WASHINGTON (CNN) - A ranking senator said Tuesday the Pentagon has agreed to drop a program that would have had investors using futures market analysis to predict the likelihood of assassinations and terrorist attacks.

CNN's Barbara Starr reports on the Pentagon's proposal of a futures market that would let investors bet on terror attacks. Play video (Real or Windows Media)

Senate Armed Services Committee Chairman John Warner, R-Va., said, "We're going to recommend to the Secretary of Defense not to use such funds as he has available ... to implement the initial stages of this program," which was supposed to start Friday.

The Pentagon's Defense Advanced Research Projects Agency (DARPA) had planned to set up a system called the Futures Markets Applied to Prediction (FutureMAP), which would have involved investors betting small amounts of money that a particular event would happen.

Under the plan, traders would buy and sell futures contracts on specific events such as terrorist attacks, based on whether they believed they would happen.

It has been part of the Total Information Awareness program under retired Adm. John Poindexter, a prominent figure in the Iran-Contra scandal during the Reagan administration.

Warner, at a nomination hearing, said, "I just got off the phone with the head of DARPA, and we mutually agreed that this thing should be stopped," Warner said at a hearing on the nominations of retired Gen. Peter Schoomaker as Army chief of staff and Lt. Gen. Bryan Brown as commander of the U.S. Special Operations Command.

At the same hearing, Sen. Hillary Rodham Clinton, D-N.Y., said the system "would be a futures market on death, and not in keeping with our values."

Other lawmakers had already weighed in before Warner addressed the program.

Senate Minority Leader Tom Daschle, speaking on the Senate floor Tuesday, said, "I couldn't believe that we would actually commit $8 million to create a Web site that would encourage investors to bet on futures involving terrorist attacks and public assassinations. ... I can't believe that anybody would seriously propose that we trade in death. ... How long would it be before you saw traders investing in a way that would bring about the desired result?"

Monday, Sen. Ron Wyden, D-Ore., said, "The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it's grotesque."

Sen. Byron Dorgan, D-N.D., called the idea "stupid," and the ranking Democrat on the Armed Services Committee, Sen. Carl Levin of Michigan, said that as reports surfaced about the plan, "our first reaction was that it was a hoax."

Wyden and Dorgan brought the proposal to public attention Monday and called for its termination.

But Warner, in an exchange with Levin during the hearing, said, "There's been no effort whatsoever to make it secret. The program is modeled after a successful program, utilized by one of the nation's foremost think tanks, which while not directed toward terrorism, are directed toward analysis of other contingencies in the future, and in the community's been perceived as a fairly successful program."

In a written statement, DARPA said FutureMAP "is exploring new ways to help analysts predict and thereby prevent the use of futures market mechanisms."

DARPA had acknowledged the program faced "a number of major technical challenges and uncertainties. Chief among these are: Can the market survive and will people continue to participate when U.S. authorities use it to prevent terrorist attacks? Can futures markets be manipulated by adversaries?"