I’ve reported before on prediction markets – betting markets like Intrade.com where people bet on future events. Because bettors put their money where their mouths are, their predictions are very accurate. When researchers compare the track record of TV pundits versus professional pollsters versus the bettors on Intrade, Intrade's predictions have the best track record. One study found that Intrade’s margin of error was just over half that of major polls.
Intrade is based in Ireland because, if it were in America, the owners would be in jail. Silly American politicians have banned internet gambling.
But one American entrepreneur got the government regulator to give him an exception to that rule so he could create a Hollywood Stock exchange. The exchange would let Americans bet on which movies would succeed. The CFTC said that by labeling his prediction market a “futures market” – Hollywood Stock Exchange would be exempt from the gambling rules.
But then, as I report on my show tomorrow night and in my column today, Congress killed it anyway:
The Frank-Dodd financial regulation law killed the real market at the behest of some in the movie industry.
Rich Jacobs, president of the Hollywood Stock Exchange, says that some studios wanted it killed because they didn't want public discussion of their plans.
"I think they were just concerned about bringing financial market transparency to an industry that hasn't had any transparency about finances," he said.
[But] through the betting, knowledge would be revealed. Films more likely to succeed would probably get funded.
Not every studio opposed the prediction market. Lionsgate defended it. Good for them.
"It would give an opportunity for those trying to produce (small) films and get distribution ... by showing that the market thinks those films can make $10 or $20 million," Jacobs said.
But the politicians didn’t care. Senators Patrick Leahy and Orrin Hatch complained that the Hollywood Stock exchange would lead to “betting and speculation that is even more risky than the typical financial product.”
Tune in tomorrow night at 9pm and midnight ET for more about the politics of Hollywood.