Online “futures market” for litigation

The stock market factors in legal events, such as regulatory approvals, IP decisions, and major litigation (See my posts of May 4, 2005 about event studies, July 25, 2005 on litigation and share price, and Dec. 10, 2005 about Merck’s Vioxx liabilities.)

When I read (NY Times, Dec. 17, 2005 at C5) about Intrade, where contracts on future events are bought and sold, I wondered why such a site would not allow people – about 65 percent of its members are from the investment, banking and trading community – to trade on the outcome or effects of major lawsuits. The market mechanism would place a likelihood on RIM prevailing, Altria reversing the $10 billion judgment, Merck winning the second Vioxx suit to go to trial, and other company-threatening lawsuits.

Intrade exhibits the collective wisdom of crowds, an acuity that underlies social networks (See my post of Sept. 13, 2005 to the similar point.)

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