About the video: vator.tv by Bambi Francisco

Twenty years ago, the first prediction market was used for the 1988 presidential election. It was run by the University of Iowa. Today, with the Internet enabling a critical mass of players and opinions to predict an outcome, a plethora of prediction markets, or idea exchange, startups have emerged, from Hubdub, NewsFutures, Spigit, Inkling, and InTrade.

If the prediction markets are accurate, Barack Obama will be the next President of the United States. On Hubdub, a prediction market launched in January of this year, McCain leads over Obama. If I bet $100 Hubdub dollars on McCain to win, and he wins, I win $349 Hubdub dollars. If I bet $100 Hubdub dollars on Obama winning, and he wins, I win $144. On InTrade, another prediction markets company, Obama leads over McCain - 63% vs. 31%.

The theory behind such markets, much like IEM (Iowa Electronic Markets), is that voters don't choose who they think will win, but rather who they want to win. In political polls, people are asked, "Who would you vote for?" In markets, people are asked, "Who do you think will win?" Essentially, markets encourage participants to take a greater stake in the outcome.