Intrade, the prediction market trading platform most widely known for its political forecasts, has a successor. After shutting its doors last year, the company's co-founder, Ron Bernstein, is crafting a new vision centered around sports. I recently chatted with Bernstein about the details of his new venture, Tradesports.

Where Wall Street meets fantasy sports
The most intriguing aspect of Tradesports is its format. Users can buy and sell stocks based on the probability that a future event will occur. Like Intrade, events are always defined as a Yes-No proposition, and priced from 0 to 100. The higher the likelihood of something happening, the closer its price is to 100, and vice versa. 


For example, the user in the image above is betting on the outcome of an NBA game between the Timberwolves and Trail Blazers. Player performance stocks -- questions like Will Mike Trout hit a home run today? or Will LeBron James score at least 30 points tonight? -- will also be an avenue for investors. Best of all, though, users can change their minds -- by buying or selling stock -- in the middle of a game.

In this way, Tradesports has something for both traditional sports bettors and fantasy enthusiasts, and as Bernstein explains, it offers a "risk level that's appropriate to everybody." Free-to-play training contests are available, and paid entry fees will range from $2 to $1,000.

For now, the platform will focus on short-term events, though Bernstein says Tradesports "certainly hopes to have longer-term contests over time." Although there's no telling what those may be, data points like winning percentage and full-season statistical milestones -- Will Aaron Rodgers throw for 40 or more touchdowns this season? -- could be on the table. 

What came before
Founded by Bernstein and a couple trading buddies at the turn of the last century, Intrade's platform was promising enough to garner it over $10 million in initial funding. Using the Yes-No, 0-to-100 format described above, it allowed users to invest in everything from weather, to presidential elections, to the probability of war. Early backers included hedge fund manager Paul Tudor Jones and Rupert Murdoch's son, according to Businessweek.

After a few years, Intrade had made a name for itself in the realm of political predictions. Here's what fellow Fool Adam Crawford wrote about it in 2011:

Its ability to accurately predict future events is quite remarkable. The prediction markets not only correctly called the outcome of the 2004 and 2008 presidential elections, it correctly called the 2004 electoral results in every single state and correctly called all but one state in 2008.

By touting itself as a hyper-accurate way to measure the "wisdom of the crowd," Intrade was able to gain considerable exposure. At its peak, it had an estimated 200,000 users. So what happened?

In 2012, the Commodity Futures Trading Commission sued Intrade for operating an unsanctioned commodities market. The CFTC had fined Intrade seven years earlier for a similar offense. Around this time, public audits revealed the company was missing more than $2 million from its books. The amount was allegedly paid to co-founder John Delaney, who died climbing Mount Everest in 2011. 

Federal regulation and the growing mystery surrounding its finances proved too much for the company to handle. Intrade began turning away U.S. customers in late 2012, and less than a year later, it closed entirely.

The connection between Intrade and Tradesports can't be ignored, but Bernstein says his revamped version of the platform won't flirt with illegality in the U.S. Thanks to the 2006 Unlawful Internet Gambling Enforcement Act, fantasy sports are considered games of skill. It's the same loophole daily fantasy sites like FanDuel and DraftStreet use to pay millions in cash prizes each year. 

Perhaps the bigger issue will be whether Tradesports can regain customers' trust. While Intrade's financial issues are largely behind it -- it reached a settlement with Delaney's widow last year -- it's still barely 12 months removed from an embarrassing shutdown. Bernstein says Tradesports might market itself to Intrade's old customer base, though in my opinion, such a move could backfire. 

What comes next
Still, because data interpretation is all the rage in the modern-day sports world -- look no further than Nate Silver's FiveThirtyEight or popular baseball site FanGraphs -- there will be value in the numbers spewed out by Tradesports, regardless of how many users jump on board. It currently provides an NFL Draft series for the Huffington Post, and the company says it's open to creating more content.

I can't argue with that strategy in a time when fantasy sports are booming. The Fantasy Sports Trade Association reports that of the 35 million people estimated to play each year, almost a quarter play shorter-term daily games. By financial value, that's nearly $1 billion of a $3.6 billion industry.

At the end of the day, it's tough to gauge what comes next for Tradesports. There's little competition in real-time fantasy sports at the moment, but that doesn't guarantee success. Because its system requires acute awareness of what's happening in any given sporting event, it's possible only the most devoted fans will want to invest.


Most likely, the service will gain mainstream usage only if it allows users to play longer-range positions. Wagering on whether or not the Yankees win 100 games in a season, for example, requires less effort than betting on how many strikeouts pitcher Masahiro Tanaka will have in a single start.

The bottom line
If the recent success of daily games proves anything, though, it's that some fans crave an alternative to the "set it and forget it" nature of traditional fantasy sports. Tradesports takes the concept to the nth degree.

In a best-case scenario, Bernstein's company could rise to a similar level of success as DraftStreet and FanDuel -- the latter pays out over $6 million in prizes a week. On the other hand, its connection with the previously troubled Intrade may make it impossible to gain users' trust. Because Tradesports will rely on real-money transactions, this will be critical.

Bernstein tells me they haven't made any official revenue projections, though by taking a portion of contest money after winnings are distributed, the potential is obvious. In its heyday, Intrade likely made at least eight figures in annual revenue.

With everything from the NFL Draft to Major League Baseball up for bidding, Tradesports' markets have broad appeal. And if sports continue to be obsessed with numbers, its predictive data might just earn it a place in every fan's heart, regardless of how many feel confident enough to invest.

Jake Mann has no position in any stocks mentioned. The Motley Fool recommends Walt Disney and Yahoo!. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.