nphebel

an absolutely interesting idea with only 1 flaw: individual players are more susceptible to sabotage than companies are (e.g. nancy kerrigan). if i were a star player that finds out there's a sudden large open interest on the short side of my stock, i'd hire a whole bunch of new bodyguards...

GopherGod

Well, this is dumb dumb dumb.

The big difference between IBM and Kobe Byrant is that Kobe can be shot dead.

amit

Why stop at athletes ? When can I buy stock in economists and software developers ?

Mango

ProTrade appears to be just another sports betting site. It's dressed up to look like a financial instrument, but in the end there is no underlying value.

I'm not dumping on it, but it looks to me a lot different from the main idea of the article: trading actual players' contract futures.

The first thing that strikes me is there might be problems with information asymmetry. Hockey players often play for extended lengths of time injured, while keeping their injuries very secret. The reason for the secrecy is that opposing players will target their injury and try to inflict futher harm if they knew about it.

Players probably know a lot of things that affect their future performance that the general public doesn't. They could take advantage of this to sell shraes of future contracts at inflated prices.

Sounds like a market for lemons...

jamm

Does that mean I can do a leveraged buyout of Tiger Woods, then sell off some of his assets (houses, cars,...) and keep other assets (golf swing, wife,...)? What about buying a 3 month future on an O-lineman whose career began and ended before the future expired?

This has to be one of the dumbest financial instruments I have ever heard of.

Mango

Another difference between IBM and Tiger Woods is that IBM has a board of directors with a fiduciary duty to shareholders.

In such a market, if Woods passed on a tournament to spend time with his family, would that constitute a breach of fiduciary trust?

mkamal

Note: for transparency purposes, I want to point out I am a Protrade employee.

Right now, the Protrade site is only a fantasy game - fake money to buy/sell the players and teams, which can be redeemed for rewards. It is not actually a betting site.

You guys bring up very good points about information asymmetry - issues like these would have to be addressed if it ever does move to a real-money market. Controls against "insider trading" would need to be considered just like in the real stock market, as well as things like skipping tourneys/games/retiring.

For now, you can simply buy and sell the futures contracts with protrade's currency (using a earnings system based on their performance). You can buy athletes in the NBA, NFL, and MLB, as well as team stocks in the major sports as well as NCAA basketball. While you can't perform a leveraged buyout of Tiger and sell off his assets (interesting idea!), you can buy (or short) shares in him as he climbs or falls on the leaderboard on the weekend at the Masters.

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aclogg

SWEET! If they do this for Sumo Wrestling then sign me up!

chancey

more jobs for accountants & lawyers. i'm for the idea:)

egretman

I'd have to hear what Pete Rose thinks about this first.

jeffkevinma

I'm one of the founders of PROTRADE and thank Steven for mentioning us.

The book Moneyball was a great inspiration for starting PROTRADE. Mike Kerns (who is the real brains behind the PROTRADE idea) and I both read Moneyball and felt it changed our lives.

Conceptually PROTRADE began as a way for players to trade athlete like they were stocks. The problem with that concept is it poses the question asked above: what's the underlying value of the athlete?

We launched with a very complicated "earnings" system that took into account how much a player helped his team win (the ultimate value of a player according to Moneyball) but had to abandon that due to its complicated nature for sports fans. Instead we shifted to an "earnings" system based on traditional statistics that everyone follows.

So what our market is now is a predictive market based on one year "earnings" for athletes and teams. These "earnings" are based on traditional stats that fans follow already like home runs, or touchdowns or wins.

As for the larger questions that people have posed above, I wonder if sports fans really know less about athletes than they do about publicly traded companies. If you compare the amount of information I know about Tiger Woods, Barry Bonds, Tom Brady to that of Larry Page, Meg Whitman or Bill Gates, I'd have to say I know a lot more about the former group but maybe that's because I co-founded a comapany based in sports.

Finally I challenge the notion that our sports financial instrument has less underlying value than say a weather derivative. Futures and commodities are often simply "bets" about whether an instrument is over or under valued by the market.

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jonathank

David Bowie sold bonds based on estimated revenue streams from royalties. Other acts have done similar things: Rod Stewart took a loan securitized by his royalties. Not quite the same but it is a bet on the future earnings based on popularity, though not on their future creations.

More directly applicable is the syndication of breeding rights in stallions. These are directly valued by the production of the offspring. The process lacks transparency because a mare is involved and no one at all really understands the mechanisms that make one horse faster or more competitive by nature than another.

One problem arose that may also be applicable: the domination by a few funding sources which dramatically ramped up prices. The run-up became a bubble. Could this happen with people?

A share in Tiger Woods has collectible value apart from the actual earnings. The same is true of certain name horses. It is easier to drive up prices when the instrument is not purely financial but has emotional content attached. A relatively small group of investors could conceivably distort the market in key players - and that might cascade into other, lesser players (if they are indeed even traded as securities). I would love to see an analysis of the stallion syndication market compared to the human athlete market.

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nphebel

#7 and #11, after looking at your site, it appears that your market function has an issue similar to the Sporting News fantasy game. That is that you independently develop a "choice market" to buy or sell and then you adjust the price after a period of time (1 day? 1 hour? 1 trade?) depending on the balance of buys and sells at the previous price. It seems the rule opens itself up to the first traders after a major event (injury) trading at prices better than what a real 2-way market would offer because the prices are sticky. Maybe hosting bids and offers would be better?

By the way, I agree a sports fin. inst. is on par with weather derivates from a value perspective.

RotoAuthority

If you could arrange it legally somehow, I would love to see ProTrade switch to real money. None of the sports betting sites have that kind of market. The best part of fantasy baseball is not drafting A-Rod and Pujols, but rather identifying the bargain sleepers and overrated busts. People would eat it up.

Chewxy

This was on marginal revolution as well :D

I'm not a sports fan though :(

lermit

You must bet to the right odds, as in all trades, and trustworthy. I'm thorougly supportive.

.lermit

mjs

This hypothetical selling of "20 percent of all future on-field or on-court earnings to a trust": does this have Fourteenth Amendment implications, or overtones?

Also, I'm struggling to see how this help the public. Would it increase the quality of playing?

mike529

mjs the real problem is the 13th amendment. However you may want to give athletes the right for a stock buyback at a 20-30% premium to avoid that problem.

nphebel

an absolutely interesting idea with only 1 flaw: individual players are more susceptible to sabotage than companies are (e.g. nancy kerrigan). if i were a star player that finds out there's a sudden large open interest on the short side of my stock, i'd hire a whole bunch of new bodyguards...

GopherGod

Well, this is dumb dumb dumb.

The big difference between IBM and Kobe Byrant is that Kobe can be shot dead.