Comment by jbstack
6 hours ago
As a matter of adopting sensible definitions, I think you need to draw the line somewhere between what is gambling and what is not.
If the risk taken can, in principle, be shifted in your favour (i.e. to produce positive expectation) through application of skill, then it isn't gambling. For example, in my mind, betting on whether you will win a game of chess is not gambling. On the other hand, if you cannot influence the outcome in your favour through skill, then it is gambling. Roulette is generally a good example of this (with the caveat that in some very specific circumstances it's possible to beat with skill).
If we're limiting the definition to merely risk-taking (you might win or you might lose) without factoring in skill, then virtually everything in life becomes gambling. For example, you gamble when you deposit money in the bank because it might go bust.
There's also the legal definition, in which case it's just a matter of checking whether the jurisdiction you are in considers the activity to be gambling or not.
I would say that gambling with skill component is still gambling. For example, in blackjack you can limit your losses by following a basic strategy, which is a 2x2 matrix with rows containing the value of your hand and columns containing the open dealer card.
If you can obtain an edge through a skill component (card counting in blackjack), some people wouldn't call this gambling anymore, but I would still call it gambling myself. Someone doing this for a living is a professional gambler.
What for me would be a sensible definition is that a bet/gamble has no other goals. Putting money in the bank/investing in a stock reallocates capital, which can be invested by someone. The fact that it is a risk-taking endeavor is merely a side effect. I would say the same goes for selling/buying insurance for your car.
So for me, the difference between betting and putting money in the bank/investing is that the primary goal is something different than the risk-taking activity.
Does this not boil down to the distinction being one's intent? I play poker occasionally, for example, and my primary goal is to win money not to take risk. Does that make it meet your definition of investing rather than gambling?
Many sports gamblers (horse racing, etc.) will say it’s about skill. They believe they shift the risk in their favor because they have the data and because they bet strategically so as to win over long term. (They can spend a while detailing it for you if you are willing to listen.)
Prediction markets in general can make anyone feel like it’s about data and skills. If they lose, then they didn’t have the good enough information, so clearly they should improve their skill, right?
From my understanding, purely natural events aside, the probability of you betting against the “house” will always approach 1. If the platform is centralised, they have a strong incentive to influence the stakes, or (this has been documented) straight up limit your ability to bet if you are winning “too much”—enough to cost them real money. If the platform is open and decentralised, “house” is another player with much more capital and personal influence in the matter than you (for example, some president can bet that he would invade a country—and then invade it; some footballer can bet that he wouldn’t score N times—then score N-1 and fake an injury at the most favourable time; of course, they would use intermediaries, and only the careless ones will get burnt).
Talking about "traditional" sports gambling rather than prediction markets: how do we account for the heavy restrictions they place on "sharps" (consistent winners)? If a game can be won through application of skill, but winning through application of skill causes you to be effectively banned, then the game cannot be won through application of skill.
Phrase it like this - market makers and casinos and other hosts really don't want it be a game of skill.
The game is still won through the application of skill even if the house chooses not to play it with you.
The “skill” line is what gamblers tell themselves to justify it. A much more useful demarcation is “does this game have any positive impact on the world” (entertainment value of the gambling itself doesn’t count). For example, insurance is not gambling even though it is itself a zero sum game, it enables societally beneficial risk taking. Options trading on real assets like stock aid in price discovery. Memecoins, sports betting, your local poker game and the way prediction markets actually function in practice are all gambling.
> “…betting on whether you will win a game of chess is not gambling.”
It’s the money aspect that makes it gambling. Just ask Pete Rose.
Is it gambling if the outcome can be shifted through the application of your money and influence?
Ask a VC.