Supreme Court could disrupt prediction markets with nuanced decision on ACA (Originally posted on Yahoo!'s "The Signal" Blog)

Many people have money riding on the Supreme Court's verdict on the Affordable Care Act, which is expected Thursday, from health care executives to 24-year-olds hoping to stay on their parents' insurance a few more years. But none have a more direct financial interest in the decision than those who have gambled on the outcome on Intrade.com. The price on the site currently rests at a 75 percent chance that the court will overturn the individual mandate provision at the center of the case. When the court issues its decision, those who placed bets will find out if they won or lost-probably.

Situations like this test the strength of the online prediction markets in two ways. First, it can be tricky to define court decisions in a way that's precise enough to make it clear who won, particularly if the court takes a surgical approach to the law. Second, the crowd is less precise when it assesses the judgments of nine secretive people, compared to predicting the outcome of a popular election.

First, there's the difficulty in deciding what to bet on. The Affordable Healthcare Act consists of many different initiatives packed into one large law. At the core is the individual mandate requires that all Americans have healthcare or pay a tax. Several additional provisions stand out. The law requires insurers make insurance available to people with pre-existing conditions, expands Medicaid eligibility, sets up health insurance exchanges, and allows dependents to stay on their family's health insurance through their 26th birthday, to name a few. It would be interesting to see how the wonkiest gamblers predict the fate of any of these provisions. But it would be a nightmare to write a legal contract in a way that would make it clear who won and who lost under the almost infinite possibilities available to the court.

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