IAG December 2015

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Gambling and the law Lessons from the Insurance Industry Licensed gaming is slowly becoming just another legal business—which is a very good thing By Prof. I. Nelson Rose Professor I Nelson Rose is recognized as one of the world’s leading authorities on gambling law and is a consultant and expert witness for governments and industry. His latest books, Gaming Law in a Nutshell, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website, www.gamblingandthelaw.com. Many of the strangest restrictions in the law arose from centuries of gambling being seen by society, or at least by opinion-leaders and lawmakers, as an activity that was simply not respectable. Gambling debts were unenforceable, and courts would no more allow casinos to advertise than they would brothels. A gaming license was similar to James Bond’s “license to kill”: It merely protected the operator from being prosecuted for what was otherwise an illegal act. In the past, other industries struggled with becoming respectable in the eyes of the law. This usually took the route of trying to show they were not forms of gambling, even if they were. They also knew they had to come up with arguments on why they were actually good for society. The best examples are trading in securities and commodity futures and insurance. Insurance is, of course, gambling. Looking just at the required three elements, insurance has “prize”, “chance” and “consideration”. After all, a policy 30 inside asian gaming December 2015
Gambling and the law holder is merely betting a small sum with the expectation of winning a larger sum if a certain contingent future event occurs. Systems similar to modern insurance are at least 3,500 years old. Shippers, merchants and financiers developed schemes to share the risk and spread unexpected losses caused by pirates and shipwrecks. Insurance as a separate contract first developed in Genoa in the 14th century, and was again focused on marine shipping. The long history of maritime insurance made it the least susceptible to being viewed as merely gambling in more modern times. The Great Fire of London, in 1666, appears to have led to the creation of the first fire insurance. Insurance probably would have been ignored by lawmakers if not for two developments. Owners of fire insurance policies seemed to be having a few too many fires. And operators found ways of turning insurance into pure gambling. A gambling fever swept England in the 17th and 18th century. As UNLV scholar David G. Schwartz put it, men would bet on anything: “on whose grandmother would live longer or whether a surgeon might successfully save a particular patient.” This turned what was merely a way for merchants to lessen their risks into wideopen wagering. People would take out life insurance policies on celebrities. During the Nine Years’ War of 1688 to 1697, insurers took wagers on which cities would be the targets of military action. Probability theory, on which both insurance and gambling is based, was developed in the 17th century at the behest of professional bettors. Conventional gambling and insurance came together with the creation of “lottery insurance” and “insurance offices.” Lottery tickets were extraordinarily expensive, at least £10, more than a year’s wages for most workers. So, shares in full tickets were sold for much less, similar to how full tickets for Spain’s “El Gordo,” which cost €200, are sold today in half-, quarter- and smaller slices. But hustlers figured out how to sell chances for even less. “Clients” could “ensure,” for one shilling, that a particular number would not be drawn from the state lottery wheel on a particular day. These “policies” paid £10 if the number was drawn. Looking just at the required three elements, insurance has “prize”, “chance” and “consideration”. After all, a policy holder is merely betting a small sum with the expectation of winning a larger sum if a certain contingent future event occurs. The practice spread to America. Even today, the illegal numbers racket is often called “policy.” Parliament made sporadic efforts over the years to eliminate lottery insurance. On April 4, 1792, the House of Commons debated The Lottery Bill, to help reimburse loyalists who had suffered during the American Revolution. The standard arguments were raised about the evils of gambling, whether the state should profit from the vices and weaknesses of its citizens, the dangers of competition from foreign lotteries, and the discussion of lotteries as a “voluntary tax.” But then one Mr Rose (probably no relation) defended the lottery by declaring “that the evils complained of formerly existed … but he had reason to think they existed no longer. They had not arisen from lotteries themselves, but from the illegal insurance offices that had been opened. Those offices were now put an end to …” What finally led to a crackdown on insurance was the unseemliness, and danger, of people buying life insurance on well-known strangers. December 2015 inside asian gaming 31
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IAG December 2015

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