Gambling convergence

Different rules for rich & poor people's gambling?

Imagine society had two different gambling systems — one with "expected losses" and another with "expected wins" (the "expected" or average outcome after making many bets).

But instead of providing greater consumer protection for the former as you might expect, there was much more regulation of the latter — the consequence of which is that this sort of gambling is only worthwhile if you have large amounts to bet (tens of thousands of dollars).  Bets on "expected losses" though are less constrained, more easily accessible (in clubs or on the street) and marketed heavily, including through sophisticated psychological ploys (e.g. flashing lights).  This lighter regulation facilitates the commercially viable selling of gambling "products" costing only a few dollars each (but with no limit on the number of bets).

Accordingly, the wealthy in this society bet on "expected wins" & get more wealthy over time, and the poor bet on "expected losses", and get poorer (until quite a number of them – more than one a day in Australia – give up & suicide).

Yep, that's the system we have!

So for both social equity reasons and also the economic reasons I cover below, it's time we had consistent regulation for all types of gambling.

Gambling convergence with financing

Australia is a nation of gamblers — people who actually pay to take on risk, i.e. their expected return on investment is negative (a loss).

Whilst the costs of conventional stock-market trading and raising finance (e.g. through crowd-sourcing, as I refer to here) are being substantially reduced by Information Technology (IT),  there are still regulatory barriers and costs, plus the size of investment and timeframes required to make large gains are not suited to the gambling market.  However, if regulations allow it, derivatives can be designed to fit gamblers' betting preferences and made easily accessible through smartphone apps, offering the potential to "exploit" (in a controlled way) these gamblers to provide low-cost finance for productive industry investment.  Depending on the market clearing price, gamblers may find they can actually "expect" (on average) a small positive return on investment (i.e. make money) and/or industry could enjoy a very low cost of finance — potentially below the "risk free rate".  Existing platforms like Plus500 already facilitate trading of existing market derivatives, and although I haven't seen it, Nenx says it enables punters to bet as little as £1 on up or down stock movements ("binary options") over a period of only 10 seconds, which is well suited to compete against traditional pub poker-machine gambling.  IQ Option seems similar, but I don't think these apps enable you to bet on larger movements, which would have higher odds and winnings and be more attractive for gamblers (similarly to big-win lotteries).

Another potential, and somewhat counter-intuitive benefit from risk-seeking stock-market gamblers is that it could reduce share-price volatility.  This is because gamblers often tend to prefer long-odd bets with high returns (such as a national lottery), whereas traditional stock-market investors are risk-averse (hence requiring premium returns) and therefore tend to "follow the herd" as an indication of what is "most likely", which amplifies volatility (through 'positive feedback').  

There may also be the potential to combine investment gambling accounts with the stakeholder superannuation accounts and "Capitalist Co-ops" I propose (which, by encouraging longer-term stakeholder investor loyalty, may also help to reduce share-market volatility).  e.g. Punters who invest their super in certain stocks could receive consolation prizes on losing bets in the form of product discounts (potentially an automatic mechanism to boost demand and counteract a falling stock price).

Thinking further, perhaps it may also be possible to translate share-price volatility into a graphical form that on-line "gamers" could aim to navigate and target (e.g. "shooting" moving stocks to buy or sell options), thus delivering a greater social-economic benefit from such activities.

Facilitating such initiatives would require another review of both gambling and investment industry laws, which could be appropriate now that a National Consumer Protection Framework for Online Wagering has been established in response to the Federal Government review conducted in 2015 (shortly after I first drafted this page), although as it focussed on illegal offshore wagering – i.e. protecting local gambling businesses rather than problem gamblers – it's not surprising if the resulting voluntary scheme is still stymied by a race-to-the-bottom between States and is unlikely to seriously curtail problem gambling.  And after no progress in ten years, the other side of politics is just as captured by the gambling lobby.

What's the odds on getting some positive policy changes for a change?