Sportsbook.com shut off betting Friday on both Sports Illustrated’s Sportsperson of the Year, and Time Magazine’s Person of the Year. Why? Because it looked like the betting was tilting rapidly toward two candidates, quarterback Tom Brady and Mother Nature, respectively.
So what, right? If the betting market is working, it is only to be expected it would tilt toward a smart choice. Maybe, but in this case some of the biggest action Friday was coming from folks who had email addresses at Time-Warner’s (the owner of both magazines) PR agency.
I have only one question: What insider could conceivably be so dumb as to make a heavy bet on such a prominent topic, and do it using their work email address? Truly amazing.
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Hmm… with great mind like those now wonder that whole AOL-merger things went less than perfect.
The University of Chicago Law School had a podcast recently that touched on using online betting in various scenarios, and discussing how much more accurate these sorts of programs are at e.g. predicting US Presidential Election winners than anything else. Interesting if you have 45 minutes to kill.
http://www.law.uchicago.edu/podcastinstructions.html
True, as long as it’s made clear that insiders are permitted, why not allow the markets to continue? (In this case, presumably there was pressure from TWX management because its “stories” were being scooped/leaked.)
However, if this is made clear, then why would outsiders want to enter the market since they know they are at such a disadvantage? This approaches a no-trade situation and the market’s liquidity/volume will tend to vanish. (unless there are hedgers, people trading for entertainment, and, well, total idiots) I have recently argued that there’s often a trade-off between predictive value and liquidity in these kinds of markets: http://riskmarkets.blogspot.com/
Jason Ruspini
On second thought, there is no need to assume external pressure. Sportsbook also shut-down their “The Amazing Race” markets in March and September. They are not really in the business of providing predictions after all. Rather, they want to maximize volume and squash no-trade conditions that would result from insider trading. (In their words, “protect the thousands of other bettors who will wager”) Sportsbook no doubt also recognizes that no-trade conditions would be contagious across many of their markets if they were known to accommodate insiders in any one market.
Wouldn’t the entrance of insiders simply hasten the ultimate result? Given a published event, such as Person of the Year, a non-insider would have to assume that at some point insiders will come in and move the contracts dramatically in one direction, which is how one wins or makes money on them. Put another way, a bettor could simply assume an earlier ‘end date’ correlating to the ‘pre-announcement’. All betting is done by choice anyways, unless the market is dissolved, then there is no choice. Place the bet, and assume the risk, like with anything else. These are not SEC-regulated investments here- this is gambling. It’s supposed to be risky. That is what is good about it.
Corey, yes it will hasten the result because the rational bet is to go with the flow if one suspects insider betting. My point was that price will move quickly *on low volume* in these cases because there will be few people willing to take the other side of the trade. Again, Sportsbook is not in the business of providing predictions — rather, maximizing volume and fees. Allowing insiders is ultimately detrimental to their revenue.
Donald Luskin: Stupidest Man Alive
A correspondent asks me if it isn’t time to surf on over again to Donald Luskin’s “Poor and Stupid” website, find some egregious offense against intelligent thought, and lay down another marker saying that Luskin is indeed the Stupidest Man AliveTM, ju…