The Pentagon is setting up a system that would allow investors to earn money if they could predict key events in the war on terror including assassinations and suicide bombings.

The program, known as Policy Analysis Market, is a project of the Pentagon’s Defense Advanced Research Projects Agency or DARPA and two private companies including a subsidiary of the Economist magazine. John Poindexter is overseeing the project for DARPA. In the 1980s, he was President Reagan’s national security advisor and was convicted of lying to Congress about the Iran-Contra arms deal. [ See Related Democracy Now! coverage]

The system yesterday came under intense criticism by Democratic Senators Ron Wyden of Oregon and Byron Dorgan of North Dakota.

Wyden said “The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it’s grotesque.?

Dorgan added, “Can you imagine if another country set up a betting parlor so that people could go in … and bet on the assassination of an American political figure or the overthrow of this institution or that institution?”

DARPA yesterday defended the project as another tool in helping the U.S. fight the so-called war on terror. The government would be able to monitor all investments looking for tips for possible upcoming attacks. The market will be based on events that occur in or are connected to Egypt, Jordan, Iran, Iraq, Israel, Saudi Arabia, Syria and Turkey.

$600,000 have already been spent creating the system and the Pentagon wants $8 million more for the next two years.