Bootleggers and Baptists: XLI- Polymarket vs CFTC

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One of the latest innovators in Predictions Markets blockchain-based Polymarket has stirred the ire of the CFTC. Polymarket is:

 “… is a decentralized information markets platform that lets people trade real-money markets on the outcomes of the most highly debated current events and follow the odds to garner accurate insights about the future. Users buy or sell Outcome Shares, which can be redeemed for $1 if the outcome is resolved as correct, and become worthless if it’s incorrect. Owners of outcome shares are never locked in and can sell their position at any time…”.

Why would CFTC regulators place this innovative consensus aggregating mechanism in their crosshairs? 

Since the interpretation of the incentives structure of Prediction Markets are contingent on the regulatory framework, such activities are analogous to gambling or a form of derivates trading. The legal scholar Tom W. Bell suggests that public Prediction Markets run a high risk, while private PMs run a lower risk of being subject to the scrutiny of the CFTC (p.6). Bell states that:

“…As the CFTC has observed, prediction markets often offer binary options contracts akin to those over which the Commission has claimed exclusive jurisdiction. Any public prediction market that offered real-money trading on such contracts, and that does so within the reach of U.S. law, would thus arguably fall within the CFTC’s regulatory purview—especially if the market offered significant hedging functions…”.

Purely based upon the above description, it becomes clear that Polymarket may qualitatively fulfill the CFTC requirements for the regulatory authority. However, placing such exchanges under the regulatory scope of the CFTC does present several barriers to entry. After the enactment of the  Dodd-Frank amendment to the   U.S. Commodity Exchange Act (the CEA), as a consumer protection measure, “…swaps generally can only be offered on a bilateral basis among eligible contract participants, or over a platform that is registered as a DCM (Designated Contract Market) or SEF (Swap Execution Facility)…”. Section 5h of the Commodity Exchange Act details the arduous requirements to obtain and retain operable status as a swap facility. These stringent requirements make compliance difficult for up-and-coming exchanges.

This situation mirrors a multitude of scenarios where regulations create barriers to entry. These obstacles are erected in the name of consumer protection, but their actual effects are contestable. Certainly, most laws select winners and losers, creating discrepancies that would not otherwise exist. Even if a regulation does make the average citizen better off, there is still a distant party in the background that stands to benefit. In effect, regulatory crusades forged in the name of consumer protection are frequently subject to Bootleggers and Baptists (1983) coalition dynamics. One faction of the advocacy coalition provides the moral reasoning for the new policy, the proverbial “Baptists”. Then lurking around the corner are our beneficiaries of the new regulation, the “Bootleggers”. The Bootleggers do not necessarily have to be vocal exponents of the causes; their role in the coalition can be diverse. Ranging from providing vocal support for the Baptists, providing financial resources for political campaigning, to even being a silent and distant beneficiary. In other words, there are certainly are moralistic arguments for erecting barriers to establishing Prediction Markets, but it would be inaccurate to assume that no one stands to benefit.

Beyond the intended financial protection measures (e.g. accountability and transparency) implied in Dodd-Frank, the moralistic arguments for regulating binary contract markets such as Prediction markets extends to other areas of public wellbeing. More opportunities exist for other parties to join the Baptists side of the coalition. Other exchanges similar to Polymarket, are denied the ability to register or shut down over the varieties of wagers placed. This mirroring the concerns that arose over the DARPA PMs established in the early-2000s. A more recent example was when CFTC denied the ability to host a political events contract market under CEA: 5c(c)(5)(C)(i), Section 5c(c)(5)(C)(ii), Section 1(a)(19); the agency citing

“..Section 1(a)(19), that “involves, relates to, or references terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law”; WHEREAS, several state statutes, on their face, link the terms gaming or gambling (which are used interchangeably in common usage, dictionary definitions and several state statutes) to betting on elections, and state gambling definitions of “wager” and “bet” are analogous to the act of taking a position in the Political Event Contracts..”.

In the case against Poly Market, it seems as if the exchange is under fire from the CFTC for not following the registration process. Directly linking the CFTC’s argument for pursuing legal action against Polymarket to the CEA requirements.

“..Because the betting contracts were deemed swaps, the CFTC found that Polymarket violated Section 5h(a)(1) of the Commodity Exchange Act and Regulation 37.3(a) thereunder which prohibit the operation of a facility that offers a trading system or platform in which more than one other market participant can execute or trade swaps with more than one other market participant unless such facility is registered as a SEF or a DCM. Under the order, Polymarket is required to cease offering access to trading in noncompliant markets and to wind down those markets unless the offering, solicitation, or trading in those markets complies with CFTC regulations. Polymarket was also ordered to pay a $1.4 million civil penalty. While Polymarket did not admit or deny the findings in the order, it is required to cooperate with the CFTC on an ongoing basis and is prohibited from making statements denying the findings or conclusions of the order and from giving the impression that the order is without factual basis…”.

The question remains, who benefits from CFTC taking action against Polymarket and the stringent regulation of binary option derivative markets? Existing exchanges that have either registered or have been granted exemptions (e.g. a no-action letter), one example being the Iowa Electronic Markets (IEM). If the barriers to entry remain high, exchanges like the IEM remain one of the few domestic options Americans have for wagering on predictions contracts.

Bootleggers & Baptists: XL- Joe Rogan: Team Spotify v. The Medical Establishment

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INTRODUCTION:

Veteran stand-up comedian, mixed-martial arts commentator, and podcaster; Joe Rogan has come under fire for promoting COVID-19 misinformation. Business Insider lists six examples of Rogan proliferating misinformation about COVID-19 within the past two years. Arguably the proverbial “straw-that-broke-the-camel’s-back” was last month (episode # 1757)when Rogan had a controversial virologist, Dr. Robert Malone, on as a guest. Prompting 270 medical experts to send an open letter to Spotify to address the inaccurate information disseminated through Rogan’s podcast. The letter expressed: “Spotify has a responsibility to mitigate the spread of misinformation on its platform, though the company presently has no misinformation policy..”.

However, is this statement even true? Do platforms have a responsibility (legally or morally) to moderate and suppress factually incorrect content? Even though Spotify is a Swedish-based company, this rhetoric parallels the talking points of the Section 230 debate in the United States. Section 230, in most instances, shields service providers from liability for the media generated by content producers. This amendment of the Communications Act of 1934 (230 falls under the Communications Decency Act of 1996). Section 230 states :

‘….‘(c) PROTECTION FOR ‘GOOD SAMARITAN’ BLOCKING AND SCREENING OF OFFENSIVE MATERIAL.— ‘‘(1) TREATMENT OF PUBLISHER OR SPEAKER.—No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider. ‘‘(2) CIVIL LIABILITY.—No provider or user of an interactive computer service shall be held liable on account of— ‘‘(A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected; or ‘‘(B) any action taken to enable or make available to information content providers or others the technical means to restrict access to material described in paragraph (1)….” (p.84).

This subsection of Section 230 could easily extend to streaming services. Spotify exercises no editorial discretion and merely provides the tools to content creators to distribute music and podcasts. ****Ethically, there are free speech concerns regarding social pressure to moderate and censor content. While the First Amendment only protects citizens from government censorship, it is evident that Spotify is not troubled by the content produced on Joe Rogan’s podcast. If Spotify takes any action, it would be due to public scrutiny.

BOOTLEGGERS AND BAPTISTS:

The outcry for Spotify to address the JRE podcast’s proliferation of misinformation may not have manifested in a formal policy proposal, but there are still individuals that stand to benefit. Making the JRE controversy a perfect scenario for a Bootleggers and Baptist (1983) coalition dynamic. One subset of the coalition acting as the public face presented the moral argument for Spotify acting against Joe Rogan. Quietly, lurking in the background, are the callous beneficiaries hoping their ulterior motives are not recognized. 

The Baptists in this scenario are the experts that drafted the open letter to Spotify and other notable public health professionals that have vocally expressed condemnation of Rogan’s commentary on the pandemic. One of these renowned crusaders is Dr. Katrine Wallace of the University of Illinois, who catastrophically describes Rogan as “a menace to public health,” particularly for espousing anti-vaccine rhetoric”. Whether or not you find this statement hyperbolic or false, it still conveys an ethical concern for the influence of Rogan’s podcast influence on public health. Therefore, making Wallace and like-minded professionals Baptists. Although, there is the potential that Wallace is a Dual-Role Actor, simultaneously being concerned about public health and seeing an opportunity to raise her public profile. After all, she is a blogger.

There are two categories of Bootleggers that operate as silent beneficiaries in this scenario. The first group is the other Podcasters that distribute their content through Spotify. If the JRE podcast becomes removed from Spotify or suffers other forms of sanctions, that would mean less competition for Tim Ferriss. The second category of Bootleggers would be the medical establishment. Not to treat this faction as an amorphous blob, considering it is a collective consortium of various people, organizations, and businesses, it would be nearly impossible to identify all the potential players in the subset of the anti-JRE coalition. The vast networks of the medical establishment are so pervasive it has even been referred to as the Medical-Industrial Complex, paralleling the concept of the Military-Industrial Complex.

There are a lot of individuals that stand to profit from keeping the status quo intact. Any professional possessing heterodox perspectives stand potentially disrupt the current public consensus resulting in fewer profits for pharmaceutical companies and other appurtenant facets of the industry. Over the past couple of years, there has been an ongoing assault on expert consensus. In a world of “alternative facts, the gap has continued to widen between popular opinion and professional consensus. Few things can be threatening as a credentialed professional who holds positions that go against the grain of the establishment. These individuals appeal to a public that is disillusioned and skeptical of expertise. The medical establishment aimed to reclaim its throne by targeting influential voices that have contrary views. In the hopes that people will stop patronizing herbalists and reading articles written by Robert Malone. When persuasion is ineffective, censorship becomes the preferred mechanism. 

POTENTIAL SOLUTION?:

The problem remains of how do we distinguish fact from fiction? Is it Dr. Malone or the medical establishment that is being dishonest? The average American citizen lacks the knowledge, time, and resources to effectively qualify the claims of either faction in the COVID debate. This situation parallels the phenomenon of rational ignorance examined in Public Choice Theory; deference to experts and public figures is cost-effective to the average layman. No need to read dozens of medical journals filled with opaque jargon. When there are have several sets of experts with competing opinions whom do you listen to? It is possible to find an expert in any field that can confirm our priors.

One brilliant suggestion comes from UCF professor and scholar Enrique Guerra-Pujol, who suggests we should utilize prediction markets to assess the veracity of conspiracy theories. In any decision-making process, we are grappling with the fact that no one can have all the information. As stated in the Hayekian Knowledge Problem; information is naturally dispersed, meaning effective top-down decision-making is impossible. If we could hypothetically remedy this by creating an incentive-based mechanism that can aggregate all perspectives on a given topic we will have a better (not perfect) outcome. By including the vaccine skeptics rather than excluding them, they become part of the validation process. When we look at range-voting in jury trials it becomes quite apparent that even including erroneous perspectives does not drastically impact the overall outcome.

Perhaps instead of capitulating to public pressure to remove all of Joe Rogan’s “COVID episodes, Spotify could run a user poll or a modified prediction market (to avoid the ire of SEC and CFTC) to get the listener feedback on the veracity of the content of these episodes. Instead of removing the episodes, if deemed to be inaccurate, Spotify should merely place disclaimers.

****Correction- The 230 immunity argument does not hold up for two reasons:

  1. Spotify does exercise editorial discretion.
  2. Spotify may satisfy the legal definition of a publisher.

Bootleggers and Baptists: XVII- Prediction Markets and Regulation (Gambling?)

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Arguably there are few methods of aggregating data that are as effective as using Prediction Markets. Prediction Markets are exchanged markets where speculators purchase “… that yield payment based on the outcome of uncertain events..” (p.877). One of the biggest misconceptions regarding this method of forming consensus on the accuracy of future events is that experts will be supplanted by amateurs. However, this concern is unfounded because of the knowledge necessary to succeed in such a speculative market. The experts would tend to dominate these markets (p.85). Separating Prediction Markets from gambling in a legal context. Dumb luck is not rewarded, but the diligent and concentrated study is. The legal lecture identifies gambling as having an element of chance (p.102). The intention of opening the trading pool to laypeople is not to give them to trade based on arbitrary “hunches”. Rather, to supplement the data pool by contributing the “on-the-ground” information absent in academic analysis (p.82).

Even though the work of legal scholar Tom W. Bell (p.102-104) demonstrates that Prediction Markets are distinct from games of chance. If a Prediction market is poorly designed, it has the potential to be subjected to anti-gambling laws (p.419). Although Prediction markets reflect the features of a decentralized form of “consulting “services than a sports betting pool (p.419). Many privately hosted sports beating pools escape prosecution due to their discrete manner. Even an in-house prediction market hosted by a corporation may raise the attention of prosecutors (p.102). It should be noted that prediction markets also face potentially regulated by the SEC and CTFC. Unfortunately, placing great barriers to entry for institutions looking to host such data aggregation markets. Prediction markets are being stifled by massive layers of red tape.

Although, it is possible under certain circumstances to be granted exemptions by regulatory agencies. 

For example, one of the best-known legal prediction markets in the United States is the Iowa Electronic Markets (IEM). In the early 1990s, the CTFC issued two no action letters granting the IEM immunity from the commission’s regulatory authority (p.25). Essentially, all federal agencies are immune from anti-gambling laws (p.419). A fact confirmed by Robin Hanson by describing the immunity enjoyed by the DARPA’s PAM project (p.77). Why not grant regulatory exemptions to all purposed prediction markets? Certainly, a novel solution. There are those voicing moral concerns and those who can prosper from prediction markets remaining heavily regulated. Presenting the classic features of any Bootlegger and Baptists coalition (1983).

Baptists:

One of the most evident examples of a Baptist would have to be the regulators. Despite the numerous examples of employees of regulator agencies engaging in rent-seeking and other pursuits of aggrandizement, there is still a concern for the rules being enforced. This does not mean that the rules are necessarily rational or even moral, but there is an ethical commitment to duty. Unfettered access to trading or gambling markets can result in adverse consequences for participants and the economy. If prediction markets were erroneously designed, they could operate similarly to securities and futures markets. Making prediction markets susceptible to dishonest practices such as insider trading leading to disparate effects for less privileged participants. Also, keeping prediction markets within the bounds of gaming regulations could help reduce the externalities of problematic gambling. In most jurisdictions domestically, as a condition of being granted a gaming license establishments are required to have their staff trained on awareness programs. Even requiring signage offering resources for those suffering from gambling addiction to seek treatment. If prediction markets are in theory like other forms of gambling, it could be a welcomed substitute for individuals with gambling problems. Casinos are often encouraged by state governments to implement exclusion programs for problematic patrons. The trading of cryptocurrencies, precious metals, stocks, etc. is free from the reach of gaming regulations. Potentially providing problem gamblers with a slightly different type of impulsive thrill. Prediction markets could fall into this category even if they are regulated as securities or futures commodities. If prediction markets lack age restrictions barring minors from participating. It may operate as a backdoor form of underage gambling.

Bootleggers

  • Casinos, lotteries, bingo-halls, dog/horse tracks, and other gaming venues either online or brick-and-mortar. None of these establishments are going to take the time to research whether prediction markets are the same as gambling. Perceiving prediction markets as an alternative to gambling with potentially fewer regulations. Incentivizing vendors providing gambling services to favor any restrictions that can be placed on this potential competing form of “entertainment”. Prediction markets are a hyper-competitive form of consulting service.
  • Foreign-based prediction markets. Overseas prediction markets in countries such as Ireland provide real monetary compensation to users with leading regulatory interference (p.414). If America’s regulatory system became more friendly towards prediction markets, these existing prediction markets would lose participants.
  • Experts and professional consulting firms. Prediction markets place professional consulting firms and other subcategories of experts in direct competition with other participants. Consequently, disrupting the current status-quo of the consulting services market. Traditionally, a firm will hire a firm, freelancer, or agent of a firm to provide consulting services. Irrespective of whether the consultant is providing flawed advice, they still receive their whole salary. This is analogous to paying full price for a defective product. Even in the service industry patrons receive refunds for a lousy meal. Prediction markets resolve this issue by rewarding the consultants providing correct information. The hosting institution benefits from receiving a large pool of data for a low cost. This practice is more cost-effective than purchasing traditional consulting services. However, concurrently threatening the bottom line of consultants operating within the framework of the original model.

Bootleggers & Baptists: XVI: Terrorism and Prediction Markets

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The program was derided by Democrats and Republicans in Congress, some of whom called it “bizarre,” “unbelievably stupid” and “offensive.” Rumsfeld himself said he canceled the program “an hour after I read about it.” ( Wired ,July 2003)

Commonly, government programs engender partisanship and opportunism. Political actors are more successful to capitalize on such initiatives are controversial. This effect is only magnified when the program is headed by a polarizing figure. One prevalent example of this was DARPA (Defense Advanced Research Projects Agency) used Prediction Markets to gather intelligence on future geopolitical events. Once more contentious questions such as terrorist attacks and assassination attempts ended up being addressed, the program began to be publicly criticized.

 PAM (Policy Analysis Market) implemented by the Information Awareness Office, a counter-terrorism project ran by DARPA. PAM operated like a future exchanges market for predicting the likelihood of geopolitical events. Including but not limited to terrorist attacks. At various phases of the program, participants (consultation firms, colleges, think tanks) were provided a sum of money to “wager” on the likelihood of certain political events happening (p.77). Those with accurate answers were awarded a larger sum of money.

Figure 1

E.g.) Phase I: Participants were provided $100,000 by the IAO to wager and awarded $750,000 for accurate predictions (p.77).

Mirroring the model used in both past and future prediction markets. Dating back to Robin Hanson first pioneering prediction markets while consulting on project Xanadu in the late-1980s, these markets have always been an incentive-driven phenomenon. It is one thing to claim certainty, but it is another to be willing to die on that hill. Especially when money is on the line. Effectively aligning incentives towards accuracy and rigorous research versus armchair speculation. The objective being the firm, organization, or government department hosting the market with aggregate a large cache of quality information (p.76).In the field of counter-terrorism having averaging consensus from a variety of sources is crucial to avoid engaging the wrong target. Such mistakes will incur costs much greater than monetary losses.

As groundbreaking and innovative as PAM was invariably the program garnered some criticism that eventually devolved into outright censure. Academics and bureaucrats “betting” on the aptitude of terrorist activities and political revolts transpiring may be unsettling from a prima facie standpoint. Particularly if taken at face value with no further analysis. Arguably the criticism of PAM intensified due to the IAO’s controversial director, John Poindexter. Poindexter rose to infamy from his involvement in the Iran-Contra scandal of the Regan administration. Even though all of the insiders of the project acknowledged that Poindexter had little involvement in PAM (P. 6, footnote 7), most of the backlash was directed at him. The fury of pundits, media outlets, and the general public caused Poindexter to resign in the summer of 2003. Leaving the PAM project permanently defunct.

The advocacy and opposition to the implementation of PAM as a means of aggregating intelligence on sensitive matters is no doubt a complex maze of ethical and pragmatic arguments. The use of prediction markets for gathering information for defense planning is just like another government policy, the impact is not neutral. Meaning that keeping or eliminating the program will create disparate consequences. Typically favoring one subset of economic agents over another. Individuals will bear the “expected costs (p.38) imposed by the impact of the policy. For example, a government program may create jobs for individuals that are politically connected. However, this is generally at the expense of the taxpayer. Vice versa, abolishing a program will eliminate jobs for the clerks and managers operating the department. The impact of policy always affects some individuals positively and others negatively. All political policies involve the transfer of benefits from one party to another.

Considering the non-neutral nature of policy, it would be justifiable to apply Bruce Yandle’s concept of Bootleggers and Baptists to the political pressure to abandon the PAM program. Yes, there were some ethical concerns regarding the prospect of having people “wager” on terrorist attacks. It would be naïve to believe that all the opprobrium was motivated by morality. Much how skilled consultants can profit from participating in a Prediction Market, many actors can also do so by dismantling such a program. Beneficiaries ranging from media outlets to opportunistic politicians. The political opportunism was multilayered including enemies of the Bush administration, the Republican Party, and even direct adversaries of John Poindexter. Proving an opportunity for democrats to temporarily shed their anti-patriotic veneer, to admonish these “conservatives” for making light of national security threats. Yet, the credulous public seldomly questions this moral browbeating. On the surface, these criticisms sound valid. Since when have politicians previously disinterested in national security matters are suddenly deeply invested in the integrity of defense intelligence? As Machiavelli pointed out in The Prince appearances are more important than actual principles in politics (p.42).

The Baptists

It is exceedingly difficult to designate one side of the coalition as a pure Baptist in the public outrage campaign surrounding PAM. The self-interest of the media, politicians, resident experts within the government is glaringly obvious. The potential for Dual-Role Actors (economic agents that benefit materially, but simultaneously sincerely believe the moral argument) in this coalition dynamic exists. However, is muddied by the perverse incentives to use strawman, ad hominem, and other logical fallacies to denigrate the program. The adversaries of PAM had a lot to gain through defaming the program. Not a whole lot of utility to extract from testing the validity of the results. Since the average constituent is not going to care too much about the granular details of the program. Rather be fixated on their visceral reaction to the ethical considerations of “betting” terrorist attacks.

Regardless, of whether moral advocacy is misguided or ill-informed, nevertheless, it is still a normative position. The average citizen happens to be the proverbial Baptist in this coalition dynamic. Any expression of disgust or moral indignation was sincere with little to no observable benefit from ending the program (dispersed costs, concentrated benefits). Even if the public’s concern was stoked by the slanted framing of the program, it still does not lessen make their concerns any less earnest. In the absence of further context, a group of contractors and academics participating in a gambling pool predicting terrorist attacks does sound grotesque. Since gambling is considered a form of entertainment appears to trivialize the severity of contentious situations that could result in the loss of lives. For the honest concern for these moral considerations, the average voter is our Baptist.

One great irony was that one of the academics deeply involved in the project narrowed down the reasonable ethical concerns in a peer-reviewed paper years after PAM had been dismantled. It was none other than prediction markets pioneer Robin Hanson. Hanson citing the following as prevalent concerns of the program:

  • “…The first concern expressed—that of replacing professionals with amateurs..” (p.82)
  • “…The second fear expressed was that bad guys would be willing to make losing

trades to mislead us..” (p.82).

  • “..The third main fear expressed was that bad guys might be rewarded for doing bad things..” (p.83). E.g.) Al-Qaeda’s meddling with airline stocks in the 9/11 attacks.

Hanson tactfully addresses all these concerns explaining how much of these concerns are the result of misconception. Like how the media coverage of the program generated several misconceptions regarding the function and purpose of PAM.

The Bootleggers

Several various individuals and groups stand to benefit from a sensationalized portrayal of the PAM program. One of the more salient examples would be the media. Media outlets are a business much like another, the incentive is to maximize profits. Logically this premise is cogent to anyone with even a small amount of exposure to economics. This controversy emerged in the primordial era of social media (Myspace being founded in 2003). The internet did exist but did not present any true competition to televised and print news media. For media outlets to have a story as jarring as the government funding a macabre gambling bracket trivializing serious events, instant goldmine. That is the type of story that sells publications. It has all the elements of a good conspiratorial techno-thriller. One only needs to consider the success of Tom Clancy to know how stories of geopolitical/government intrigue are lucrative. It could be argued that the media is merely the messenger, if they happen to profit from the event, it is a natural consequence of the event. How the information is presented and sways public opinion. If news reports are worded in a manner that is hostile towards the program, this will influence public opinion. Creating a feedback loop, inciting the ire of the Baptists while concurrently profiting. This would be an excellent example of the Bootleggers tacitly inciting the indignation of the Baptists.

Another subset of Bootleggers would be the politicians who spoke out against PAM. A book could be written about the political motives guiding the strategy condemnation of the program by various politicians. As previously mentioned, the layers of political opposition operate on a continuum of scale. Varying from individual grudges, contention between political factions, and even opposition to the sitting president at the time (George W. Bush). Despite the complexities of various political considerations, speaking out publicly about a controversial government program fosters a positive public image. Especially for politicians who were affiliated with the Democratic party. During the Bush administration, Democrats were perceived as being soft on terrorism. At a time where terrorism was a hot-button issue, speaking out against counter-terrorism measures was tantamount to political suicide. The whole PAM debacle presented an opportunity for a clean slate. An opportunity to capitalize on a misstep made by the Bush administration and to feed into the fears of the public. Paralleling the Bootlegger –Baptist feedback mechanism generated by the media. See below for a shining example of such sanctimonious posturing:

For instance,” Mr. Wyden said, ”you may think early on that Prime Minister X is going to be assassinated. So you buy the futures contracts for 5 cents each. As more people begin to think the person’s going to be assassinated, the cost of the contract could go up, to 50 cents.

‘The payoff, if he’s assassinated, is $1 per future. So if it comes to pass, and those who bought at 5 cents make 95 cents. Those who bought at 50 cents make 50 cents.’ (Senator Ron Wyden (D), NYT July 2003).