IAG December 2015

Gambling
and the law
Probability theory, on
which both insurance and
gambling is based, was
developed in the 17th
century at the behest of
professional bettors.
The argument that the purchaser of
insurance is actually trying to avoid risk did
not work in this case. Business owners do
not think they have lost bets when they do
not have a fire, any more than when they
hire security guards who never have to
draw their guns. But while a theater has
a business reason for insuring against
the death of its box-office draw, even the
biggest fan does not.
In the US and England, courts and
legislatures developed the “insurable
interest” rule. You cannot take out a life
insurance policy on someone you have no
connection with. That would be too much
like making a bet that another person would
die. Plus, government is afraid that you
might be tempted to do something to try to
increase your chances of winning.
The insurance industry won its battle to
remain legal by showing that true insurance
was different from pure speculation.
This is similar to the arguments that
advocates for Internet poker are making
today. Poker sites would like to have online
casino operators as allies. But they know they
have more chance of winning over religious
conservative Republicans and paternalistic
liberal Democrats if they show that poker is
a game of skill.
Of course it is an easy argument to
make. As noted poker author Richard Sparks
observed: “I’ve been outplayed far too often
on the Internet not to have learned the hard
way that poker is, very sadly, a game in which
skill predominates.”
State lotteries can’t make this argument.
But they were originally sold as ways of helping
education or the elderly. They successfully
shifted their image, to the public, as being
merely another form of entertainment; while
legislators and governors see lotteries as
essential to balancing state budgets.
Insurance eventually overcame its
gambling roots because it was seen as
creating a benefit for the general public, as an
efficient way of spreading and lessening risk.
Still, insurance had to be outlawed
if the sole purpose was merely to make
money by betting. Pure speculation was
not only of questionable morality, but
also considered economically inefficient,
because it did not contribute anything to
the greater society.
Advocates for expanding gaming need
to study history to see how insurance
succeeded. Insurance is, by far, the largest
form of legal gambling. In fact, by some
standards, the insurance industry is the
largest industry in the world.
In the US and England,
courts and legislatures
developed the
“insurable interest”
rule. You cannot take
out a life insurance
policy on someone you
have no connection
with. That would be too
much like making a bet
that another person
would die.
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inside asian gaming December 2015