A friend of mine once told me about a rule he set in his startup company that produced Bitcoin ATMs: Under no circumstances were they going to sell machines to casinos. He was afraid that gamblers would use Bitcoin to shift their habit online and offshore, making it all the more accessible, not to mention dangerous. His previous business venture involved the manufacturing of gambling machines and after witnessing one too many human tragedies, he has vowed to never support the industry again.

It’s a noble gesture that has cost him a lot of money, which is why I felt tempted to applaud that decision. However, I couldn’t.

As with illicit drugs, it’s the state itself that introduces almost all negative effects into gambling. Dr. Madsen Pirie of the Adam Smith Institute has rightfully called UK’s tax on lotteries “a tax on the poor for the wealthy”. This is because while most lottery players are low paid workers or social welfare dependents, the causes that lottery taxes finance – culture and sports – are typically enjoyed by members of the upper class. It’s very similar in many other countries.

A variety of nations have monopolized lotteries and run them inefficiently, while controlling a sizable margin of funds to finance chosen causes. This makes the odds of winning that much lower. Demand for gambling is as inelastic as that for drugs which makes those at risk of harming themselves or their families lose more money than if free market competition drove margins down and odds up.

What’s worse is when gambling is banned altogether. The analogy of drugs offers itself again to this example as prohibition turns the market black and sends it into the hands of organized crime. This inevitably increases the risk factor and practically guarantees the possibility of violence.

My advice to my friend and to anyone facing a similar dilemma is to support a means of gambling which is free of the state and of all negatives that this association carries. We can’t stop every human tragedy occurring, much the same way that we can’t stop car crashes caused by erring human beings. But as with everything, government social engineering introduces unintended consequences which make what is arguably a dumb, but mostly harmless habit much worse for the people that my friend (and supposedly the regulators) care for most. Removing this habit from the hands of government is thus a net contribution to society and should be endorsed, supported and profited from.

Image by Jason Reed