New Zealand Trades on the Future

New Zealanders have just got their first online predictions market, which allows them to trade real money on predictions on future events such as elections.

Established as a research tool by Victoria University in Wellington and the think tank ISCR, iPredict uses the predictions of its audience over the Internet to predict future outcomes. Its creators say it will also benefit companies.

"iPredict is easy to use and fun but it has a serious side to it - it can really help make a difference to companies, agencies or community organizations in testing ideas and their likely take-up," said iPredict Chief Executive Matt Burgess.

Burgess said iPredict works like a stock exchange, trading real money. "How it works is that contracts pay $1 if an event comes true - nothing otherwise - and the price these contracts trade for is the prediction. For example, you could have a contract that pays $1 if [incumbent] Helen Clark is the next Prime Minister, and pays nothing otherwise. If that contract trades for 60 cents, then the market's prediction is a 60% probability that Helen Clark will stay on as Prime Minister."

Access to the iPredict website is free, but traders must be 18 years or older to set up their free account. With as little as NZ$5 (US$4), people can start trading.

Similar long-term prediction markets have been operating in other countries since the 1990s. In 2007 companies from the USA, Ireland, Austria, Germany and Denmark formed the Prediction Market Industry Association, aimed at promoting prediction markets.