Sports Betting Is NOT Gambling. It’s Skill-Based

11 / 17 / 2018 By Mark Thomas

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Good news moral police — you no longer have to crusade against sports betting. Because it’s actually not gambling at all. It’s 100% skill-based. Since I began fundraising for ZenSports’ Token Sale a few weeks ago, about about 15% of investors say they’d love to invest but have to pass because either they or their Limited Partners have a moral issue against gambling. To which my response is always, “So? We’re not a gambling app”.

I always get a perplexed look on their face (or can imagine the perplexed look on their face when they send me a perplexed email back). “Of course it’s gambling”, they retort. “No it’s not”, I always reply back. “Gambling is when you bet on something where you have little to no control of the outcome and/or where the statistical odds guarantee you will lose in the long run, no matter how much skill you put into the activity. Sports betting is not gambling because you have the ability to know the outcome more than 50% of the time, and you can absolutely make money in the long run against the “house.”

I’m now on a crusade myself to get the old meaning of gambling discarded like a 2–7 off-suit hand in Texas Hold ‘Em. Society has gotten smart enough and there is simply too much information at everyone’s disposal to continually consider what used to be gambling as still gambling today. A perfect example is Webster’s definition of gambling, which feels like it was written in the 1800’s. According to them, gambling constitutes any of the following:

  • playing a game for money or property, or
  • betting on an uncertain outcome, or
  • staking something on a contingency, or
  • taking a chance

Based on the above four definitions, you’re considered to be gambling if you’re doing any of the following activities:

  • Investing in bonds, the stock market, a 401K, or any other financial instrument.
  • Putting money in a CD or money market account where the interest rate is less than inflation.
  • Buying a house or any other real estate.
  • Paying someone to do your taxes and/or manage your finances.
  • Doing your own taxes or managing your own finances.
  • Buying a car.
  • Driving a car.
  • Riding in a car.
  • Riding public transportation.
  • Walking across the street.
  • Quitting a job.
  • Taking a new job.
  • Starting a company.
  • Shutting down a company.
  • Buying a plane ticket too far in advance (price could come down).
  • Waiting too long to buy a plane ticket (price could go up).
  • Getting on a plane.
  • Getting off a plane.
  • Leaving your kids with a babysitter.
  • Leaving your kids with your spouse.

All of the above require you to bet on an uncertain outcome, stake something on a contingency, or take a chance, with most involving some form of monetary risk (remember, the definition of gambling according to Webster doesn’t require money to be at stake). But would you honestly consider any of the above activities as gambling? Almost certainly not. They are by far and away considered calculated risks by most people. While the outcomes aren’t guaranteed, there are no guaranteed statistical odds set against you, and in fact, the odds are actually in your favor of having a positive outcome if you know what you’re doing.

The key phrase being: “if you know what you’re doing”.

If you know how to invest your money, or pick the right financial professionals, or drive a car safely, or buy plane tickets using miles/discounts, or find a good babysitter, you drastically increase your chances of having a positive outcome, right?

Now let’s take a closer look at traditional casino games (we’re getting to sports betting eventually, I promise).

With traditional casino games like craps, roulette, and even blackjack (if you’re not counting cards), the statistical odds of the game are set in favor of the house. No matter how skilled you are, and no matter how much you know what you’re doing (there’s that phrase again), you are guaranteed to lose in the long run if you keep playing because the rules of the game are set in favor of the casino. Only when the sample size is small and the law of large numbers hasn’t kicked in can you win or beat the house. In the long run, though, you will lose.

Notice I didn’t include poker in the above list of casino games where the house always wins. Most people know by now that poker is a skilled game, in which you play against other players at the table instead of against the casino itself. In this case, the casino is simply the “host” of the game. The casino makes money at poker by taking a fee for each hand dealt in return for hosting the game. There’s no house edge in the game and the casino doesn’t care which of the players at the table wins, as long as they get their fee from each hand. A skilled player will win more frequently than they’ll lose at poker, which is why you can win at poker in a casino on a consistent basis. And of course, we’ve all seen that if you get really good at poker, not only can you win money in a casino, but you can become a professional and be a star on TV.

Prior to poker becoming televised, most people would never have thought of poker players as being able to make a living from it (and a good one at that). They would have classified poker players as being gamblers. Which, per the Webster’s definition, they are (just like you’re a gambler for driving your car or taking public transit to work). But clearly, the statistics and math show that poker is skill-based — not gambling.

So what about sports betting?

Several years ago, shortly after DraftKings and FanDuel burst onto the scene, New York Attorney General Eric Schneiderman sent both companies ceast-and-desist letters, saying that daily fantasy sports violated the state’s gambling laws. Schnedierman’s position was that daily fantasy sports was in essence, gambling. Draft Kings and Fan Duel disagreed that daily fantasy sports should be considered gambling, and both companies raised a pile of money to fight back in order to get fantasy sports re-classified as skill-based games. Both companies were granted a stay and allowed to continue to operate until New York eventually passed legislation legalizing daily fantasy sports because it no longer considered it as “gambling”. DraftKings and FanDuel were able to show that determining player stats and how a specific player would perform in a given game or set of games were indeed based on skill, not gambling. If someone does the research necessary to understand stats, odds, and tendencies of player performance, that person can, in the long run, make money.

Which brings us to traditional sports betting that isn’t classified as daily fantasy sports. By traditional sports betting, we’re talking about team bets like wins/losses, point spreads, over/unders, and other future/prop bets. For individual player bets, it’s things like what will a player do in a given game, set of games, or season. Will they hit 2 home runs, throw 3 touchdown passes, win the MVP, etc.

At a glance, you might be as confused as I am about how there’s any difference between “daily fantasy sports” and “traditional sports betting”. Both require you to do research on the teams or players that you’re betting on if you want to have a statistical edge. Both require humans that you can’t control to perform at a certain level for you to win money. And both have uncertain outcomes that aren’t guaranteed to make you win in the short run. Most importantly, both allow you to make money in the long run if you know what you’re doing (eek, I said it again).

The Supreme Court of the United States was just as confused as I was back in May 2018 when it struck down the archaic 26 year old PASPA law that prohibited anyone from outside the state of Nevada from operating a sports book. In their ruling, the Supreme Court stated that it should be up to individual states to decide if it wanted to offer sports betting or not. Since the Supreme Court ruling, 6 states have already fully legalized sports betting, 4 states have passed bills that will be taking effect soon, and 15 states have introduced legislation. Which means about half the United States will probably have legalized sports betting within the next 12 months. My prediction is that every state except Utah will have legalized sports betting within 3 years.

While government endorsement of a particular activity doesn’t necessarily change the definition of it, one can’t help but think that if the Supreme Court and state legislatures thought that sports betting was equivalent to gambling, they would also be legalizing non-Native American casinos or online casinos right now (or not legalizing sports betting). Instead, they’re moving lightning fast to legalize sports betting, and there’s no mention of expanding casino gaming at all. I think that speaks at least to an indirect endorsement that sports betting is in a classification by itself and isn’t in the same family as house-edge casino games that can’t be beat by the player in the long run.

If Webster’s definition of gambling is clearly too broad and ridiculous, and if sports betting’s close cousin (daily fantasy sports) is considered skill-based, and if professional sports bettors can make the same kind of money as professional poker players, and if one of the last countries in the world to legalize sports betting has finally done so, doesn’t it make sense to stop calling sports betting “gambling”?

Just something to think about the next time you’re on a long car or plane ride.

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