North Korea Missile Test

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Aug 11, 2006, 2:38:02 PM8/11/06
to Prediction Markets
The North Korea Missile contract was set to expire at 100 if all of the
following 3 conditions were met:

-North Korea launched a test missile;
-It left North Korean airspace on/before 11:59:59pm ET on 31st July
2006; and
-The above were confirmed by the US Department of Defense.

The last condition indisputably was not met. Despite TEN's repeated
attempts to secure confirmation directly from the DoD, or to source a
public DoD statement that would provide explicit confirmation that the
missiles left NK airspace, no such confirmation was forthcoming.

Further, on the day of expiry, a DoD spokesperson stated directly to
TEN that the DoD would not offer any confirmation related to North
Korean airspace, as such specifics were considered military

Accordingly, the contract was expired at 0.

Let's be clear. This was not the easy or popular decision. This
contract generated discussion wildly out of proportion to its volume,
which was small and which consisted overwhelmingly of trades placed
after the launch.

North Korea obviously tested several missiles. Given reports about how
far the missiles went and where they landed, it certainly could have
been inferred that at some point, some of them left North Korean
airspace. It also was possible to assemble various transcripts,
emails, and statements into a 'straw man' that might somehow have
served as a proxy for confirmation.

The simple fact is that a stated confirmation source is an integral
component of a contract. This fact only hides in plain sight because
many contracts have inherent confirmation mechanisms which are
unanimously accepted without ever being discussed. An example would be
the Nasdaq: the closing print is its own confirmation.

At the other end of the spectrum, consider a seemingly far-fetched
proposition which absolutely would require a specific confirmation
source to have any hope of being a tradeable proposition: a UFO
sighting occuring before the end of the month. The contract value will
depend almost entirely on what will server as the source. Is it the US
government, or a tabloid? MSNBC, or someone's blog?

Most contracts fall somewhere in between these two extremes. Yet
whether or not it's taken for granted, a confirmation source is always
an essential, integral component of a contract.

Real money contracts on real world events are real financial
transactions with real consequences. Stock buyers may lose money. Put
writers may be assigned. Adjustable mortgage holders may face rising
rates and higher monthly payments. If you don't close a long commodity
position before expiry, you may need to decide what, exactly, you're
going to do with 40,000 pounds of frozen pork bellies or 110,000 board
feet of lumber.

Inference and proxy are not a substitute for the terms of a contract,
and to pretend otherwise does a serious disservice to the integrity and
credibility of our marketplace.

Our commitment is to be transparent and responsive, and to lead the
growth of a new market by continuously improving offerings, services,
liquidity, and functionality. This is why we're expanding the
confirmation sources for similar current events contracts, and why
we're creating an arbitration body to give members a mechanism for the
independent review of contract disputes.

This is why discussion, criticism, and hard questions are not only
welcome, but necessary.

This is how businesses are built, and how sustainable industries are

Matt Bonner
Trade Exchange Network, Ltd.

Chris. F. Masse

Aug 11, 2006, 7:23:52 PM8/11/06
to Prediction Markets
Hello friends of prediction markets,

As I wrote many times, all NKM opinions are respectable (expire to 0;
expire to 100; unwind all trades and void all bets; or pay both sides)
and were expressed by respectable people with sound arguments and
established facts. I have my own opinion, which I will express on my

As a result of this NKM mess, SportsBook Review has downgraded
TradeSports to a C+. (For your information, BetFair is rated A+.)

As I wrote many times, TradeSports apologized and promised to reform,
but they did nothing to compensate the victims (i.e., the traders who
were right in their prediction but lost their money).

Matt Bonner (the new TradeSports/InTrade P.R. agent) wrote: "This is

why we're expanding the confirmation sources for similar current events
contracts, and why we're creating an arbitration body to give members a
mechanism for the independent review of contract disputes."

This is an admission of failure and a promise to reform. Once again.
Good. But what about the defrauded TradeSports traders???

It's cool to acknowledge own's error(s), but it's better to repair the
damages done. That's called "responsibility".

>From day one, I have given air time and support to the defrauded
TradeSports traders. In return, TEN CEO John Delaney (who five minutes
ago was claiming urbi and orbi that I deserved his "prediction market
award" of $10,000) retaliated against me.

Matt Bonner's spin doctoring does bring nothing new to the discussion.
Nothing. Strictly nothing. A band aid on a wood leg.

The fight will thus go on until either a satisfactory answer is given
or the TradeSports / InTrade reputation is completely destroyed.

Thanks for your attention.

Best regards to all sides,

Chris Masse

APPENDIX: The NKM links...

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