Yossi Beinart, chief executive of the North American Derivatives Exchange, wanted to be up and running with a new set of options this week that would have allowed investors to bet on the 2012 election.
Who will be president? Which party will control the House or Senate? People would have been able to trade futures contracts on these questions.
Instead, the Commodity Futures Trading Commission on Wednesday decided to put this proposal under a 90-day review. Meantime, one of the regulator's five commissioners has said Beinart's idea amounts to "political poker."
Imagine that. Investors playing cards with political candidates instead of, say, subprime mortgage securities or credit-default swaps.
Perhaps commissioners never got the memo when the casino industry and global financial markets merged. Or when Wall Street and Washington became the same fashionable shopping mall with a revolving door in the middle.
By now, just about every conceivable objection to Beinart's proposal has been heard. Here are just a few of the nuttier ones:
It might entice a candidate to throw the race, like a prize-fighting boxer in a B-movie. It may create an incentive for someone to dig up dirt on a candidate to extort them or dash their campaign for a quick profit. It could even lead to candidate assassinations...gasp!
Chicago-based Nadex, however, is a tiny exchange geared toward retail investors. The way its proposal is structured, the most one could profit from a bet on a political event is $250,000. That's hardly incentive enough for a grand conspiracy. It doesn't even compare to what a Wall Street powerhouse could make getting Moody's or Standard & Poor's to put a triple-A rating on a bag of horse manure and trading that over an exchange.
There's already an exchange called Intrade in Ireland that takes bets on the next U.S. president or even whether Israel will launch an air strike against Iran.
"Americans trade on it," Beinart said. "Why wouldn't you want this market here?"
To a limited extent, it's already here. The Iowa Electronic Markets, an experimental exchange operated by the University of Iowa's business school, has been allowing investors to buy and sell futures on election results since 1988.
I say American politics is so filled with nonsense, it is high time we apply some basic market discipline. I, for one, couldn't stand all these Republican candidates in Iowa complaining about Obama being a socialist while preaching to a state that thrives on enormous federal subsidies for ethanol.
"The fact that there's a market trading these options will take some of the B.S. out," Beinart said. "It's another voice that may be slightly more rational."
Wouldn't it be fun to hear how much money gets lost by ideologues and amateur political junkies who are so easily manipulated by the absurd labels campaigners toss at them?
Wouldn't it be fun watching Herman Cain options drop to zero as one woman after the next popped out of his past? Or options on Rick Perry plunging as the nation discovers he cannot even count to three?
Pundits had bet Ron Paul would take Iowa. Can you imagine the run-up we'd have seen in Rick Santorum options as he unexpectedly grabbed the lead in the anyone-but-Romney race?
I might have bet Newt Gingrich was finished after reading how much money he made working for the failed government agencies--Fannie Mae and Freddie Mac--that he's roundly blamed on Democrats. Gingrich is still in the running, although his little hissy fit after placing so low in Iowa might have sent his options tumbling lower.
Beinart guessed options on Obama winning the next election might be priced at $56 if they were trading today. After the election, they would be priced at $100 if Obama won, and zilch if he lost, but they would trade up and down in the meantime, as the race develops.
Having a bet on a particular candidate might make voters think more clearly about their choices. It's one thing to knee-jerk along to a slogan, and another to put down your money and keep vigilant tabs on what's really going on.
"There's polling. There's pundits. And there's your neighbor's opinion," Beinart said. "This will be an additional source of information."