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August 11, 2006

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ib

A well-functioning legal system enforces prohibitions when the prohibited harm exceeds enforcement costs. The balance of these two terms may explain why commercial gambling is policed whereas gambling between colleagues or buddies is not (yet).

There are at least three reasons why social gambling may be less costly than commercial.

First, there is the difference in threat of violence. When a person loses a large amount of his savings, he is prone to do something rash. Such losses do not occur in office pools or Thursday night poker games. Additionally, informal social restraints (e.g. friendship, fear of being fired) dampen animosities in these non-commercial settings. These restraints do not affect strangers losing money to strangers in the casinos.

Second, at casinos people are simply gambling. At your buddy’s house or at the office, gambling is a complement to socially approved/beneficial behavior – camaraderie, labor.... A tax on gambling would also be a tax on these activities.

A third reason, related to the second, that social gambling may be less costly than commercial is the former variety encourages social capital accumulation. Here I assume casinos support one dimensional anonymous interactions whereas a poker game at a buddy's house would be more likely to encourage multiplex relationships.

The above three reasons could explain why the first term - the costs from gambling - are higher in the commercial context.

As to the second term in the equation – the enforcement costs – there is little to add to Saul’s explanation. The enforcement costs in the commercial setting are lower and perhaps negative given tax receipts. If office pools become more prevalent or stakes rise, enforcement may become worthwhile.

A third setting to observe gambling would be online, where extremely negative enforcement costs advise in favor of policing largelly benign conduct.

bcowan

I applaud ib's identifying the intrinsic richness of intensive experience for the participants as a rational and empirical (just ask!) ground of distinction among the many particulars that might be grabbed up by a sampling abstraction such as the word "gambling."

I think Saul's characterization of some kinds of participation in securities markets as "gambling" suggests that he, too, suspects the presence of the fallacy of misplaced concreteness.

In fact there are very broad limits, if any, on the breadth of activities of essentially mortal individuals that could be called "gambling" and which should not. I used (very long ago) to walk from the law school to my apartment on 53rd street after dark most weeknights for the benefits of exercise, not thinking too hard about the odds of getting hit on the head. Gambling?

I would also point out, however, that the sort of gambling that attracts law enforcement's attention is operated for profit on very substantial investment by persons whose needs to provide returns on that investment imply incentives to exploit the vulnerabilities of participants. This is in part corroborated by the advertisements we see in California frantically attempting to portray what the casinos are selling as simple enjoyment.

There is a well-known calculus of the effect of the house cut of each pot as arithmetically a simple transfer of wealth, albeit disguised. This seems in principle greatly unlike contributing to the host of the poker game for beer and snacks.

It also suggests that the suspicions which bring the police are probably well-founded on a salient difference involving the potential for corruption and degradation.

David Erroll

Under New York law, a "Thursday night poker game" is perfectly legal just so long as no one acts as "the house," i.e., takes a fixed cut of each bet or gets paid to organize the game. If there isn't any structural transaction cost to the game, then there is no problem. (It would seem that this would allow home games of poker, but not home blackjack, since the dealer's edge is part of the rules.)

So at least in New York, there is a legal acknowledgement of the difference between amateur entertainment gambling and major business gambling. Of course, with the Rockefeller drug laws still in force, New York's attitude toward recreational drug use is probably more stringent than most.

The fine line between illegal gambling and legitimate business was illustrated when a firm (in the mid-1990s, if I recall) sought to sell financial options on the weather. The premise was that businesses that relied on certain weather could purchase an option as a hedge. However, this ran afoul of anti-gambling laws, since the option writer was taking payment for what was essentially a bet on an unpredictable outcome.

Bob

Why is gambling illegal? All parties entering into a bet are doing so of their own accord. There is no coersion. As long as there is no cheating, there is no victim. It looks to be a perfectly legal act. Don't tell me it's to protect dummies from themselves, because if that were the reason then state lotteries would have some explaining to do. So, explain to me, why is gambling illegal? I admit, I may be a little ignorant about this issue.

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malin

sir,I am a master major on jurisprudence.Now i have a question: what is legal prediction and do you know whether is a book which name is the path of law. could you like tell me some information about them? thanks a lot

linda bruel

bush want to make liberty a think of the past

Orfej

I work in gambling industry and read every day about odds, prediction.Gambling is not illegal.In my oppinion in many countries lottery is 15 times worse than online gambling because your chance to win lottery jackpot is 1: 15000000.Tax is other story.

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