As a matter of adopting sensible definitions, I think you need to draw the line somewhere between what is gambling and what is not.
If the risk taken can, in principle, be shifted in your favour (i.e. to produce positive expectation) through application of skill, then it isn't gambling. For example, in my mind, betting on whether you will win a game of chess is not gambling. On the other hand, if you cannot influence the outcome in your favour through skill, then it is gambling. Roulette is generally a good example of this (with the caveat that in some very specific circumstances it's possible to beat with skill).
If we're limiting the definition to merely risk-taking (you might win or you might lose) without factoring in skill, then virtually everything in life becomes gambling. For example, you gamble when you deposit money in the bank because it might go bust.
There's also the legal definition, in which case it's just a matter of checking whether the jurisdiction you are in considers the activity to be gambling or not.
I would say that gambling with skill component is still gambling. For example, in blackjack you can limit your losses by following a basic strategy, which is a 2x2 matrix with rows containing the value of your hand and columns containing the open dealer card.
If you can obtain an edge through a skill component (card counting in blackjack), some people wouldn't call this gambling anymore, but I would still call it gambling myself. Someone doing this for a living is a professional gambler.
What for me would be a sensible definition is that a bet/gamble has no other goals. Putting money in the bank/investing in a stock reallocates capital, which can be invested by someone. The fact that it is a risk-taking endeavor is merely a side effect. I would say the same goes for selling/buying insurance for your car.
So for me, the difference between betting and putting money in the bank/investing is that the primary goal is something different than the risk-taking activity.
Does this not boil down to the distinction being one's intent? I play poker occasionally, for example, and my primary goal is to win money not to take risk. Does that make it meet your definition of investing rather than gambling?
Well you're not committing the money to purchase an asset that will generate returns, so no, it's not "investing".
It would be more accurate to say you're working, really: spending time and effort to earn money. Though the "work" here, assuming you're a skilled poker player sitting with lesser-skilled marks, is similar to a crypto bro performing a rug pull. You're enabling other participants to gamble in the hope of an uncertain win, while they actually are pretty much guaranteed to lose in a zero-sum game where the house will always earn its keep.
One could say that if everybody else at the table is gambling and you're working, it's still gambling. Lunch is lunch, whether you're the customer, the chef, or the lamb.
In poker the asset I invest in is just very short term - a single hand. I put money in when I expect the asset of that hand to pay off, risking the money a bit like an even shorter term day trade.
I don't think this thread is the best place for the everlasting debate on whether day trading is "investing", but for the purposes of my definition above, day trading, like other kinds of trading like buying commodities for resale, or having a booth at the flea market, would fit my definition of "work" (you purchased something that you expect to generate profit from by putting in your time and effort) rather than investment, since the poker hand is not doing anything by itself to generate value/money/returns for you.
Many sports gamblers (horse racing, etc.) will say it’s about skill. They believe they shift the risk in their favor because they have the data and because they bet strategically so as to win over long term. (They can spend a while detailing it for you if you are willing to listen.)
Prediction markets in general can make anyone feel like it’s about data and skills. If they lose, then they didn’t have the good enough information, so clearly they should improve their skill, right?
From my understanding, purely natural events aside, the probability of you betting against the “house” will always approach 1. If the platform is centralised, they have a strong incentive to influence the stakes, or (this has been documented) straight up limit your ability to bet if you are winning “too much”—enough to cost them real money. If the platform is open and decentralised, “house” is another player with much more capital and personal influence in the matter than you (for example, some president can bet that he would invade a country—and then invade it; some footballer can bet that he wouldn’t score N times—then score N-1 and fake an injury at the most favourable time; of course, they would use intermediaries, and only the careless ones will get burnt).
The “skill” line is what gamblers tell themselves to justify it. A much more useful demarcation is “does this game have any positive impact on the world” (entertainment value of the gambling itself doesn’t count). For example, insurance is not gambling even though it is itself a zero sum game, it enables societally beneficial risk taking. Options trading on real assets like stock aid in price discovery. Memecoins, sports betting, your local poker game and the way prediction markets actually function in practice are all gambling.
That’s what they say, but that’s not how they actually operate. There’s not nearly the liquidity there (and probably can’t ever be) to actually protect against downside risks. This niche is already better served by boutique insurance.
Talking about "traditional" sports gambling rather than prediction markets: how do we account for the heavy restrictions they place on "sharps" (consistent winners)? If a game can be won through application of skill, but winning through application of skill causes you to be effectively banned, then the game cannot be won through application of skill.
They don't mind a few with skill so long as those people don't win too often and they brag about their winnings to others who then think they have skill.
of course if you had the skill to win big why would you not make that your job thus making too much.
There is an entire category of casino games where the house is a player. These are called house-banked games and they include most of what you imagine when you think of a casino floor: blackjack, roulette, craps, slots, etc.
But even in player-banked games like poker, the house is an agent participating in the game through the dealer. They can still exercise their right to free association and not play with you.
A corrected analogy would be Nintendo banning you from Mario Kart Online for suspected cheating. Yes, Nintendo isn't playing, but they still have that authority as the facilitator.
I thought the commonly-held definition of gambling is: "it's gambling if it introduces risk."
e.g. a transaction to buy paper towels is not introducing risk, since I pay an amount and get something.
If I have a chance of not receiving those paper towels if I put money in, then it's considered gambling because the inherent activity introduces risk. It's the same reason the lootboxes were considered gambling at first, and the same reason I classify betting on a chess game as gambling. You're player may potentially not win.
>For example, in my mind, betting on whether you will win a game of chess is not gambling
As a general rule it is considered gambling not if skill is involved, but if there is any uncertainty involved.
And because there is not such thing as a perfect application of skill, all applications of skill have a degree of uncertainty to them. And you don't necessarily know how much your skill and luck will be in effect in the game.
In the context of Chess. Do you get to choose who you play against or is there a random draw? How close is the other player to you in skill? If you are both alike in skill then the skill application will be less important to the outcome.
I once lost a game at a tournament that had the rule that usage of en passant required saying en passant before doing it, so I was playing this guy whose skill was abysmal, we walked into a scenario where the very next move he did was going to allow me to do en passant, he had to take that move, or do something else that would lead to me taking his queen in the next move, and then folding up pretty all of his pieces and coming out two queens ahead. If he did the en passant move his position was worse, it was checkmate in like 10 moves.
If he had seen it and had any politeness and grace he would have just resigned. I mean it was extremely painful to have gotten into this position because it could be seen 20 moves before we were going to end up here and yet, he laboriously walked in to it, he could have gotten out before, by sacrificing a horse, and then a bit later he could have gotten out by sacrificing a horse and a knight, and then a horse and a knight and a castle, etc. etc. But nope, he just made move by stupid move into this position.
So then he made the move that I should make en passant with and ... I forgot the term "en passant" I couldn't remember the term to use, my brain froze, I probably let the clock run for ten minutes trying to remember the word, it's also not like I didn't know the move and the phrase, I had known it that 20 moves ago when I was thinking I do A, he do B I do C... and then en passant. But I couldn't remember.
Now if I had been not such a stickler for rules I might just have done it anyway hoping for him to accept and not require me to say it, but I didn't. So he won. Later my friend played him and he said "You lost to that guy?!" and I said "fuck I froze up and forgot the word to en passant, I had him setup to take all his stuff but because I forgot the word he had me. Damn it"
Despite differences of skill other factors can prevent the skill from being deployed to its greatest effect. If someone knew Bryan is skillful, but he does have a habit of choking up or sometimes losing focus in longer games, whereas that guy there sucks so the odds are 4 to 1 in Bryan's favor (which I was very much more skillful than this guy, so embarrassing), but that guy is skillful enough to drag it out a bit, and he will never give in, therefore it might make sense for me to bet a small amount in this case to leverage the uncertainty.
Because of course that kind of gambling is itself a form of skill.
If you only consider gambling on things that do not have any skill component, you then essentially say that gambling does not take any skill, which then leaves you with a large sphere of skilled activity, that many people have taken part in for many years of human society and that has traditionally been known as gambling, which now does not have a name to identify it.
What should this field of activity that you have rendered nameless by your fiat be called then?
If the risk taken can, in principle, be shifted in your favour (i.e. to produce positive expectation) through application of skill, then it isn't gambling. For example, in my mind, betting on whether you will win a game of chess is not gambling. On the other hand, if you cannot influence the outcome in your favour through skill, then it is gambling. Roulette is generally a good example of this (with the caveat that in some very specific circumstances it's possible to beat with skill).
If we're limiting the definition to merely risk-taking (you might win or you might lose) without factoring in skill, then virtually everything in life becomes gambling. For example, you gamble when you deposit money in the bank because it might go bust.
There's also the legal definition, in which case it's just a matter of checking whether the jurisdiction you are in considers the activity to be gambling or not.