In the western U.S., one finds a few water markets that function quite efficiently from an economic point of view. Most water markets, some operational for over a hundred years, are highly imperfect, characterized by high transaction costs, asymmetric information on buyer & seller sides, long administrative or legal processes, and excessive brokerage fees. The question is What features of the relatively efficient water markets account for their success and how many of these features can be carried over to the larger set of inefficient water markets?. What changes in the legal and institutional frameworks would be required? Examples will be presented, starting with the Northern Colorado Water Conservancy District's market for permanent transfers as a benchmark, contrasted with major examples of inefficient transfer processes undertaken by Denver suburbs in the last several years. The functions of traditional legal doctrines/practices such as no injury, beneficial use, forfeiture through non-use, and required drying-up of irrigated land upon sale of water are evaluated from an economic point of view and seriously questioned.