Gambling, Skill and Millennials

There has been a lot being written about which betting games are games of skill versus just gambling. After reading some of this stuff I’ve come to an inescapable conclusion: you can define anything where a bet is involved as gambling, as long as it forwards some specific agenda to do so.

What, you say? Horseracing is the classic game of skill. The house takes a fixed amount, and the payouts go to the players with the highest level of skill, right?

Well, maybe not. Jeff Hwang in this article ( provides these three requirements for gambling:

  • Consideration. There must be a wager of some value in order to win something of value.
  • Prize. What you get when you win, whether of monetary value or something else.
  • Chance. There must be at least enough variance that an unskilled or lesser skilled bettor can win said prize, at least in the short run.

So far we sound  safe, but then he puts the icing on the cake:

You see, poker is a game of skill, but it is also clearly gambling. Even if you want to argue that a skilled poker player is “investing” and not gambling, then it would also be unequivocally true that a lesser or unskilled player must be gambling, even if he thinks he is playing with an edge but really isn’t. What the player thinks he is doing is irrelevant.

In essence, the very existence of skilled poker players – playing with an edge and for a profit – depends on the presence of lesser skilled players willing to gamble at a disadvantage against them. You can’t have a skilled poker player without a compensating gambler. Therefore, though poker is a skill game, it is also most definitely a gambling game, regardless of a preponderance of skill.

Thus, in my view, legal interpretations which attempt to qualify poker as being either a game of skill or a game of chance by virtue of predominance are insufficient practically speaking, because such interpretations only identify what the winners (the “skillers”) are doing, and not what the losers (the “gamblers”) are doing.

Well that pretty much covers the waterfront. I win so I’m not gambling, but you lose so you are gambling. As the Cheshire Cat said in Alice in Wonderland, “Imagination is the only weapon in the war against reality.” In fact, by Hwang’s “unequivocal” logic, any game where everybody doesn’t win is gambling, This is impossible in horseracing. Even if there was no take, the best the collective bettors could do is break even. It’s impossible in sports betting because of the “vig.” It’s impossible in poker because of the rake. Same with the whole fantasy sports discussion. For all those guys who are up half a mil, somebody is down, thus it’s gambling. Even Monopoly is gambling, albeit with fake money. Somebody gets all the money and the other players go broke.

Hwang gives us no outs. Any game where the result is somebody wins and somebody loses, even if only one person loses, is gambling because the losers aren’t skilled enough to win in the long term. In other words, the fact that certain players are unwilling or unable to to acquire the necessary skill – which would make losing apparently their fault, not the fixed odds nature of the game – gives Hwang no reason to waver in the strength of his conclusion. Losers lose because they choose to gamble instead of becoming skilled, so ipso facto, the game itself is gambling. Apparently, even those who handicap the hell out of a card and lose get lumped into the category of gambler. Those of us who deluded themselves into believing horseracing was investing, sorry. No matter how much or how often we win, we’re in a gambling game. In an act that would make contortionists proud, Hwang essentially concludes betting equals gambling.

If horseracing, poker or fantasy sports are in fact gambling, and if Congress decides they need more regulation (specifically federal oversight) players express concern about being regulated by people who mainly don’t understand the games. I defy you to poll the 535 members of the House and Senate and find more than a handful who would admit to betting the occasional trifecta, much less actually knowing what one was. The final regulations for any sport depend in great part on which of the lobbyists prevailed, and I’m not so sure I’d put the future of horseracing, poker or fantasy sports in the hands of people who think passing a two-month stop-gap budget is a major accomplishment.

Which brings us to the last topic. What kind of gambling are the millennials into? Slots, once the cash cow of casinos, are fading like a bleeder in the stretch. This of course begs the question, why did it take 150 years to figure out there are quicker ways to lose money, but not many. Table games are similarly suffering. Many casinos, after consulting with the management of racetracks, decided to cut the premium for blackjack from 3/2 to 6/5, with the predictable outcome that the action slowed down even more.

The well known formula for calculating gaming revenue is

Gaming Revenue = Volume x House Advantage

In other words, if you want to make more money you have two choices. Increase the house advantage while keeping volume the same, or increase the volume. Unfortunately, increasing the house advantage (or raising the take) usually has the effect of decreasing the volume. The arithmetic is the same whether we are talking about horseracing or table games or fantasy sports, and in the case of horseracing has been well documented. The more you take, the less you make. Unfortunately the only people who don’t know this are the legislature and the racing commission.

Apparently, unlike every generation before them, the millennials have not only figured this out, but they are refusing to be as dumb as their ancestors. They aren’t going to play unless they have the right conditions and the right edge. According to the Motley Fool,

  • Millennials find the current slot product uninteresting
  • Millennial gamblers want to be engaged and empowered, and to exert some control over outcomes
  • Millennials prefer night clubs to casino gambling
  • Millennials are more interested in online gaming, poker and daily fantasy sports (DFS)
  • Millennials want skill-based games
  • Millennials want experiences
  • Millennials want to be social
  • Millennials demand fairness

The question is, why would they not be a lot more interested in horseracing? It can’t be that picking a fantasy team is orders of magnitude easier than coming up with a winner. You want daily action? No problem. Skill-based. Check that box. Exerting control? You make all the decisions.

So what could horseracing do to compete for millennials?

  • Dropping the take seems to be job one, but given how many people want a piece of the pie, it might be hard to get it low enough to compete with things like fantasy sports. Racing, like casinos and fantasy sports, has to disengage from the state. They have to become a for profit business that pays taxes based on profits and not a percentage off the top. Only then could they drop the take enough to make a difference.
  • Racing needs to give away the very basic information necessary to handicap for free. If that means tracks or the ADWs have to subsidize Brisnet (yes, many already give PPs away if you make a bet), it’s better than paying tribute to the state.
  • Somebody has to figure out what creates “fairness,” because the current regime has done little to convince even ardent supporters that it is a clean sport. Not that fantasy sports are much better, especially after a couple of employees were nailed for using inside information to beat the game at a site where they weren’t employed.
  • Racetracks need to become destinations for more than playing the horses. Millennials are showing up in Vegas, but for nightclubs and entertainment. How many racetracks have nice restaurants or shopping (and I don’t mean the 9X12 space they allot for the gift shop). Would a horseplaying husband take his wife to the track? Maybe if there was a first class restaurant at which to eat. Would a group of friends head out to the track? Maybe if there was a really nice sports bar (and I don’t mean one in a part of the track where you have to pay extra to get in). If you get them there, at least you have a chance to get them to wager.
  • Horseracing already has the online part figured out.

Horseracing is a lot like Congress. It’s mostly run by a bunch of guys born in the 40’s and 50’s who are mostly clueless about what viewpoints millennials hold or what might get them to participate in their respective activities. I for one (full disclosure: I’m the parent of two successful millennials) have a lot of faith in a future where they will be in charge. I’m pretty sure the millennials have a lot of libertarian in them, especially when it comes to gambling. A lot of the angst about what is or isn’t a gambling game probably goes away once the millennials take over. But in the meantime, how about racing figures out how to make that sport the number one destination for the millennials gambling dollar.