Anyone who says you can get rich through gambling is a fool or a knave. Multiply the size of the prize by your chance of winning it and you'll always get a number far lower* than what you put into the pot. The only sure winners are the organizers -- casino owners, state lotteries, and con artists of all kinds.
Organized gambling is a scam. And it particularly preys upon people with lower incomes -- who assume they can't make it big any other way, who often find it hardest to assess the odds, and whose families can least afford to lose the money.
Yet America is now opening the floodgates.
In December, the Department of Justice announced it was reversing its position that all Internet gambling was illegal. That decision is about to create a boom in online gambling. Expect high-stakes poker to be available on every work desk and mobile phone.
Meanwhile, states are increasingly dependent on revenues from casinos, lotteries, and the "Mega Millions" game (in which 42 states pool their grand prize) to partly refill state coffers.
Given who plays, this is one of the most regressive taxes in the nation. In the most recent Mega Millions game -- whose winning tickets were drawn last week and whose jackpot rose to $640 million -- lottery ticket buyers shelled out some $1.5 billion, most of which went to state governments.
And then there's the "Jumpstart Our Business Startups" or "JOBS" Act, which President Obama is expected to sign into law Thursday. It allows so-called "crowd funding" by which people whose net worth is less than $100,000 can gamble away (invest) up to 5 percent of their annual incomes in any get-rich-quick scam (start-up) that any huckster (entrepreneur) may sell them.
Forget the usual investor disclosures or other protections. In the interest of "streamlining," Congress has streamlined the way to fraud. Although start-ups will have to market themselves through third-party portals approved by the Securities and Exchange Commission, this is like limiting Bernie Madoff to making pitches over the radio. The SEC can barely keep track of Wall Street let alone thousands of Internet portals. Small wonder SEC Chair Mary Schapiro has been one of most outspoken critics of bill.
The bill was sold to Congress as a way to promote jobs (note the acronym) on the supposition that small start-ups create huge numbers of them. Wrong. That assumption comes from research by the Kauffman Foundation, which counted as a "start-up job" every laid-off worker who morphed into an independent contractor.
I'm all in favor of more entrepreneurship, and it's good to give investors another way to participate in emerging companies. But this bill doesn't do nearly enough to protect the vulnerable.
America's capital market was already a giant casino. Why now turn the rest of America into one?
Anyone who says you can get rich through gambling is a fool or a knave. Multiply the size of the prize by your chance of winning it and you'll always get a number far lower* than what you put into the pot. The only sure winners are the organizers -- casino owners, state lotteries, and con artists of all kinds.
* An earlier version of this post stated that "you'll always get a number far larger than what you put into the pot." This was a transcription error and has now been corrected.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
Jeff Jarvis: The Importance of JOBS
One contributor said, prohibition does not work. I don't agree, they wouldn't spend trillions on the prohibition of drugs if they did not have the impression it worked (lol).
Anyway, through the credit card system you can cut off this kind of scam just as quickly as they cut off wikileaks' money supply. If, in addition, people had a legal right to claim back the money they lost on an internet gambling site from the bank, these companies would be choked pretty quickly - but Washington seems to embrace the scam. Congrats!!!
Big winners when it comes to Organize Gambling, are of course the casinos. They wouldn't be in business otherwise, just like the big winner in the War on Drugs are Drug Dealers. Just because people make a lot of money running a business. Doesn't mean thats bad and just because you make things illegal, doesn't mean it goes away. Again take the War on Drugs and I would add prostitution, the oldest profession in the World. Legal or otherwise to use as an example. Organize Gambling should be treated like any other business. Subjected to regulation and taxation, to make it as safe as possible.
nt is, organized gambling should be available for all and like the drug thing profits would go way down due to saturation, which would be a good thing.
capisce?
It's not the Fed government's job to protect us from ourselves.
That kind of nanny state thinking led to Prohibition.
Left vs Right is really a matter of the rights of society vs the individual. Like socialism and capitalism, there is no right answer. And neither works in a pure form, only hybrids do. It's why I reject ideology, it's no way to run our lives or government. Life is not ideological.
Corporations which are too big to fail are allowed to gamble and the CEO's get big bonuses when their bets pay off but the public bails them out when bad bets create a bankruptcy crisis.
Corporations which are too big to fail should be broken up.
Internet poker was around for several years before it was recently banned. I did play on my phone. What was the big deal? Can you show where it got out of hand? We'll be much better off with companies in the US (instead of Europe and Costa Rica), where we can have more protection and the tax dollars say local.