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Wednesday
Apr222009

The unlikely marriage of prediction markets and charitable giving

We have profiled a number of ways in which online mechanisms are facilitating innovations in charitable giving, ranging from social lending to Palestinian entrepreneurs to domestic p2p loans to needy families. Here's a new one: funneling gambling proceeds to selected charities as a means of skirting US anti-gambling laws. At bet2give.com, bettors participate in prediction markets where your online earnings are donated to the charity of your choice. According to founder Emile Servan-Schreiber, since you never see the earnings, this makes the process "not gambling".

Bet2Give is a prediction market site where you can bet on topics ranging from politics to sports to business. Beginning with bets as small as $5 and as large as you want, you can bet real money on future occurences. If you win, then your earnings get donated to your charity of choice; if you lose, your losses get donated to the winner's charity of choice. This promises to offer "the thrill of betting and the power of giving". Thanks to the accounting trick, the site should get more accurate predictions because participants are putting real money on the line. In the end, it all goes to charity regardless, but presumably, participants care enough about their respective charities, to bet as though they were betting for their own gain.

So is this construct being embraced? A few charities have linked back to bet2give, seeing it as a possible fundraising opportunity. I see it as more of a gimmick: charity tagged onto a betting website for the sole purpose of skirting government regulations. None of the markets are socially motivated; I would be interested to see perhaps markets relating to the major charitable players, especially the social lenders and the predicted impact on the welfare of the budding entrepreneurs received loans.

For prediction market enthusiasts, perhaps the bigger problem is the weakness of the markets offered. Today's featured stock is, "A horse leaving from an Even numbered post position will win the 2009 KY Derby" Great! Harnassing the wisdom of crowds to answer a question of pure chance. Not surprisingly, the stock price is hovering right at $0.50.

The marriage seems to be unnatural one: There appears to be only about $5,000 trading on the site currently. Donors moved by an organization enough to want to give it money, don't seem naturally drawn by the prospect of doubling down their bets.  Natural gamblers must get a greater thrill from seeing the money arrive into their bank account than amass on a website where it gets emptied by the end of the month and transferred to various institutions.

Flickr credit: thunderchild tm

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