The U.S. Defense Department is withdrawing a controversial plan to create an internet futures market on terrorist attacks and assassinations after a firestorm of criticism from lawmakers on Capitol Hill.

The Pentagon initially had defended the plan as a new way to predict and prevent terrorist attacks.

Under the so-called "Policy Analysis Market," anonymous traders could log on to the web site and bet on the probability of a particular event. Profits would be paid to investors who guessed correctly. The site includes such examples as the overthrow of the Jordanian monarchy, the assassination of Palestinian Leader Yasser Arafat, and a North Korean missile attack.

The plan was scrapped under pressure from Senate Republicans.

"This defies common sense," said Senator Pat Roberts of Kansas, chairman of the Senate Intelligence Committee. "It is absurd." Senator Byron Dorgan of North Dakota is one of two Senate Democrats who first revealed the terrorism market plan on Monday. On Tuesday, he called for those responsible for the idea to step down.

"You could actually place a wager on a Pentagon web site that bets on how many U.S. soldiers would be killed in a certain time frame. I am telling you, I think this is disgusting, and I think those who thought it up ought not only close down the program, they ought not be on the public payroll any longer," Senator Dorgan said.

Deputy Defense Secretary Paul Wolfowitz, responded to angry Democrats at a Senate Foreign Relations Committee hearing, saying he first learned of the program in newspaper accounts earlier in the day.

"I share your shock at this kind of program. We will find out about it, but it is being terminated," Mr. Wolfowitz said.

The chairman of the Armed Services Committee, Senator John Warner of Virginia, expressed concern to officials of the Pentagon unit responsible for the plan, after he and other key Republican Senators agreed the project should be ended.

"It is not the first time that unit, the Defense Advanced Research Projects Agency, has come under Congressional criticism. It's Terrorism Information Awareness plan, a computerized surveillance program, raised privacy concerns. Retired Admiral John Poindexter, who served as President Reagan's National Security Adviser, helped create that program and is responsible for the terrorism market plan," he said.

The Pentagon had sought three million dollars for the plan next year, and five million the following year.

Traders were to begin registering by Friday, with trading set to start October 1.