Prediction markets: Don't bet on it THE American election brought prediction markets more attention than ever before. These exchanges allow punters to wager on the probability of an event, such as Barack Obama winning a second term as president. Economists have long praised them for their accuracy. Many journalists, too, have noticed that they are just as likely to be right as opinion polls; probably more so. The most widely referenced market during the 2012 campaign was Intrade, an Irish website. In the past year the New York Times has mentioned it 68 times. It now appears that the spotlight may have done Intrade more harm than good. On November 26th America's Commodity Futures Trading Commission (CFTC) sued the company for allowing betting on the prices of products, such as oil and gold, which trade on derivatives markets it regulates. In 2005 Intrade had promised the CFTC not to offer such contracts. In response to the suit, the firm announced it would no longer let Americans trade on its site. It gave those customers until December 23rd to close their positions. Intrade's decision to pull out of the world's biggest market might seem like an overreaction, since it might have satisfied the CFTC simply by eliminating contracts on physical commodities. But the 2010 Dodd-Frank financial reform gave the commission broad new powers to regulate prediction markets "in the public interest." This April it rejected a request by Nadex, a Chicago-based derivatives exchange, to offer contracts on the elections. Even if Intrade managed to get approval from the CFTC for its markets, the cost of complying with its regulations would have narrowed its profit margins. Intrade's withdrawal does not prevent Americans from betting on future events altogether. They can still place wagers with bookies in Nevada, although only if they show up in person. And Americans with foreign friends who will bet on their behalf can wager on other British or Irish websites, such as Betfair or Paddy Power. However, that requires much more effort than simply mailing a cheque. American credit card companies were already legally barred from sending payments to Intrade. As a result, all but the most dedicated gamblers will probably give up. Since the wisdom of crowds is proportional to their size, the accuracy of prediction markets - and the benefits they offer third parties that use their forecasts - is likely to decline.