The Needless Confusion Between Gambling and Investing
Even Bloomberg gets it wrong, contributing to decades of misinformation
Last week, Bloomberg Markets ran a piece titled Why It’s Harder to Tell Gambling From Investing Nowadays (paywall). Frankly, it’s becoming more difficult to read these articles without frustration. We seem to be stuck in an endless loop: Uninformed media publishing misinformation, respected outlets regurgitating them, and the cycle repeats.
We need a reset.
A reset requires acknowledging that some of the concepts we’ve carried for decades–sometimes centuries–are unsolved confusions. It’s a false dichotomy, a trap we unpacked in our inaugural LexBeyond podcast last week. The investing vs. gambling dichotomy.
These are the kinds of topics we explore here, on our sister blog Full Court Press and on LexBeyond. We dive deep, assume nothing, stress test everything and share our discoveries with you.
With that background, let’s dissect the Bloomberg Markets piece. Why is it more difficult to separate gambling from investing nowadays? The answers are hiding in plain sight, within the article itself.
The Subtitle Problem
With a tap on your phone, bet on football, elections and the price a stock will hit just hours from now.
Why is nuance so difficult to grasp? If everything is called a bet, then nothing is a bet. That’s an extreme position.
Dustin Gouker captures the right approach here:
Some prediction markets are worthy and they should be permitted. At the same time, some are unworthy and should be prohibited. The policy answer, then, is not all-or-nothing, it lies somewhere in between. The volume, however, is much closer to one extreme than the middle: As Gouker often notes, volume is heavily skewed toward sports event contracts. Those are the contracts that should never have existed in the first place.
The “everything is a bet” is an extreme position that only deepens confusion and hands ammunition to the other side. Its extreme nature not only makes the other extreme, “nothing is a bet,” equally plausible, but it also makes it more powerful because the latter receives significant support from two critical incentive dynamics:
Psychological: People feel better calling themselves investors rather than gamblers or speculators.
Financial: The desire to speculate on sports is innate, so most investors treat legal risks as a cost of doing business, funding platforms in hopes they grow “too big to fail.”
When the subtitle is misleading or flat out incorrect, can we really expect the rest of the article to deliver disciplined reasoning? You’ve likely seen this style of clickbait across the board–finance is no exception.