I'm considerably more Libertarian than the next guy, but you need to take the tin foil hat off for this one.

A futures market like this is just an efficient, effective tool for measuring the likelihood of something happening. It's essentially a datamining technique where you have a large number of intelligent actors processing information for you and coming together to find a market-clearing price. From this price, you can back out the likelihood of the event occuring.

This is nothing more than an application of sports betting or like the Iowa Electronic Markets, which I understand are good predictors of election results.

Alas, I'm afraid some of the more fanciful suggestions here will not come to pass. Do you really think a terrorist would be foolish enough to trade large on a DoD futures market right before committing some act? It would seem silly to do that with your DoD account when you could just sell airline and insurance stocks instead.

A market like this is not going to be sufficiently liquid for someone to either hedge the risk of an event or profit much on one.

That is, if you came to the market and tried to buy $3 billion worth of "Chippewa Falls destroyed by fire and brimstone SEP '03" futures, you'd probably spook the market and wouldn't find any profitable edge.

If I were the King of Jordan and I found out people were willing to pay $97 for a "King overthrown by December" I'd be pretty damned greatful for the head's up. It's like a free opinion poll.

And...except that it might be government sanctioned (though it would be easy enough to have an outside firm run the market), this is not different than betting sites making markets on whether Saddam will still be in power.

TIA sucks. But I think this is a not-so-novel, but pretty ingenious thing that really doesn't trample anyone's liberties.