Buick Riviera: Internet Gambling Conviction Upheld (no BJ)

[Buick Riviera]

The 2nd Circuit of the United States Federal Court of Appeals has upheld the conviction of a New York man who was conducting an Internet gambling operation.

Although not a virtual casino (as Nelson Rose points out in the article) it nevertheless is the nose of the camel under a very big tent for the Feds.

Follow the link to read an article.

Buick

Internet Gambling Operation Conviction Upheld

[Norm Wattenberger]

Ambassador Annenberg?s father died in prison for violating the same act. And he didn?t even take any bets. As I understand it, he merely used the old Western Union lines to provide race track info to betting parlors. I believe, simply providing the racing results in real time is against the Wire Communications Act if it is for the purpose of enabling gambling. Besides the obvious impact on gambling, this is my real concern with the Leach Bill (H.R. 556.) The U.S. Government has been quite sloppy in recent days about adhering to the Bill of Rights when constructing laws to push its moral agenda.

[Moose]

.. it's legal to gamble on companies (via the stock market) but you cannot gamble on sports teams?

If it LOOKS like hypocrisy, and SMELLS like hypocrisy, well..

M.

[Don Schlesinger]

> .. it's legal to gamble on companies (via
> the stock market) but you cannot gamble on
> sports teams?

I'll try to give you a very quick, very simplistic answer.

Short-term (and sometimes "short" can be a few years!), anything can and does happen in the stock market. But, longer-term, there is a trend: the market goes up. It has done so in about 75% of all years since 1900, and a dollar invested back then would be worth a bloody fortune today.

Furthermore, the companies that comprise the stock market also comprise the fabric of the American economy, and some people feel happy (although not these days!) to "invest in America's future."

No such analogy exists for sports wagering, where the vast majority of participants lose their hard-earned money and where the only "product" produced is the revenue that the books collect.

That said, I have no intention of prolonging this discussion or engaging in any kind of political debate, which I loathe and avoid 100% of the time.

But, it is simply naive to think that investing in the stock market and betting on sports are similar activities -- despite Will Rogers's famous explanation: "If you bet $100 that a horse will win a race, that's gambling; if you bet $100 that a stock price will go up, that's investing. See the difference?"! :-)

Don

[Norm Wattenberger]

Why are puts, calls, straddles and short-selling legal? None of these in isolation are long-term winners and none help 'investment' outside hedging situations. And, unfortunately, as of late it could be argued that casinos are more honest.

[Waters]

... thereby making it easier for a company that desires to hedge to do so.

Despite the gambling-like quality of some speculative investments, there is still a fundamental difference between betting on the outcome of a horse race and "betting" on a business. Companies produce goods and services; a horse race (or a throw of the dice, or the deal of the cards) *is* a service. Both gambling and investing are risky, but that does not equate the two.

The problem is not "why are these speculative strategies legal?" but rather "why is gambling illegal?"

[Don Schlesinger]

> Why are puts, calls, straddles and
> short-selling legal? None of these in
> isolation are long-term winners and none
> help 'investment' outside hedging
> situations.

You shrug off the "outside hedging situations" as if they aren't vitally important to the people who use them. Hedging helps limit and control risk (volatility), which, in turn, makes all kinds of investing and business decisions more tolerable.

Were it not for options, countless industries would undergo tremendous fluctuations in revenues, whose flows are somewhat controlled by the ability to hedge via options.

Despite what you may imagine, the vast majority of open options contracts are owned by bona fide hedgers, not speculators.

Don

[Norm Wattenberger]

options. But, I'd bet short-selling is mostly speculative. Never liked the concept of selling stock you don't own. Really bothered ne when I was at C and some officers short-sold. And they weren't doing it to hedge options. It was simply a bet that the company's stock would drop in the short-term.

[Sun Runner]

> .. it's legal to gamble on companies (via
> the stock market) but you cannot gamble on
> sports teams?

is "tangible."

You take a risk every time you buy anything tangible. Stocks, bond, your home, your car. But they all have continuing value after the acquisition.

Your sports bet has no continuing value after the event is passed.

As for selling stock short, that's a tough one to justify. I think the option traders believe, or say they believe, it gives "liquidity" to the markets.

SR

[Norm Wattenberger]

> is "tangible."

> You take a risk every time you buy anything
> tangible. Stocks, bond, your home, your car.
> But they all have continuing value after the
> acquisition.

> Your sports bet has no continuing value
> after the event is passed.

Neither do puts, calls or straddles after their expirations.

[Don Schlesinger]

> options. But, I'd bet short-selling is
> mostly speculative. Never liked the concept
> of selling stock you don't own. Really
> bothered ne when I was at C and some
> officers short-sold. And they weren't doing
> it to hedge options. It was simply a bet
> that the company's stock would drop in the
> short-term.

Short-sellers are the "wrong-way," don't bettors of the equity markets. In this case, it's an investment, like any other, but one in the misfortunes, rather than in the fortunes, of a company. Did you ever wonder why craps was the only game that had this feature, whereby you could bet against the shooter's fortunes, rather than on them? So be it. (Baccarat really isn't the same thing, because just as many players bet on Bank as they do on Players, so there's a certain symmetry to the game, and not an "us against them" mentality.) But, I digress.

Don

[Don Schlesinger]

> Neither do puts, calls or straddles after
> their expirations.

It's not the same at all. Next time I do a conference in the city, you're cordially invited. ;-)

Options and futures play an enormous role in providing liquidity and hedging opportunities to the investment community. They are frightfully misunderstood by most people. That they come with expiration dates is no big deal.

Don

[Moose]

> Short-sellers are the "wrong-way," don't bettors of the equity markets.

So what's the equivalent of "barring the 12"?

C.