As of last night Intrade, the online trading exchange website which allowed users to bet on the outcomes of non-sports-related future events, shut down.
With sincere regret we must inform you that due to circumstances recently discovered we must immediately cease trading activity on www.intrade.com.
But Intrade (and other services like it) are incredibly valuable (and here to stay). Traditional polls are limited by their lack of a market mechanism. You can vote for a preferred outcome, but dictating the strength of the preference for that outcome (or how strongly you believe something will happen) is tricky. Pollsters can ask respondents to rank issues by how important they are, but such a measure is always going to be crude. Crucially, nothing is at stake. Intrade changed that, by using a price mechanism. When you have to put your money where your mouth is then there are strong incentives for accuracy. It also made the predictions of Intrade fairly tamper proof, as attempts to play the system would see other traders move to push bets back to an equilibrium as there was money to be made.
InTrade may be dead. Prediction markets are not. They're still in active use by corporations, policy makers, pundits & the press.— Justin Wolfers (@justinwolfers) March 11, 2013
Now that InTrade has closed, I'll be following betfair.com for prediction market info. Even deeper markets (though no US traders)— Justin Wolfers (@justinwolfers) March 11, 2013