16 ms·

The Fall of Intrade and the Business of Betting on Real Life (2014)

69 points by JacobAldridge 11y ago

claywm 11y ago
Take note, daily fantasy sports sites: > “We’ve learned from our own experience,” [Intrade founder Ron Bernstein] replied, “that regulatory avoidance isn’t a good business model.”
- otoburb 11y ago
  A couple of decentralized prediction markets[1][2] powered by blockchain technology are trying to move regulatory compliance from centralized betting exchanges to the users themselves, which could be construed as an attempt to minimize regulatory liability, similar to DMCA Safe Harbor provisions. [1] http://www.truthcoin.info/ http://www.truthcoin.info/ [2] http://www.augur.net/ http://www.augur.net/
  - joosters 11y ago
    I wonder how these companies/groups will prevent minors from betting? Even countries where gambling is fully legal frown upon underage gambling. I think these startups are not going to be able to dodge all the regulatory problems by pushing the betting onto a blockchain.
    - aianus 11y ago
      They aren't startups, not any more than "Bitcoin" or "Bittorrent" are startups. Once the software is initially developed and released, there's no head to cut off or assets to seize, there's just a million little pseudo-anonymous players scattered all over the world.
      - joosters 11y ago
        Augur raised millions of dollars through crowd funding. There's definitely a central organisation there.
        aianus 11y ago
        Seizing the money raised in the distribution of the reputation isn't going to shut down Augur any more than seizing Satoshi's house and putting him in prison would shut down Bitcoin. At a certain point (Augur and Ethereum aren't there yet) it just takes on a life of its own beyond its creators. I mean, Bittorrent ostensibly had a "central organization" at one point but there's nothing you could do to it that would shut down the protocol.
        joosters 11y ago
        I take your point, and I don't expect any legal action against Augur until (if?) it grows big, by which time it will have less of an obvious core. But there will still be identifiable promoters, e.g. anyone hosting a website advertising/facilitating Augur. I'd guess that these people would be the ones at risk, rather than the individual bettors. Anyway, I'm watching its development with interest, but I suspect that it won't become a big success.
  - comrh 11y ago
    I'm a little confused by augur. It can only predict things well based on a large crowd of people betting on it? So the more specific or niche the event, the less chances it will be correct?
    - otoburb 11y ago
      The correctness should be taken care of by the bettable event, ideally carefully considered by the market maker. If the event is not believed to be easily verifiable, you probably should avoid betting on it.
phillc73 11y ago
"Intrade’s system was designed to evoke sophisticated investment, not a casino or a horse track" I resent the supposition that there is not sophisticated investments being made on horse racing. There are many professional investors all over the world, making sophisticated investments in horse racing. One company I'm involved with, essentially a one man band, pays between £10,000 - £15,000 per annum just to access horse racing data, both daily races and historic results. They then use this raw data to produce complex ratings for daily races and to perform historic data analysis. Their toolset is mostly R and Python based. This is just one small company in the UK. If you looked at other jurisdictions, such as Hong Kong, there are multi-million dollar syndicates crunching numbers to make sophisticated horse racing investments.
- jameshart 11y ago
  No matter how you dress it up, betting on an outcome is not an investment, it is playing a game. You can invest in applying sophisticated tactics to a game to swing the odds in your favor (look at a formula 1 or NFL team for an example of this taken to extreme), but you are still playing.
  - phillc73 11y ago
    To pull another quote out of the article: “Lots of ordinary financial things are gambling,” says Robin Hanson, an economist at George Mason University. “But they are carved out in the public mind.” Life is playing. Everything you do is an investment of some type - time, energy, emotion, money. Every decision you make is "betting" of a kind, it just depends how you decide to dress it up.
    - davmre 11y ago
      There's a very reasonable distinction to be made between "gambling" bets, which are zero sum, and investments, which are not. If I invest emotional energy in a friendship, that's certainly a risk which might not always pay off. But unlike playing horses, no one else has to lose in order for me to win.
    - 11y ago
gefh 11y ago
It's so sad that intrade got stomped by the Feds while fanduel and draftkings are advertising on TV. There's a serious social utility in prediction markets, whereas fantasy sports betting is just another way to separate punters from their money.
- _delirium 11y ago
  While the feds haven't done anything about them yet, Nevada just started cracking down on daily fantasy sports: http://www.nytimes.com/2015/10/16/sports/gambling-regulators-block-daily-fantasy-sites-in-nevada.html http://www.nytimes.com/2015/10/16/sports/gambling-regulators...
  - avn2109 11y ago
    The NFL's army of lobbyists and attorneys will insure that some form of legalized digital sports betting is available mostly-nationwide. It might be called "Fantasy Sports" or it might be called something else, but it will be widely-advertised and very profitable. The cat's out of the bag and they'll make sure it's never going back in.
    - slg 11y ago
      >The NFL's army of lobbyists and attorneys will insure that some form of legalized digital sports betting is available mostly-nationwide. Except if that were true, why wasn't there legal nationwide betting available before DraftKings and FanDuel? The NFL only cares about gambling to the extent it can grow interest in the sport, but once it gets too messy they will wipe their hands of the whole situation. The NFL's lobbyist have more important things to work on than dying on the hill of legalized sports betting.
      - huac 11y ago
        DraftKings and FanDuel paid off top NFL-related personnel, so the interests of DK/FD align with the NFL's interests. Now, the NFL (or at least influential executives) will get their cut of the pie, without actually having to bake the pie themselves. Turns out, asking for permission rather than forgiveness works. Though, yes, the NFL's lawyer army will have concussion battles to fight for the foreseeable future.
lucio 11y ago
> “The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it’s grotesque,” said Sen. Ron Wyden, a Democrat from Oregon. The head of DARPA, Adm. John Poindexter, was forced to resign and the project was squelched. How idiotic. It sound like a very good idea. Anyone with "insider knowledge" but no participation of a terrorist attack, will be very tempted to place a bet. By checking the bets you can avoid attacks. Create such a market using bitcoins, and you'll get very valuable intel. It's like having ears everywhere.
- joosters 11y ago
  Anyone with insider knowledge of a forthcoming terrorist attack should be telling the police, not placing a bet to make themselves money.
  - harmegido 11y ago
    Sure, just take the moral high ground while people needlessly die. I'd rather the insider make money nefariously than tsk-tsk about what he should have done if it means preventing attacks.
  - Moshe_Silnorin 11y ago
    If your utopia is powered by virtue, prepare for bitter disappointments. If your utopia is powered by vice, prepare for happy surprises.
- ikeboy 11y ago
  If they bet, and that bet stops the attack, then they won't make anything, right? So where's the motive?
  - AngrySkillzz 11y ago
    You size your bet with regard to the probability that the bet will inform a change in policy. Or maybe you hedge it by also betting on that change in policy.
- 11y ago
deleted 11y ago
[deleted]
chollida1 11y ago
Modelling for the purpose of "betting" is sort of the definition of my day job. Over the past few years I've started applying some of the same techniques we use in the equity and bond markets to the fantasy sports arena. The biggest issues I've come across are: 1) small sample size, football teams only play 16 games which means you really don't have alot of data to use. 2) counter party risk, lots of fantasy betting sites spring up and then fold, just like bitcoin. Ideally there would be a new form of prediction market that hosts bets but has a reliable third party escrow the funds. 3) Not enough volume, this is getting better but only due to Draft Kings huge advertising push this past year. 4) Lack of apis, most of these sites seem to want to cater to people who make 1 or two bets. Ideally I'd be able to make 1000's of bets each week. If anyone else out there is working on models for fantasy sports betting please feel free to drop me a line if you'd like to discuss techniques for modelling( I believe the cool kids now call this machine learning).
- sputknick 11y ago
  To your point on #2, Augur (augur.net) should overcome a lot of that risk. Probably not all of it, since the oracles can rule against your win, but at least you know no one can make off with your money.
- lordnacho 11y ago
  I've got a friend who used to work in quant hedge funds. He's moved to a company that exclusively trades sports. There's a lot of interesting alpha in there, and you don't get the same portfolio effects (market up/down) that you get in finance. One thing that juices returns is access. If you know about the new markets opening you run your arbs on them and make good money. Hours are weird.
  - username223 11y ago
    I can't help but be reminded of that Taibbi quote about Wall Street being a vampire squid plunging its blood funnel into anything that smells like money. It's a living, I suppose, but does "running your arbs" create anything of value?
ryanelfman 11y ago
I've been creating a platform for some time now that is similar except it has to do with trading future revenue streams. Check it out http://www.gimmeview.com http://www.gimmeview.com
tunesmith 11y ago
Random product idea: An app where people can place bets on outcomes in their own personal lives by assigning percentage certainty. And where the app will let them make bets on future public events the same way, events that are fed via a service and where the bets are stored centrally. The bets wouldn't be for money, they'd instead be for the credibility of who could be most "well-calibrated" via a "proper scoring rule" that would penalize you for inaccuracy or ignorance - so you have incentive to be knowledgeable about the event, and accurate about the odds. Soon you'd have a leaderboard of people who were best able to tell the future, and you could design future features from there. But the MVP is pretty simple. Create an event, create a bet, create a leaderboard.
SilasX 11y ago
>Intrade’s system was designed to evoke sophisticated investment No, it wasn't, or it failed at that: 1) They changed rules on bets midstream. I lost when they redefined the swine flu count as "the CDC's current total" rather than the original specification "number of cases as estimated by major media sources". (The CDC stopped updating.) 2) The bizarre $1 = 10% chance system. (Bet contracts would be set to have a value of $10 each, so a 100% chance should equate to a ~$10 bid.) 3) The flaky, designed-to-trick-you withdrawl system. When I asked for a check for my balance, there as a $X fee. So I asked for $Y, while leaving $X in the account, and was told I'd get $Y. Then they took $X out of the check, leaving an $X balance.
jeffdavis 11y ago
"The idea that the expert human mind could be outclassed by a bunch of amateurs getting together is very disturbing, as disturbing as saying the Earth is not the center of the solar system." The article doesn't quite make the case that that is true. Crowds predicting an election is no surprise -- crowds determine the outcome. It would be more compelling if the results were accurate a year ahead of time or something. And for sports betting, the average betting amateur is actually quite well-informed. I don't think this really applies to science very well. Crowds change opinions all the time, so they can't be right about some unchanging law of nature.

69 points by JacobAldridge 11y ago

Take note, daily fantasy sports sites: > “We’ve learned from our own experience,” [Intrade founder Ron Bernstein] replied, “that regulatory avoidance isn’t a good business model.”

otoburb 11y ago
A couple of decentralized prediction markets[1][2] powered by blockchain technology are trying to move regulatory compliance from centralized betting exchanges to the users themselves, which could be construed as an attempt to minimize regulatory liability, similar to DMCA Safe Harbor provisions. [1] http://www.truthcoin.info/ http://www.truthcoin.info/ [2] http://www.augur.net/ http://www.augur.net/
- joosters 11y ago
  I wonder how these companies/groups will prevent minors from betting? Even countries where gambling is fully legal frown upon underage gambling. I think these startups are not going to be able to dodge all the regulatory problems by pushing the betting onto a blockchain.
  - aianus 11y ago
    They aren't startups, not any more than "Bitcoin" or "Bittorrent" are startups. Once the software is initially developed and released, there's no head to cut off or assets to seize, there's just a million little pseudo-anonymous players scattered all over the world.
    - joosters 11y ago
      Augur raised millions of dollars through crowd funding. There's definitely a central organisation there.
      - aianus 11y ago
        Seizing the money raised in the distribution of the reputation isn't going to shut down Augur any more than seizing Satoshi's house and putting him in prison would shut down Bitcoin. At a certain point (Augur and Ethereum aren't there yet) it just takes on a life of its own beyond its creators. I mean, Bittorrent ostensibly had a "central organization" at one point but there's nothing you could do to it that would shut down the protocol.
        joosters 11y ago
        I take your point, and I don't expect any legal action against Augur until (if?) it grows big, by which time it will have less of an obvious core. But there will still be identifiable promoters, e.g. anyone hosting a website advertising/facilitating Augur. I'd guess that these people would be the ones at risk, rather than the individual bettors. Anyway, I'm watching its development with interest, but I suspect that it won't become a big success.
- comrh 11y ago
  I'm a little confused by augur. It can only predict things well based on a large crowd of people betting on it? So the more specific or niche the event, the less chances it will be correct?
  - otoburb 11y ago
    The correctness should be taken care of by the bettable event, ideally carefully considered by the market maker. If the event is not believed to be easily verifiable, you probably should avoid betting on it.

phillc73 11y ago

"Intrade’s system was designed to evoke sophisticated investment, not a casino or a horse track" I resent the supposition that there is not sophisticated investments being made on horse racing. There are many professional investors all over the world, making sophisticated investments in horse racing. One company I'm involved with, essentially a one man band, pays between £10,000 - £15,000 per annum just to access horse racing data, both daily races and historic results. They then use this raw data to produce complex ratings for daily races and to perform historic data analysis. Their toolset is mostly R and Python based. This is just one small company in the UK. If you looked at other jurisdictions, such as Hong Kong, there are multi-million dollar syndicates crunching numbers to make sophisticated horse racing investments.

jameshart 11y ago
No matter how you dress it up, betting on an outcome is not an investment, it is playing a game. You can invest in applying sophisticated tactics to a game to swing the odds in your favor (look at a formula 1 or NFL team for an example of this taken to extreme), but you are still playing.
- phillc73 11y ago
  To pull another quote out of the article: “Lots of ordinary financial things are gambling,” says Robin Hanson, an economist at George Mason University. “But they are carved out in the public mind.” Life is playing. Everything you do is an investment of some type - time, energy, emotion, money. Every decision you make is "betting" of a kind, it just depends how you decide to dress it up.
  - davmre 11y ago
    There's a very reasonable distinction to be made between "gambling" bets, which are zero sum, and investments, which are not. If I invest emotional energy in a friendship, that's certainly a risk which might not always pay off. But unlike playing horses, no one else has to lose in order for me to win.
  - 11y ago

gefh 11y ago

It's so sad that intrade got stomped by the Feds while fanduel and draftkings are advertising on TV. There's a serious social utility in prediction markets, whereas fantasy sports betting is just another way to separate punters from their money.

_delirium 11y ago
While the feds haven't done anything about them yet, Nevada just started cracking down on daily fantasy sports: http://www.nytimes.com/2015/10/16/sports/gambling-regulators-block-daily-fantasy-sites-in-nevada.html http://www.nytimes.com/2015/10/16/sports/gambling-regulators...
- avn2109 11y ago
  The NFL's army of lobbyists and attorneys will insure that some form of legalized digital sports betting is available mostly-nationwide. It might be called "Fantasy Sports" or it might be called something else, but it will be widely-advertised and very profitable. The cat's out of the bag and they'll make sure it's never going back in.
  - slg 11y ago
    >The NFL's army of lobbyists and attorneys will insure that some form of legalized digital sports betting is available mostly-nationwide. Except if that were true, why wasn't there legal nationwide betting available before DraftKings and FanDuel? The NFL only cares about gambling to the extent it can grow interest in the sport, but once it gets too messy they will wipe their hands of the whole situation. The NFL's lobbyist have more important things to work on than dying on the hill of legalized sports betting.
    - huac 11y ago
      DraftKings and FanDuel paid off top NFL-related personnel, so the interests of DK/FD align with the NFL's interests. Now, the NFL (or at least influential executives) will get their cut of the pie, without actually having to bake the pie themselves. Turns out, asking for permission rather than forgiveness works. Though, yes, the NFL's lawyer army will have concussion battles to fight for the foreseeable future.

lucio 11y ago

> “The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it’s grotesque,” said Sen. Ron Wyden, a Democrat from Oregon. The head of DARPA, Adm. John Poindexter, was forced to resign and the project was squelched. How idiotic. It sound like a very good idea. Anyone with "insider knowledge" but no participation of a terrorist attack, will be very tempted to place a bet. By checking the bets you can avoid attacks. Create such a market using bitcoins, and you'll get very valuable intel. It's like having ears everywhere.

joosters 11y ago
Anyone with insider knowledge of a forthcoming terrorist attack should be telling the police, not placing a bet to make themselves money.
- harmegido 11y ago
  Sure, just take the moral high ground while people needlessly die. I'd rather the insider make money nefariously than tsk-tsk about what he should have done if it means preventing attacks.
- Moshe_Silnorin 11y ago
  If your utopia is powered by virtue, prepare for bitter disappointments. If your utopia is powered by vice, prepare for happy surprises.
ikeboy 11y ago
If they bet, and that bet stops the attack, then they won't make anything, right? So where's the motive?
- AngrySkillzz 11y ago
  You size your bet with regard to the probability that the bet will inform a change in policy. Or maybe you hedge it by also betting on that change in policy.
11y ago

deleted 11y ago

[deleted]

chollida1 11y ago

Modelling for the purpose of "betting" is sort of the definition of my day job. Over the past few years I've started applying some of the same techniques we use in the equity and bond markets to the fantasy sports arena. The biggest issues I've come across are: 1) small sample size, football teams only play 16 games which means you really don't have alot of data to use. 2) counter party risk, lots of fantasy betting sites spring up and then fold, just like bitcoin. Ideally there would be a new form of prediction market that hosts bets but has a reliable third party escrow the funds. 3) Not enough volume, this is getting better but only due to Draft Kings huge advertising push this past year. 4) Lack of apis, most of these sites seem to want to cater to people who make 1 or two bets. Ideally I'd be able to make 1000's of bets each week. If anyone else out there is working on models for fantasy sports betting please feel free to drop me a line if you'd like to discuss techniques for modelling( I believe the cool kids now call this machine learning).

sputknick 11y ago
To your point on #2, Augur (augur.net) should overcome a lot of that risk. Probably not all of it, since the oracles can rule against your win, but at least you know no one can make off with your money.
lordnacho 11y ago
I've got a friend who used to work in quant hedge funds. He's moved to a company that exclusively trades sports. There's a lot of interesting alpha in there, and you don't get the same portfolio effects (market up/down) that you get in finance. One thing that juices returns is access. If you know about the new markets opening you run your arbs on them and make good money. Hours are weird.
- username223 11y ago
  I can't help but be reminded of that Taibbi quote about Wall Street being a vampire squid plunging its blood funnel into anything that smells like money. It's a living, I suppose, but does "running your arbs" create anything of value?

ryanelfman 11y ago

I've been creating a platform for some time now that is similar except it has to do with trading future revenue streams. Check it out http://www.gimmeview.com http://www.gimmeview.com

tunesmith 11y ago

Random product idea: An app where people can place bets on outcomes in their own personal lives by assigning percentage certainty. And where the app will let them make bets on future public events the same way, events that are fed via a service and where the bets are stored centrally. The bets wouldn't be for money, they'd instead be for the credibility of who could be most "well-calibrated" via a "proper scoring rule" that would penalize you for inaccuracy or ignorance - so you have incentive to be knowledgeable about the event, and accurate about the odds. Soon you'd have a leaderboard of people who were best able to tell the future, and you could design future features from there. But the MVP is pretty simple. Create an event, create a bet, create a leaderboard.

SilasX 11y ago

>Intrade’s system was designed to evoke sophisticated investment No, it wasn't, or it failed at that: 1) They changed rules on bets midstream. I lost when they redefined the swine flu count as "the CDC's current total" rather than the original specification "number of cases as estimated by major media sources". (The CDC stopped updating.) 2) The bizarre $1 = 10% chance system. (Bet contracts would be set to have a value of $10 each, so a 100% chance should equate to a ~$10 bid.) 3) The flaky, designed-to-trick-you withdrawl system. When I asked for a check for my balance, there as a $X fee. So I asked for $Y, while leaving $X in the account, and was told I'd get $Y. Then they took $X out of the check, leaving an $X balance.

jeffdavis 11y ago

"The idea that the expert human mind could be outclassed by a bunch of amateurs getting together is very disturbing, as disturbing as saying the Earth is not the center of the solar system." The article doesn't quite make the case that that is true. Crowds predicting an election is no surprise -- crowds determine the outcome. It would be more compelling if the results were accurate a year ahead of time or something. And for sports betting, the average betting amateur is actually quite well-informed. I don't think this really applies to science very well. Crowds change opinions all the time, so they can't be right about some unchanging law of nature.