Information Markets & Gambling

Description:

Increase in information markets and online gambling. Information markets to forecast a myriad of events have proliferated. In addition, a recent WTO decision allowing online gambling overrides national laws prohibiting it.

Enablers:

- Increased diffusion of internet access (broadband and mobile connections) - Increased computer/internet literacy and comfort level - Online anonymity - Smaller minimum bets make it accessible to more people - Difficult to enforce laws in cyberspace

Inhibitors:

- National laws (if and when applicable) - WTO rulings and decisions - Filters

Paradigms:

Talk is cheap but money speaks the truth. The theory is that the aggregated hunches of many people with money at stake are likely to be more accurate than the opinion of disinterested experts or of whoever happens to be at home when a pollster calls. It is easier to put your money where your mouth is in information markets than in many “proper” markets. Because you can “sell” without first “buying”, short-selling, which is limited in many financial markets, is essentially unconstrained. Businesses have also made good use of information markets. Siemens, a German conglomerate, used an internal market to correctly forecast that the firm would fail to deliver a software project on time, even though internal planning methods showed that the deadline could be met

The US plans to appeal the WTO decision that old American laws prohibiting gambling over wires that cross state lines violate global trade rules for the services sector. The degree to which governments are clearing up grey areas of internet-related law may not be the outcome cyber enthusiasts want.

Timing:

1995: WTO agreement lets countries ban trade where it has national laws designed to “protect public morals”, which would seem to cover gambling, at least from an American perspective.

2003: An American government body, the Defense Advanced Research Projects Agency, tried to create an exchange to trade contracts on the likelihood of a terrorist attack.

Nov. 10, 2004: WTO decision that old American laws prohibiting gambling over wires that cross state lines violate global trade rules for the services sector.

Web Resources:

House of Cards: The WTO and Online Gambling from the Economist http://www.economist.com/research/articlesBySubject/displayStory.cfm?story_id=3411641&subjectID=682268&emailauth=%2527%252FUOH%255F%253CC0SP%255C%2520%250A

Guessing Games from the Economist http://www.economist.com/research/articlesBySubject/displayStory.cfm?story_id=3400241&subjectID=348918&emailauth=%2527%2528%2540%252E7%2525%255C%255C%253B3%2540%255C%2520%250A