Gambling

Stop Thinking of Betting as a Vice

Bans on betting create crime and deprive Americans of useful information.

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maddielaferney/Flickr

Want to bet on this week's NFL game between Chicago and Dallas? I do. Newspapers and websites all over America tell their readers that Dallas is favored by three points. That's the "spread" posted by bookies. Millions will be bet on that game, and billions will be bet on other games this weekend—college football, NBA games, NHL matches, UFC events…

Most of these bets are illegal. This is not a good thing.

Recently, National Basketball Association commissioner Adam Silver became the first major professional sports commissioner to endorse legalizing sports betting. In The New York Times, he wrote, "Gambling has increasingly become a popular and accepted form of entertainment in the United States. Most states offer lotteries."

They do, and states give worse odds than bookies. Silver writes, "There is an obvious appetite among sports fans for a safe and legal way to wager."

But bills to legalize betting go nowhere in Congress. Casinos oppose them because they don't want competition. They are joined by people who consider gambling immoral. "Bootleggers and Baptists" is what economist Bruce Yandle called these coalitions. Bootleggers got rich off Prohibition.

Just as Prohibition created Al Capone, bans on betting create crime. They also deprive Americans of useful information, such as who is likely to be the next president.

The pundits don't know. In 2012, conservative pundits confidently predicted a Romney victory. This year, Democrats predicted they'd keep the Senate. We in the media try to rely on "scientific" polls. Except they aren't so great either. In Maryland, most polls had the Democratic candidate for governor up by double digits, but the Republican won. On average, polls underestimated Republican performance by 4 percent.

Pollsters and pundits rarely suffer much penalty for being wrong. People figure these expert guesses are the best anyone can do. But they aren't. When politicians allow people to put their money where their mouths are, bettors do a better job predicting future events. Bettors are better.

Last month, I wrote about how U.S. regulators shut down Intrade, a site that allowed people to bet on all sorts of things. Before elections, Intrade's bettors consistently out-predicted the pundits. In 2012, Intrade gave Obama a 90 percent chance of winning, while pundits still said the race was "too close to call." Gallup predicted a Romney win.

Although American regulators killed Intrade, the British online prediction market Betfair still operates. It gave 89 percent odds that Republicans would win the Senate.

By the way, Betfair now gives Hillary Clinton a 40 percent chance of being the next president. Prediction markets like Betfair, PredictIt.com and Predictious.com allow bettors to predict everything from the gender of England's next royal baby to the winner of the next Nobel Peace Prize.

The Iowa Electronic Markets has outperformed political polls 74 percent of the time since 1988. Why?

First, although individual bettors are no more enlightened than any one pundit, a large and diverse group of bettors usually is. Second, people are more realistic when betting than when answering a survey. Polls suffer from a "self-reporting bias," where participants say what they think they should rather than what they actually feel. With money on the line, forecasts are more accurate.

So allowing betting helps us make better predictions about the future.

Luckily, the U.S. Commodity Futures Trading Commission recently gave New Zealand's University of Wellington permission to run a prediction market in the U.S. The site, PredictIt.com, allows users to bet on elections, court cases, regulatory decisions and more.

Unfortunately, regulators will allow no more than 5,000 traders to make bets on a given contract (that is, a predicted outcome), and each trader can bet no more than $850. That will limit the site's prediction ability, but at least America will allow one site that will generate real predictions instead of just hot air.

Legalization efforts might get farther if we stopped thinking of betting as a vice and instead recognized that it's a useful part of rational decision-making. There's knowledge to be tapped in people's heads about what will happen next, and markets, as usual, are the best way to unleash that wisdom.

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  1. That looks like Detroit v Dallas. If you bet on Detroit, you are the definition of a broken heart. When Pacino delivered that line in The Godfather (2 was it?) – “you broke my HEART!” – he practiced for it by channeling being a Lions fan beforehand.

    Betting on the Lions = broken hearts.

    What were we talking about?

    1. But if you beat on the Cowboys your sure to lose. Maybe the statists are right in this particular instance?

      1. Somehow, if I were to put money on that game, it would end up in a tie.

      2. I’d beat on the Cowboys just for the FUN of it!

        1. Are you trying to manipulate the spread?

        2. my keyboard is sticky from repeated beatings.

  2. Fucking Cowboys. Little-known fact: Hitler was a Cowboys fan and part owner.

    1. They WILL make the playoffs (WOO HOO!) Don’t ever bet money on them though.

      1. Sure. All sorts of evil things happen these days. Why not that?

        1. It’s going to be glorious! All the Texans fans will be scratching their heads as the ‘Boys get to the NFC championship game.

          1. Is there anything better than seeing the sad Cowboy’s fan-face when Romo becomes an interception machine?

            1. Yes- watching the Texan’s fans hate and then get DESTROYED by whomever they’re playing.

              1. I forgot, watching the Titans lose is even better than seeing the hopes shrivel and die.

                1. You have to love a team whose octogenarian owner gives opposing fans the finger. 🙂

            2. It gives me hope that the team has become a uniform source of schadenfreude for this sad nation of ours. A sliver of light in the gloom is watching the Cowboys fail yet again.

            3. For me – watching either Brady or Manning’s sad face when they become a playoff loser. I don’t know why I hate those guys so much, but I do.

              Even more than Romo. Prolly cause he almost seems like he’d be fun to have a beer with or something, but Manning and BRady just seem like insufferable douchenozzles.

              1. Manning is the worst, but it’s entirely media driven for me. I hate the constant Archie Manning/Eli/Peyton snuff films they show whenever they are involved in a big game it’s the worst. Didn’t you know that Archie Manning is Peyton’s dad? And the NFL lets his retarded brother play qb as well?

                1. There’s also so many folks in the media who refuse to give Peyton any criticism whatsover. Two years ago when they lost in the playoffs to Baltimore, Peyton threw a pick-six early on, and a second INT in OT, but if you listened to the media the only reason the Broncos lost was because one of the DBs let Flacco complete a long pass at the end of regulation.

                  (You win and lose as a team, but it seems that it’s Peyton who’s responsible for the team’s wins, and everybody else who’s responsible for the team’s losses.)

                  1. To be sure, he is a great QB. He rarely has a lot of great talent around him, and has been plagued most of his career by shit defenses. Yet his teams contend. Very Marino-like.

                    I say this as someone who would wear a Danny Wuerffel shirt when meeting Manning that said in big numbers, 5-0.

              2. I bet you loved Brady at the end of the Packer/Patriot game on Sunday. 🙂

      2. It’s now December.

        Tony Romo and December are not friends.

  3. There should be nothing known as vice to the government.

    1. How’s Biden gonna keep a job???

      1. He doesn’t want it. Everyone knows that the fix is in, and that he’s going to be the next host of The Tonight Show.

        1. Late Late Show. CraigyFerg will be missed.

          1. Biden is too big for late-late night. In fact, he may go prime-time, with the first reality talk show.

        2. Twenty-six successful years of not watching The Tonight Show. Here’s to twenty-six more!

          1. I used to watch Carson some, though never regularly. He was pretty funny and had interesting guests.

            Back in college, I watched Letterman a lot. In the 80s, he was fucking brilliant.

            1. Craig Ferguson was really good for a few years. Really cool guests no other show would think about having.

              1. I liked Ferguson a lot. His improvised monologues were often good too. And when they weren’t, they were still more entertaining than Leno or Letterman reading dumb jokes that other people wrote.

            2. I wasn’t born until ’88, so I think I must have missed all the best parts. : /

              1. Yeah – of EVERYTHING!

              2. I really need to adjust my sense of time. I still have a hard time thinking of people born in the late 80s as adults. And I’m only 10 years older than you.

                1. Get with the program, Zeb!

                  If it makes you feel any better, I need to adjust mine, too. Thinking of folks born in 2000, I still think of them as toddlers/babies.

              3. Trust me, it was great. I suppose it’s hard to maintain that level of funny for decades. I haven’t watched him at all since the 90s.

                1. Carson was great because he was a clown and didn’t try to be an intellectual. He was truly humble (or at least faked it best). Leno didn’t try to be an intellectual, either. Letterman is the biggest douche of the wannabe intellectuals, although Jon Stewart is right up there. Jimmy Fallon sometimes goes there, as does Conan. Steve Allen may have been the best – he really was an intellectual who could poke fun at himself.

    2. Exactly this.

      The government doesn’t need to be imposing a flawed or any other kind of morality on its citizens.

      Gambling is as much a vice as anything else: drinking, knitting, fishing, etc.

      1. I equate gambling to fisting.

        1. so you pay a little asian boy to gamble for you?

          1. He only bets on big hands?

        2. I’ve heard fisting equated to a lot of different things (because my friends and I are all pervs) but gambling is a new one.

  4. The problem with legalizing gambling is that it will become heavily taxed “for our own good”. You can’t have people actually making decisions on how to use their own money unless the juice goes to the “right” pot, then it won’t matter what decision is made. The government will win more than anyone else.

    1. Let’s not let the perfect get in the way of the good.

    2. But if you lose, you can deduct it.

      How much do they tax gambling winnings in somewhere like the UK (or Nevada) where gambling is not seen as so much of a vice?

      1. How much do they tax gambling winnings in somewhere like the UK (or Nevada) where gambling is not seen as so much of a vice?

        Can’t speak for the UK, but in the US gambling winnings are taxed as regular income (landing on line 21 on your 1040), and Nevada has no income tax. Above a certain payout threshold (and I can’t remember the amount off-hand) you have to fill out a W-2G for uncle sam, and the casino keeps 25% of your payout for withholding.

        Also, you can only deduct gambling losses up to the amount of your winnings (and only if you itemize, obviously).

        There is one caveat if you are a professional gambler, in which case you would report your losses and expenses on Schedule C as you would for any other business or trade. And you better keep meticulous logs if you want to be allowed those expenses and losses when (not if) you get audited.

  5. IMPORTANT CAVEAT: As long as persons who have the ability to affect the outcome have no other incentive besides what is apparent to the market. (Which I think is a lot of the reason it got banned in the first place.) I would think that having thousands of online sports books would make it hard for many bets to get so lopsided it would be worth taking a dive for, but it does happen.

    1. The market has a way of dealing with cheaters and liars.

      1. As long as it has some fair arbiters somewhere. I don’t think we have to worry about violence-backed regional monopolies on sports books anymore. But the anti-gambling did have some origins in market distortion by violence.

      2. It sells pitchforks and torches at a relatively cheap price?

  6. Stop thinking that the government should ban things it considers “vices.”

  7. “Bettors are better.”
    The Chinese ministry of Proper Humor would like to speak to you, John.

  8. I’m going to still think of it as a vice. Very few vices should be criminalized or regulated. Gambling certainly shouldn’t be.

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