was set up in 2008, when Labour was still in power.
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Rob S, in reply to
iPredict is no more.
Didn't see that coming. -sorry, I'll get me hat
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Rich of Observationz, in reply to
Well plugged in politically, anyway. I don't know if anyone else has ever tried something like this, but it strikes me that the FMA wouldn't have been as helpful to a random bunch of kids with a startup or an overseas betting operation like IG Index.
There are a whole bunch of lines of research that would deliver interesting results but aren't legal/ethical. I'm actually surprised that the universities ethics committee approved iPredict, given the scope for insider trading (such as an oil company employee making a few bucks by predicting petrol prices). And they've had seven years to gather data.
Maybe the way out of this would be to lobby to amend the gambling laws.
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Insider trading is the point of prediction markets of this kind in many ways -- for instance, it's not entirely clear why an oil company employee betting on petrol price movements is doing anything unethical (except in terms of possibly misusing their employer's confidential information).
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Sacha, in reply to
It's Hooton's toy, not Farrar's.
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Rich of Observationz, in reply to
why an oil company employee betting on petrol price movements is doing anything unethical - except in terms of possibly misusing their employer’s confidential information
Misusing confidential information is one problem. Having a conflict of interest such that the employee can change a price to make money for themselves (as opposed to setting an optimal price for their employer to make money) is another. In the case of interest rates, there's the possibility of abuse of public office.
Would Vic Uni regard it as ethical to operate a market for stolen goods, just as an academic exercise to find out what prices they sell for?
In pretty much all real futures markets, insider trading is illegal for the above reasons.
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BenWilson, in reply to
it strikes me that the FMA wouldn’t have been as helpful to a random bunch of kids with a startup or an overseas betting operation like IG Index.
Maybe not beforehand, but after another one existed, they'd have less of a leg to stand on.
I’m actually surprised that the universities ethics committee approved iPredict, given the scope for insider trading (such as an oil company employee making a few bucks by predicting petrol prices). And they’ve had seven years to gather data.
The incredibly tiny scope, where attempts to do any such thing would be extremely obvious to whoever is watching, something that all the other traders are financially incentivized to do.
I'm not surprised they approved it, it's an extremely interesting experiment.
In pretty much all real futures markets, insider trading is illegal for the above reasons.
You're talking at cross purposes here. When people say insider trading is the point of prediction markets, they're not saying they condone insider trading. They're saying that one of the best ways to deal with it, given how inevitable it is, is to allow a system in which the signal that someone is trading on the inside comes out immediately in the price - in short, the price contains all the information available to all traders, including the insider traders. This is its main strength, why it can be more accurate than models based on only the purest information and most ethical of motives.
Furthermore, the killing of it was not done out of any concerns about its ethics. It was because it could be used for money laundering, so the Associate Justice Minister claims.
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As Graeme pointed out upthread, iPredict was licensed as a "market for the trading of the futures contracts". If it hadn't, it would have been an illegal lottery.
The government agreed internationally and passed domestic legislation to place requirements on financial institutions to do due diligence on their customers. There wasn't any exception in any of this for "interesting research by academic institutions involving small amounts of money" and consequently, I'd expect that the Minister was advised not to except iPredict from money laundering legislation.
I'd suggest that where possible, laws should offer certainty, not allow workarounds for mates. If the FMA wants to authorise prediction markets, then it should do so properly as they've done with peer to peer lending (something that will end in tears, in my view).
It's all very well taking the traditional NZ "they're a bunch of good blokes eh, let's cut down on the red tape" approach" - until it all goes pear shaped.
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Rich of Observationz, in reply to
Kier:
Insider trading is the point of prediction markets of this kind in many ways
Ben:
The incredibly tiny scope, where attempts to do any such thing would be extremely obvious to whoever is watching, something that all the other traders are financially incentivized to do
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Which is it: insider trading is intrinsic, or insider trading can't happen?
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BenWilson, in reply to
It can obviously happen, and it's intrinsic. It's also quite probably tiny and insignificant in the case we're talking about, and not particularly unfair. The whole idea is that the price itself reflects the inside information. Someone even acting on it at all has effectively made it almost public information. At least it's somewhat public that something is going on that might affect the price. It makes for a fascinating study in group dynamic behaviour and information flows, played only by people who are up for it, and affecting nobody but them, for the most part. If there's a mad gambler out there that's been ruined by iPredict, I'd like to hear about it. Or at least some fucking evidence at all that something sinister is afoot with it.
I’d suggest that where possible, laws should offer certainty, not allow workarounds for mates.
If you can provide any evidence that such "workarounds" happened, do so. Perhaps a story of someone who tried to make a similar business/research project here, but was not allowed.
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