Tuesday, July 05, 2005

Insider Trading in Predictive Markets: The Good Professor Weighs In

Not for nothing is Stephen Bainbridge a corporate law professor...after a lot of talk back and forth over the relative efficacy of a small, predictive market as it relates to something like the SCOTUS nomination, I found myself somewhat perplexed. Well, along comes Bainbridge with a well-reasoned and well-sourced discussion of the issues involved, particularly with regard to insider training (i.e., someone trading on SCOTUS futures who is in a position to know).

Prof. Bainbridge found no rules banning insider trading at TradeSports, interestingly enough, but concludes that, if insider knowledge is only likely, and not certain, the predictive nature of the market will be vastly improved, with enough degree of uncertainty to attract new money. But what am I doing trying to explain this to you? Just go see Bainbridge and see for yourself...

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