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SURPRISES, in the staid world of banking, tend to be of the unpleasant sort, as customers at IndyMac Bancorp, a California thrift, can attest. Cross a few palms with silver, however, and there is a new way to profit from others' unexpected losses. Punters can now bet on bank failures in America, thanks to 12 new contracts against individually named banks listed on July 16th by Intrade, the largest online prediction market.

Once viewed as grubby gambling dens, prediction markets have sharpened up. Intrade says it has brokered $76m of bets this year. Its data have been used as a price-discovery tool by America's Commodities Futures Trading Commission, the United States Navy, various Federal Reserve banks, and the European Central Bank. The accuracy of prediction markets makes them hard to ignore; they were better than Gallup polls in predicting the outcome of elections between 1998 and 2004. Using the wisdom of crowds, they do a good job of forecasting the outcome of sporting events.

Exchanges such as Britain's Tradefair and America's HedgeStreet have sought to apply this predictive power to financial markets, offering contracts on financial instruments, interest rates and commodities. CME Group, a Chicago-based exchange, launched its first economic-event contracts in April. But these markets do not appear to have taken off as successfully as election or sports markets, possibly because they struggle to strike the right balance between experts and laypeople. A bet on the merger that created CME Group received only 82 trades in its 80-day lifespan. When markets are that small, punters should watch carefully for signs of manipulation.

So far, it must be said, there appear to have been no deals on Intrade's bank-failure market. Top of its danger list, based on the bid-offer spread, is Miami-based BankUnited Financial, which has featured in news reports as one of several banks with a high ratio of non-performing loans to total assets. On July 16th BankUnited's share price more than doubled, however. The stockmarket is a more liquid place to bet on banks—but hedging against failure may be a sensible option if banks continue to go bust.