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
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?