Even by Washington scandal standards, the "terrorism futures" scandal was strange and dramatic.

It started when two senators discovered an obscure military program designed to gauge the chances of various geopolitical developments, including terrorist attacks, by asking people to bet money on them. Within 48 hours -- or, more precisely, two news cycles -- the program was canceled and the man behind it, John Poindexter of Iran-contra fame, had tendered his resignation.

What most people don't know is that the Department of Defense is already funding a research program with far creepier implications.

The $24 million enterprise called Brain Machine Interfaces is developing technology that promises to directly read thoughts from a living brain -- and even instill thoughts as well.

The research, some of which is being done at the Massachusetts Institute of Technology, is already surprisingly advanced. Monkeys in a laboratory can control the movement of a robotic arm using only their thoughts. And last year scientists in New York announced they could control the skittering motions of a rat by implanting electrodes in its brain, steering it around the lab floor as if it were a radio-controlled toy car.

It does not take much imagination to see in this the makings of a "Matrix"-like cyberpunk dystopia: chips that impose false memories, machines that scan for wayward thoughts, cognitively augmented government security forces that impose a ruthless order on a recalcitrant population.

It is one thing to propose a tasteless market for gambling on terrorism. It is quite another to set some of the nation's top neuroscientists to work on mind control.

But though they differ in degree, the Brain Machine Interface program and the terrorism futures market share many features. They are shocking. They are bizarre. And they are far more worthy of taxpayer money than at first they seem.

The terrorism futures idea, the subject of near hysterical media coverage, is rooted in well-established economic principles. The Brain Machine Interface program, which may well be next in the spotlight, could offer help to the paralyzed and is no more likely to bring about a virtual police state than technologies that already are available.

With Congress clamoring for much stricter oversight of the Defense Advanced Research Projects Agency (DARPA), which funds both programs, the episode is less a drama of Poindexter and a band of mad bureaucrats than it is a reminder of how important it is for the government to spend some of its resources on the outlandish. Money from DARPA and other small government agencies, such as the Office of Naval Research, has produced profound scientific advances, Nobel Prizes, and technologies -- such as the Internet -- that have changed the world.

"It is important to have horizons longer than three years and the chance to try out bold ideas," said Tomaso Poggio, one of the MIT scientists involved in Brain Machine Interfaces. More traditional funding agencies can be so conservative, Poggio said, that "people sometimes joke that you have to have done the experiment before you can write the proposal."

Like the futures market, the Brain Machine Interface program grew out of DARPA's long involvement in information processing. DARPA is the successor to ARPA, an office that was created in 1958, in the wake of Sputnik, to push forward scientific research with potential military applications. ARPA laid the foundation for what is today the Internet, and also contributed to a wide variety of computer applications currently in use.

DARPA's brain-machine work, which is unclassified and eventually will be published in scientific journals, attracts scientists because it explores some of the central questions in neuroscience, such as the nature of consciousness and memory, and the neural code the brain uses to store and process information.