The problem with all of those instances (as a model for our hypothetical manipulator) was that they moved the Intrade odds drastically over a very short period of time, and everybody noticed.
The 2004 manipulation was “particularly ham-fisted,” Zitzewitz said. It was so obviously unrealistic that other traders caught on and began exploiting the manipulation to make money, buying up the shares at the artificially deflated prices, raising the price, and selling them at the higher price. Essentially, the manipulator gave a lot of money to a lot of people.
Zitzewitz recalled: “You could look at the [Intrade precursor] Tradesports forum at the time, and you could see all these quotes from frustrated people where they were saying, you know, ‘I bought all I could, but my account’s tapped out and it’s going to take a little while to get more money in, so, you know, the rest of you guys, please profit from this,’ from this fool who’s attempting to manipulate the market.”
“I think it took about 24 hours for the price to come all the way back,” Zitzewitz said.
The 2007 attempt was “a little bit less obvious,” but still evident within the larger context. At the time, the odds of Democrats winning the primary were just over fifty percent, and the odds of Clinton winning the primary were lower. Taken all together, Zitzewitz explained, the numbers didn’t jive – they showed that Democrats would have “an over 80 percent chance of winning” if they nominated her, and that if they nominated anyone else, they would have less than 20 percent chance of winning.
The McCain manipulation was also discordant with related numbers, as well as the odds for the same events on other futures trading sites like Betfair.
The matter was heavily discussed on Intrade forums, and the company conducted an investigation into the matter. The now-late founder of Intrade, John Delaney, concluded that the fluctuations were not the result of someone trying to rig the system.
“The trading that caused the unusual price movements and discrepancies was principally due to a single ‘institutional’ member on Intrade,” Delaney explained on his blog. Intrade had contacted the company involved, and established that they were “using our markets in good faith” as a means of “[managing] certain risks.”