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1.2. Why isn't real money used in the market? Isn't real money the only way to insure that people put serious effort into finding the most accurate prices?

The CFTC appears to have nonfrivolous grounds for claiming jurisdiction over any idea futures market that is based in the United States (some of their rules may apply even to non-U.S. markets that accept money from investors in the U.S.). If the CTFC doesn't have jurisdiction, then gambling laws would create a legal situation that is harder to evaluate. See this paper for more discussion of the legal issues.

While there are some reasons to hope that the CFTC will be willing to approve some idea futures trading, everyone I have talked to who seemed to know something about these issues expects it will take substantial investments of time (presumably talking with lawyers) and money. I doubt that I have the patience or skills to accomplish this in the near future.

While real money is a fairly reliable way of limiting the extent to which prices reflect anything other than honest predictions in markets which are widely known and watched, I doubt that this is the only way to accomplish that.

If a play-money market can attract a good enough set of initial participants and if the means of acquiring wealth in that market insure that a large fraction of the wealth in the market is controlled by people who have been successful at predicting the value of claims, then it can potentially be at least as hard under this system to alter market prices for undesirable reasons than with real money (assuming that people value their scores and that the one-account-per-person rule can be enforced well enough - assumptions which are not certain).

Still, there is a clear need for a real-money idea futures market to handle claims which require significant expense to research.


The U.S. Idea Futures Market / IF FAQ Wizard 1.0.4 / Feedback to pcm
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