But the markets won't be based in America. They'll be here in New Zealand, run by iPredict, with backing from fans of Sumner's work.
Why here and not America? Mostly because New Zealand is way cooler than America.
Prediction markets got their start in the US with Iowa's Electronic Market, which exists by virtue of a CFTC no-action letter that, while allowing the IEM's existence, also massively constrains what it can do.
New Zealand's iPredict operates under a saner regulatory structure here, in the Outside of the Asylum.
iPredict exists thanks to the foresight of the University of Victoria at Wellington. It was set up when Canterbury's Professor of Finance, Glenn Boyle, was at Vic, before he came to Canterbury. I'd put in a couple of failed Marsden grant proposals to start up something like it at Canterbury before Glenn came over. I didn't know he was pursuing the same goal. Glenn beat me to it because he didn't waste time asking Marsden for money for it, and because he knew other ways of getting it funded. Asking Marsden for money for anything risky and cool is a waste. He knew not to bother; I'd not been here long enough to know that. iPredict operates as an authorised futures dealer under the Financial Markets Authority.
So we'll have quarterly forecasts of American nominal GDP going forward for a few years.
Americans cannot trade on these markets. Why? iPredict, a small University outfit, would then be stuck dealing with American regulations that make it impossible for small foreign outfits to deal with Americans. As Scott puts it,
We have to exclude Americans because . . . well because America is no longer a free country. More specifically there are two problems. First, iPredict does much more than the Iowa Electronics Market, and hence doesn’t have their waver from the Feds. And second, there are now incredibly burdensome “know thy customer” rules that America imposes on foreign financial firms dealing with US citizens. A small entity like iPredict (run by the Victoria University of Wellington) obviously doesn’t have the funds to meet all these burdensome regulations. Now when I travel around the world almost everyone I talk to in the financial area regards US citizens in roughly the same way they view the Ebola virus. They see our government has being a sort of madhouse.We're the outside of the asylum, so we can do cool things here. Inmates of the Asylum can visit, but we have to be careful in dealing with them.
I'm very happy to have been able to help out a bit in hooking Scott Sumner up with the good people at iPredict.
When you're in a think-tank, fun stuff like this, that would never hit your PBRF portfolio, is totally worth spending time on.