“Individual Mandate to be ruled unconstitutional by the US Supreme Court”

Source: Intrade


As I have said over the years (repeatedly) this is the sort of thing that Intrade gets wrong.

Futures markets are really a focus group unto themselves: When the group is something less representative of the target market, they get it wrong with alarming frequency. Indeed, the further the traders are as a group to the target decision makers/voters, the worse their track record.

Here are the calls that I tracked over the years that were awfully wrong – IMO, it is absolutely due to the fact that the traders as a group have no correlation to the decision-makers:

GOP Retention of Senate (2006)
Michael Jackson Trial Results
Morgan Stanley CEO Purcell resignation
Howard Dean’s Iowa Primary
pre-Election 2004
Election day trading frenzy

Today’s SCOTUS decision is a classic example of why Prediction markets have minimal value.

The Wisdom of Crowds is wildly overstated . . .



Why Prediction Markets Fail   (January 11th, 2008)

Misunderstanding Prediction Market Failures   (February 14th, 2007)

The Prediction Markets Chalk Another One Up! (June 13th, 2005)

Category: Markets, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

35 Responses to “InTrade Blows It Again: ACA Upheld by SCOTUS”

  1. Mike in Nola says:

    Listening to Intrade is like gauging our economic health by looking at the Stock Market.

  2. Proudhon says:

    Intrade is much more useful as a measure of conventional wisdom than as a predictor.

  3. KeithOK says:

    This seems like an excellent opportunity for a person to make money. If you can correctly identify the “the sort of thing hat Intratrade gets wrong” and consistently bet against Intratrade on that sort of thing, you should come out ahead in the long run.

    Of course you’d have to know in which direction it’s wrong, but if you can identify the reasons why it’s likely to be wrong, shouldn’t that help you identify the direction?

    Note: I won’t be trying this.

  4. MorticiaA says:

    “Wisdom of Crowds” – how oxymoronic.

  5. mathman says:

    So much for Rmoney’s statement that Obama’s entire administration would have been a failure if Obamacare fell.

    Here’s a little something going around now too. What, yet MORE scandal in the financial industry?


    Exclusive: Banks Braced For New Mis-selling Scandal

  6. VennData says:

    But as a free-market fundamentalist, you must reject this data point, and any other data points that don’t feel right.

    The GOP should be ecstatic at this ruling, the law will force the “Luckie Duckies” the folks the GOPers are angry at that pay no income tax…


    … to PAY their share of the nation’s medical costs…. INTO THE FREE MARKET SYSTEM!

  7. JesseLivermore says:

    What does it mean for Intrade to “get something wrong?” They collectively predicted an 80% chance that the mandate would be struck down. That means one out of 5 times, it would be upheld. To really say that they get things wrong, you would have to use a larger sample, to test whether things they predict with 80% certainty actually happen 80% of the time.

  8. ragnu says:

    “InTrade Blows It Again” : I’m not familiar with the particulars of how InTrade works, but I doubt they have a bunch of editors sitting around deciding the odds on the SCOTUS decision.

    Doesn’t seem more likely that it’s the people who were deciding to bet on this SCOTUS decision who were wrong (in the aggregate, i.e. ‘on average’)? Did InTrade itself really ‘blow’ anything?

    Come on, Mr. Ritholtz. Accuracy in what we say matters, but so does precision.

    Big fan, long-time-reader and first-time-commenter, BTW :)

  9. ragnu says:

    “Doesn’t seem more likely” —> “Doesn’t it seem more likely”

    I need to follow my own advice.

  10. BigD173 says:

    Well, five members of the Court (Roberts, Kennedy, Scalia, Thomas, and Alito) said it WAS unconstitutional, as a violation of the Commerce Clause. But five justices (Roberts, Ginsburg, Breyer, Sotomayor, and Kagan) said that this did not matter, because it was constitutional as an exercise of Congress’ power to tax.

    If you look at how the Intrade proposition was worded, (i.e. — “The US Supreme Court to rule individual mandate unconstitutional before midnight ET 31 Dec 2013″), you could certainly argue that it WAS ruled unconstitutional. So I’m not sure the Intrade betting was incorrect after all.

    BR: mandate upheld (it’s a tax) that = upheld

  11. Mike in Nola says:

    I see CNBC in it’s best post hoc ergo… reasoning is blaming the ruling for the risk off day. Nothing to do with Europe, another bad employments number or a drop in the Kansas City Manufacturing Index or (insert other bits of bad news here).

  12. [...] Intrade gets the Obamacare decision wrong.  (Big Picture) [...]

  13. econimonium says:

    People like you, BigD173, crack me up. The decision came down to let the law stand. You can read into that whatever you want but we all know what Intrade meant by the odds. I’d like to see you collect on this bet.

    But hey, if it makes you feel good about yourself, then justify it any way you like. That’s between you and your shrink. Me? I’m all for a single payer system because I’m so conservative I believe that businesses have no, um, business paying for people’s pensions or health insurance. That’s what makes us less competitive and hurts workers here because every other civilized government picks up the costs. And trust me, the taxes I’d pay are less than it costs me in benefits to employees. It costs me less to outsource and pay taxes (btw more than we paid to the US last year) in the country than it does to pay the all in cost here. Ponder that.

  14. KeithOK says:


    The ACA was not found “unconstitutional, as a violation of the Commerce Clause.” If it had been, the law would have been thrown out. The Court said that the Commerce clause does not give the Federal Government the power to force individuals to buy health care – but the mandate is constitutional under the Government’s taxing power.

    It’s not a subtle difference. It’s one of violation a clause of the constitution, versus a that specific clause not being found to not justify the law. Nothing in the Commerce Clause was violated – it just doesn’t apply here, contrary to what many supporters argued.

  15. [...] crowds predict well is their own imminent behavior. Thus it is no surprise that betting markets fail to forecast the actions of an unrelated group in camera. Share [...]

  16. “The crowd is untruth.” ~ Soren Kierkegaard

  17. lunartop says:

    Presumably there’s money to be made from this insight..

  18. S Brennan says:

    What it means is the deconstruction of Social Security through the use of government mandated private annuities may proceed as planned.

    Meanwhile poorer/unemployed people will be fined for not buy buying high deductable insurance where even when the insurance pays [and it always tries not to] for a major illness the insured declares bankruptcy. Say you are making median wage of $26,364 [2010-HuffPo] and you have a minor heart attack with an average cost of 76,0000.00 USD [2010-CBS]. Assuming, your insurance pays [a big assumption on individual policies], your 6,000.00 USD deductable will be eaten up in one go [that's where the good news ends], with an 80/20 split on the remaining 70,000.00 USD you will pay 14,000 in addition to the 6,000.00 for a total of 20,000.00 USD! Let’s you are 50 years old, you’ve been paying about 270.00 USD [CNN-2009] per month, or 3240.00 USD per year and lets say we split that in half, your out of pocket expense is 21,620.00 USD for the heart attack alone. That’s about 120% of your after payroll tax yearly income…off to bankruptcy court you go.

    If you own a house, you will lose it, because lost work time means you missed at least three payments, so our median wage “insured” heart attack victim losses everything under the Democratic “insurance” plan. Nice going guys!

    Not that everything is bad in the bill, it does improve around the edges, by enrolling more on Medicaid, instead of an estimated 60,000 needless deaths, we will have something closer to 35,000 needless deaths. That should thrust the US past 49th place [2010-Columbia University] in health care worldwide. But let’s be clear, by forcing additional costs onto states, who are already in financial straits, States are compelled to cut elsewhere. Gee, who do you think gets the short end of that stick? The 1 percent?

    Since the economic downturn in 2007 about 100,000 [American Progress] per week have lost their health insurance, if they have already lost everything, they can apply for Medicaid under this program, if not, they will be fined for not having insurance until they lose everything and can then apply for Medicaid. As the economy slowly improves [maybe not, we could be headed for another recession] these folks will have every incentive NOT to take work, because they would lose insurance and start paying the fine instead. Republicans will be sure to make hay out to this “free loading” and start hacking at Medicaid.

    This is what passes for wonkish “LIBERAL” health policy, no wonder the Supreme Court gave it a pass, it will gut liberal/progressive policy for the foreseeable future. When you see ignorant angry crowds of plebeians, egged on by Fox, wanting to string “Limousine Liberals” up by their necks, or voting “against their own interests” supporters of this monstrosity can be sure they played a vital role in the USA’s declining standard of living.

    Did I mention this does nothing to reduce the cost of Medical Care in the US, which is by a factor of 2, the most expensive in the world, which is the core problem? No? Sorry to go off topic, I know we don’t do solutions in the USA any more.


  19. VennData says:

    If conservatives hate business-paid-for health care, why don’t they make a law against it? Or do they just hate it for poor people?

  20. BigD173 says:

    To quote from the opinion by Chief Justice Roberts:

    “Just as the individual mandate cannot be sustained as a law regulating the substantial effects of the failure to purchase health insurance, neither can it be upheld asa “necessary and proper” component of the insurance reforms. The commerce power thus does not authorize the mandate. Accord, post, at 4–16 (joint opinion of SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting).”

    The Chief Justice further said:

    “JUSTICE GINSBURG questions the necessity of rejectingthe Government’s commerce power argument, given that §5000A can be upheld under the taxing power. Post, at 37. But the statute reads more naturally as a command to buy insurance than as a tax, and I would uphold it as a command if the Constitution allowed it. It is only because the Commerce Clause does not authorize such a command that it is necessary to reach the taxing power question. And it is only because we have a duty to construe a statute to save it, if fairly possible, that §5000A can be interpreted as a tax. Without deciding the Commerce Clause question, I would find no basis to adopt such a saving construction.”

    In view of the foregoing, one could certainly argue that Supreme Court did indeed rule that the individual mandate was unconstitional. And as explained in my previous post, that was the way the Intrade proposition was worded.

    I don’t use Intrade (I confine my gambling to horse races and the financial markets), but Intrade ought to be careful in how it words these propositions. This is a good example of why that’s true.

  21. Greg0658 says:

    I’ll weigh in on HC not being deep6′d :-) :-| .. now thanks S Brennan for the list of baby steps to see more progress

    on KingMitt explaining his 1st order of business IF elected is to deep6 IT :-(

    in this 21st century world .. the power of big and global is here to stay .. we need HC reform to remain healthy & free … free to leave a corporation who controls the HC plan / or able to stay insured if they cut you

    not sure I like the provisions as stated – since most discussions are around – this issue of what can Congress force you to do ? (A: a lot) .. something tells me if money was against it – its tobe good for workers rights eventually

    bringing down costs to match other world economies is whats next …
    remember cash was invented to divy up food & energy AND to get people to climb out of bed each morning to plant & mine for it

    the west has turned it into something else :-/ a skate’g party

  22. northendmatt says:

    Wisdom of the crowds… didn’t we used to call that mob rule?

  23. Greg0658 says:

    ps – removes pledge’g allegiance to corporate flags .. allocates that capital out of the manufacturer directed hands* .. free’er market HC capitalism .. socialized legislated balances for a compassionate world

    * that imo is the biggie > auh oh loop backs & oops ‘poof its gone’

  24. gc says:

    “The Wisdom of Crowds is wildly overstated … .” Same goes for penicillin, which does not a thing for my toenail problems. Germ/virus/fungus–blah blah blah–don’t want to hear it. If it worked, then it should work.
    ——Pause to let the snark dissipate—— The problem with the wisdom of crowds is the absence of a clear articulation of the difference between a something for which it is suited and those things for which it is not. It never gave us the theory of relativity, but Einstein as an individual did. Surowiecki describes that with a handful of persons giving a good faith guess at someone’s weight, their average guess is more accurate over time than a single individual’s guess.
    I would think that this is a question that people involved in markets would feel is important. For example, with weight guessing, if someone with the ability to guess with high frequency skews the group average with many extra guesses, the group’s wisdom could appear to fail over time. It wasn’t that the group got dumber, but that the set up for the group wisdom was not preserved. Or, in politics, if one of us buys $100 million of free speech, when the rest of us have only our $25 each, does it not feel like the group wisdom coming out of our group political decisions is subject to distortion? The Wisdom of crowds might deserve more respect and less abuse, but which is which ain’t an easy question.

  25. patfla says:

    I hardly think that those who participate on Intrade are a random selection from the population. And even then, what population? Intrade operates, I believe, from Ireland, and is anyone in the world potentially participating on a US issue?

    That’s interesting. Intrade’s founder and CEO became, in 2011, among those who’ve died on Mt. Everest:


    The odds on surviving Mt. Everest are not good.

  26. philipat says:

    “The Wisdom of Crowds is wildly overstated . . .”

    Can’t wait for crowd funding.

  27. Having conducted public opinion polls since 1990, I can attest to the incredible accuracy of prediction markets … especially in recent years. Barry, you have highlighted seven bad calls. I am confident they can show 140 great calls. Every poll has a calculable margin of error (19 times in 20). Almost every polling firm has suffered a dreaded rogue poll or two. It’s all about statistical probability.

  28. nicholasteague says:

    Prediction markets at a minimum have value as a more precise measure of conventional wisdom.

  29. AndrewD says:

    I am astonished that everyone is not mentioning how thinly traded the market was on Intrade for this contract as I mentioned this on my Facebook page last night.

  30. BigD173 says:

    @ BR, economonium and KeithOK,

    The Intrade proposition in question was NOT phrased in terms of whether the individual mandate would be “upheld” (BR), NOR whether the Supreme Court would “let the law stand” (economonium), NOR whether the Supreme Court would rule the individual mandate “constitutional under the Government’s taxing power.” (KeithOK). It was also not phrased in terms of whether the individual mandate would “survive,” “be struck down,” “be invalidated,” or anything of the like that focused on the ultimate fate of the mandate. No, the specific proposition was put forward by Intrade was whether the Supreme Court would “rule individual mandate unconstitutional.”

    And a majority of the Court determined that the individual mandate violated the Commerce Clause. As Chief Justice Roberts said: “Just as the individual mandate cannot be sustained as a law regulating the substantial effects of the failure to purchase health insurance, neither can it be upheld as a “necessary and proper” component of the insurance reforms. The commerce power thus does not authorize the mandate. Accord, post, at 4–16 (joint opinion of SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting).”

    As the Chief Justice’s opinion indicates, a legislative act can violate a certain provision of the Constitution (here, the Commerce Clause), and yet be constitutional under another provision (here, the Taxation and Spending Clause). That the individual mandate was ruled constitutional under a certain provision does not change the fact that it was ruled unconstitutional under another. And since the proposition in question was worded as whether the Supreme Court would “rule individual mandate unconstitutional,” it seems to me that the Intrade users made the correct call.

    I have no vested interest in this; that’s just how I see it.

  31. NMR says:

    Couldn’t agree more Barry. Intrade is a joke largely driven by political junkies. And pace Freddy Hutter….. Intrade is not an opinion poll.

  32. Greg0658 says:

    bottom line I’ve had on this question of legality:
    how can Congress tell hospitals to care for the indigent but not be able to force citizens to pony up in advance ? its just plain out of sync .. I’ve said in blog posts and aloud I wouldn’t like that strict world – but its logical – and nature can’t be fooled forever (this case its human nature)

  33. NMR, I didn’t say Intrade was in opinion poll. I am stating that as I have observed them or competed against them over my career, in most cases the various prediction markets are as accurate and sometimes more accurate than opinion polls.

  34. randal says:


    It’s not possible for a law to violate the Commerce Clause. So it’s not possible for the individual mandate to be unconstitutional with respect to the Commerce Clause.

    It’s like if I go to a bar with my passport, and the bartender asks for my drivers licence. I say I don’t have it, so he asks for another ID, I show him my passport, and he gives me a drink. I was never “ruled underage,” even though there was a finding that my driver’s licence did not authorize my beer.

    The Commerce Clause only authorizes laws. It can’t invalidate laws. A majority of the Justices said that the individual mandate wasn’t authorized by the Commerce Clause. Using your own technique of fine parsing, you won’t find any use of the word “unconstitutional” or anything similar, like “invalid” or “violate” in the opinions. So there’s no basis for claiming that the individual mandate was “ruled unconstitutional” in any context. Every law is constitutional with respect to the Commerce Clause, even if the Commerce Clause doesn’t authorize it.

    Assume the individual mandate also wasn’t authorized by the Taxation and Spending Clause. Technically, it would have been held a violation of the Tenth Amendment, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people,” or simply by Article 1 Section 8′s implicit denial of powers not granted. It wouldn’t have been ruled unconstitutional as a violation of the Commerce Clause.

    Even a law stripping Congress of the power to “regulate interstate commerce” wouldn’t violate the Commerce Clause. It would be held unconstitutional as a violation of Article 5, the amendment process, and the implication that it’s exclusive.

  35. [...] prediction market Intrade thought the US Supreme Court would nix Obamacare, but got it wrong.  Shares of “US Supreme Court to rule individual mandate unconstitutional” traded high [...]