One would think that the ongoing and heated debate between the Democrats and the Republicans over the issue of Social Security reform provides enough food-for- thought on the subject for the average person. Apparently, however, this is not the case, as there are people out there who actually ponder the topic enough for them to place wagers on how and when the issue will be resolved. Intrade, an online futures market based in Dublin, Ireland, lists three futures contracts that lets traders bet on whether a law will pass that would allow workers in the U.S. to divert a portion of their Social Security taxes into individual investment accounts.

With the first contract, traders bet on whether they believe a law permitting the individual investment accounts will be passed by December 31, 2005. With the second contract, traders are betting on whether the law will be passed by June 30, 2006 and the third contract is for those who wish to wager that the law will be passed by December 31, 2006. So far, most of the wagers placed don’t favor the individual accounts. Traders see only a nine percent chance of the law passing by this December. They give passage by June 30 of next year a 21 percent chance and passage by December 31, 2006 received a slightly higher chance of 27 percent.

For anyone doubting the predictive powers of this type of wagering, he should check again. For example, a day before the presidential election, traders with Intrade correctly predicted that George Bush would win the election. They also correctly predicted the outcomes for fifty states and the District of Columbia. Additionally, traders with Intrade correctly predicted the winners in 33 out of 34 Senate races. If that wasn’t enough, traders also accurately predicted the winner in the papal elections two days before the official announcement.

Anyone living in the United States, however, should think twice before placing an online wager over Social Security reform (or any other online wager for that matter). Internet gambling is illegal in the United States and is banned under the 1960’s Wire Act. According to Frank Catania, the former director of the New Jersey Division of Gaming Enforcement as well as a current consultant to the online gambling industry, the whole Internet gambling issue is a “gray area”. He also pointed out that not all legal analysts believe the Wire Act covers Internet gambling since the law was introduced long before Internet gambling was even around. The legal status of Internet gambling is further clouded by the fact that some states have a clear and outright ban on online gambling while other states do not.