As we mentioned, a group of economists recently penned an open letter to lawmakers urging them to relax regulations that prevent prediction markets from opening up in the US. While the list of signees was pretty impressive, one name that was notably absent was Steven Levitt of Freakonomics fame, who is a fan of prediction markets. On his blog, he discussed his reasoning for not signing the letter. In addition to being hesitant to get involved in any such letters (which probably aren't that effective), he felt that this particular letter didn't go far enough, in that it sought to carve out exemptions for societally useful prediction markets, whereas Levitt sees no reason to separate prediction markets from other forms of gambling. This is an important point. Too often, people take a rather parochial view in their definitions of things like investments, markets and gambling when in fact they're all basically the same thing. So while it would be nice to see prediction markets allowed to flourish, this shouldn't necessarily be a separate goal than undoing the many absurd regulations pertaining to online gambling.
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