Predictive Markets and Lunar Gambling

teamodds.pngA few years back, while I was finishing my master's degree at the MIT Media Lab, a fellow researcher proposed an interesting idea: why not use predictive markets to determine unknown outcomes (we happened to be talking about music sales)? The idea, I suppose, is not new. Futures markets and other derivatives have been around for a long time. But while corn and hog prices may be easily determined, why couldn't we understand other outcome-based situations as well?

As it turns out, you can. Futures markets have been used for a number of interesting uses, including predicting presidential elections, projecting box office returns, and even determining whether or not Tony Soprano would die in the series finale of his eponymous show.

Well now you can predict when we'll get back to the Moon.

Intrade.com has designed a security to determine whether the Google Lunar X PRIZE will be won by December 2012 (careful, link will resize your browser). Sadly, shares are currently trading at around 20 (max of 100), but trade volume is extremely low. I imagine as the PRIZE progresses, it will begin to move again.

Of course, the line between futures markets and betting is rather thin. Some markets, such as the Hollywood Stock Exchange, use fake currency (they call it H$), and allow users to trade their currency for branded merchandise. But many other markets, including the Iowa Electronic Markets use real-world currency. And the predictive futures trend has continued to online gambling sites as well. Some of these markets are regulated, others are not. It's a bit of a grey area.

And then things get even weirder. A site called Longbets.com has a prediction that casinos will appear on the moon by 2040. As of this writing, the odds are about 50/50. But Longbets.com works a little differently than many predictive markets. For starters, it's a nonprofit company. Proposing a prediction costs US$50. Then, in order to bet on this prediction, it costs $200. Payoff amount is confusing and the whole process seems a little too intricate.

But wait! Another Google Lunar X PRIZE prediction!

Sister site Predictify.com has a bet running based on TWO outcomes of the Google Lunar X PRIZE: prize won by 2012, and prize won by 2013.

We've been thinking of having something of a running leaderboard at the Google Lunar X PRIZE homepage, with all the official teams ranked based on public opinion of who will win. We recently ran a quick survey: Who is your favorite team? With some clever self-promotion, team Lunatrex stole the contest. But what if we kept this as a running feature? Would you like to see a leaderboard?

Pierre-Damien said...

I'd certainly love to see a leaderboard on the website, whith people able to have vote on it over the entire competition!!

I am sure it would be very intersting to see how it evolved with time, after a year or two! Enbling a "Historical" tool would be pretty cool too!

William said...

I'm glad you posted on this stuff, Mike, as I find it fascinating. I didn't know about the Predictify listing, but I've been following the inTrade market for a while. One word of caution--I've never been able to get any direct link to that particular bet to stay current for very long, so anyone reading this post in the archives may have to hunt around on the inTrade site to find the particular bet Mike's referring to here.

It would have been really interesting to watch a Lunar Lander Challenge leaderboard, and to see how it fluctuated during and just after each of the last two X PRIZE Cups...

Pierre-Damien said...

I specially liked the name of the teams on the top picture!!

nigeleccles said...

You are right longbets.org (note it is .org not .com) is a strange one. Bets are generally made as high profile challenges. To get around US betting laws when they are settled the winnings are donated to charity (selected by the winner of the bet).

We are also running a Lunar X market but the forecast here is on if the prize will be won: http://www.hubdub.com/e/Market/Will_anyone_claim_the_main_Google_X_Lunar_Prize_1634/view

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