Gambling on Our Future

November 3rd, 2008 by Kathy McManus

Does betting on political races irresponsibly sway votes?

Brought to you by Liberty Mutual's
The Responsibility Project

There’s a financial market for everything, it seems. 

Including your vote. 

As stock markets around the world continue to nose-dive, an unusual futures market called Intrade is heating up, with global investors focused on one bet: the outcome of the U.S. presidential election. 

Unlike typical financial markets where profits are tied to a company’s growth, Intrade’s profits rise and fall on the results of political, cultural, and geological events--including weather. Traders buy and sell “contracts” that function like stocks.

But it’s not just investors who are keen on Intrade. Pundits and politicians routinely analyze it as they follow the McCain and Obama campaigns, trying to determine the probable winner before the actual vote. According to Congressional Quarterly Today, “experts have found that the Intrade market is generally more accurate in predicting the outcome of major events than other leading indicators, including public opinion polls.” 

However, scholars of so-called predictive markets issued a caveat about Intrade: “The relatively small scale of the market and its lack of outside regulation could leave the system vulnerable to unscrupulous investors.” 

Sure enough, a rogue trader on Intrade seems to have been responsible for mimicking Wall Street maneuvers by buying suspiciously large purchases of McCain futures to boost his standing in the race, while selling off blocks of Obama futures to lower the market’s predictions of his chances of winning. The manipulation left pollsters uncertain. 

Tell us what you think: Does betting on political races irresponsibly sway votes? Is it more responsible to put your money where your mouth is and vote?