Pentagon drops plan for terror betting site

The Pentagon has abandoned plans to set up an online futures market on which investors could speculate on the likelihood of terror attacks. Critics said the $8m (£5m) plan would have been an incitement to terrorists to make attacks.

Under the project, the Policy Analysis Market, traders could have speculated anonymously on the chances, say, of the leader of a Middle Eastern country being assassinated or North Korea firing a nuclear missile.

The Pentagon said the project was designed to find the "broadest possible set of ways to prevent terrorist attacks". It said in a statement: "Research indicates that markets are extremely efficient, effective and timely aggregators of dispersed and even hidden information. Futures markets have proven themselves to be good at predicting things such as election results. They are often better than expert opinions."

But the revelation of the existence of the plan - drawn up by the Pentagon department that proposed electronically spying on American citizens to monitor terror suspects - caused an outcry on Capitol Hill. On the day that a story about the project appeared on the front page of The New York Times, chairman of the Senate Armed Services Committee said the plan was being scrapped. Senator John Warner said he had spoken to the programme's director "and we mutually agreed that this thing should be stopped".

Mr Warner announced the decision after Tom Daschle, the Democratic leader in the Senate, denounced the project as "an incentive actually to commit acts of terrorism".

The project was to have started on Friday with about 1,000 traders taking part. They would have been able to register anonymously, triggering fears that terrorists could make money from their own attacks.