The Pentagon on Tuesday scrapped a planned online futures market that aimed to get information on Middle East events by letting investors bet on the probability of wars, terrorist attacks and assassinations.
One day after Democrats in Congress brought the Pentagon's Policy Analysis Market to light with withering criticism, a Defense Department spokesman said the program had been terminated.
"The director has determined that this is a program that under further scrutiny probably doesn't deserve continued support," spokesman Lawrence Di Rita said.
Earlier, Deputy Defense Secretary Paul Wolfowitz told senators that while the Defense Department was supposed to be imaginative, "it sounds like maybe they got too imaginative."
US senators released a letter saying the program's funding would be eliminated and Senator John Warner, a Virginia Republican who chairs the powerful Armed Services Committee, called the plan "a very significant mistake."
After meeting with Warner, Anthony Tether, director of the Pentagon's Defense Advanced Research Projects Agency that planned the futures market, said the initiative was finished.
The Policy Analysis Market, launched online at http://www.policyanalysismarket.org, aimed to let anonymous traders wager money on when and whether such events as the overthrow of the Jordanian monarchy might take place.
The market, primed to start in October, planned to focus on economic, civil and military futures of Egypt, Jordan, Iran, Iraq, Israel, Saudi Arabia, Syria and Turkey, and the impact of US involvement with these countries, according to the Web site.
The idea was seen as a means of aiding the Pentagon to predict terror trends based on the predictive abilities of the markets.
"The price discovery process, with the prospect of profit and at pain of loss, is at the core of a market's predictive power," the program's Concept Overview said.
The plan would have allowed traders to buy futures contracts priced on the certainty of a particular event occurring in the Middle East.
While the proposal came under fire from lawmakers angered that the administration should have involved itself in a scheme that "trades in death," a senior market expert noted that financial markets have considerable powers to predict the future.
"From one end, creating a futures market on terrorism makes sense because markets have major predictive powers," said Phil Flynn, vice president and senior market analyst with Alaron Trading Corp in Chicago. "But not only could it help the good guys, it could also help the bad guys. The terrorists could use the same information that these markets provided to see where we would be the most vulnerable."
The plan drew sharp criticism from congressional Democrats, including Senate Minority Leader Tom Daschle, who asked the Bush administration to reject the plan.
"We are asking the administration this morning to renounce this plan to trade in death," Daschle said.
Senate Intelligence Committee Chairman Pat Roberts said someone in the administration would have to account for the fiasco: "I think they are way off base and somebody should bear that responsibility."