Archive for February, 2011

Oh the Irony! Paying Fees for a Lower Minimum Bets

Monday, February 28th, 2011

I have heard tell of a brick and mortar casino up in Atlantic City that charges players to play at blackjack tables with lower minimum bets. You know how when you are learning to play a new game, and you finally venture out onto the casino floor you, you tend to stick with the tables with lower minimum bets. This is because you do not want to put too much on the line when you are stilling getting your feet under you with the new game.

Well, at least that is what newbies to the game of blackjack do. Trust me, I know that one. So is it really fair to charge a fee for such players to play a low minimum bet table? When I say low minimum bet I mean the minimum of the $2 variety. Well under $5 at the minimum…ha! Okay, bad joke.

This particular brick and mortar casino in Atlantic City, Resorts Casino, is charging patrons who play at blackjack tables with a table minimum of less than $5 a fee of $0.25. That just sounds like a contradiction to me.

The reason for the low minimum bet fee is so that the casino can make sure that they are not losing out on any profit since they are offering a lower table minimum than is average. But here is what the casino seems to be missing—the players that are likely to be playing at a $2 table are either still learning the game and will be prone to mistakes, or are tourists who do not play with a strategy and are just out to enjoy the game. The house is likely to wind up with their bankrolls in this case, fees or not.

The problem with charging a fee for a lower table minimum, other than it being ironic, is that the guaranteed amount coming to the house actually ups the edge. And the lower the wager the more it ups the house’s edge because there is not as much of a wager on a round of blackjack that can be used to win money back with—to offset the loss of the quarter. Effectively speaking, for the $2 wagering blackjack player who has to pay a fee, the house edge is 13.5%. This gives players with the typical $40 bankroll of a newbie or tourist blackjack player a rough 60% chance of lasting through 100 rounds or about an hour of play.

The thing that I do not get is why the Resorts Casino feels the need to charge players a fee when the chances of taking low minimum players’ bankrolls. Just does not make sense to me.

But on the other hand this is an Atlantic City brick and mortar casino. And although New Jersey Governor Chris Christie did pass those bills for a revitalization of Atlantic City, it may be that the Resorts Casino just needs the revenue that badly. Be that the case, then I hope that Christie signs the intrastate online gambling bill, which will give the brick and mortars in Atlantic City the chance to utilize online counterparts and third party sites to increase their revenue.

Vietnam Puts Curfew on Online Gaming

Monday, February 28th, 2011

vietnamVietnam is taking drastic steps in its attempt to curb an addiction to online gaming. Of course, I’m not just talking about Internet gambling (since “gaming” is often used as a euphemism for “gambling”). The law applies to all forms of online gaming, such as playing World of Warcraft, some first-person shooter, the Sims or the newest FIFA World Cup game.

The Vietnamese government has enacted a ban on all online gaming activity between the hours of 10:00 PM and 8:00 AM. According to them, gaming is a very addictive activity and those games include psychological devices aimed at creating compulsive playing. The communist government knows this is the case because of a test on lab rats pushing a button…Yes, seriously.

So now gamers have a curfew in Vietnam because those late-night gaming sessions are harmful. After all, they can make you really tired. Not as tired as working all day in the rice field for very little pay, which the government isn’t against, but still…

In addition to those rules, the government has outlawed any games that include “unwholesome” content. You’re probably wondering what content the communist government finds unwholesome. Well, that includes pornography (naturally), violence, gambling and any games that involve the exchange of real currency. Well, I’m pretty sure those rules effectively ban approximately 95% of the games available.

The idea that poor decisions are made late at night isn’t a new one. I’m pretty sure no one has ever ordered some pointless invention from an infomercial when sober in the afternoon. Instead, those are late-night drunken decisions. I still regret buying that ShamWow. Similarly, no phone calls or text messages sent at 3:00 in the morning are ever for wholesome reasons.

The Vietnamese government wants to put an end to decisions such as “hey, I know I have a test tomorrow, but I can play another hour of WoW.” Of course, they won’t be counting on the honor system. The internet service providers will be required to cut off access to games of any kind during the restricted hours. That means it will be difficult for citizens to defy the rules and play games during that time, at least as long as the games are online.

So if you’re reading this in Vietnam (which is unlikely), I’m sorry to report that you will no longer be able to gamble online, play games that involve violence or pornography (are they games with porn?) or play any types of games after 10:00. The internet service providers have until March 3 to comply with the curfew. Any that violate it by not blocking access to online gaming will risk being shut down entirely in Vietnam. Approximately 23 million Vietnamese citizens (26% of the population) have regular access to the Internet.

Florida Sneaking Up on New Jersey’s Intrastate Gambling Bill

Monday, February 28th, 2011

New Jersey may well lose the race to become the first of the fifty states to legalize and regulate online gambling on an intrastate level. Both Florida and California have proposed legislation to legalize and regulate online gambling within their own states. But everyone thought that New Jersey, with the historic passing of an intrastate online gambling bill in both the House Assembly and State Senate, would be the first to profit from regulating online gambling.

But lo and behold here comes Florida. In just over a week, on March 8th, a piece of legislation will undergo discussion by lawmakers. The piece of legislation was proposed by Representative Joseph Abruzzo. Abruzzo sees a $4 billion deficit in Florida’s budget and that a couple hundred thousand Floridians gamble online every year; in that picture he sees that there is a major source of revenue to help fill in the hole in the Florida budget, and a way to protect the residents of that state. “We want to legalize it, regulate it, and bring revenue to Florida. To me it is common sense to protect our players.”

Currently Florida is in the hands of Republicans, who we all know have a crusade going to prevent US citizens from gambling online. Florida Republican politicians overall are against gambling expansion, both of the online and brick and mortar variety. Last year saw the end of a long standing legal battle between Republican lawmakers and the Seminole tribe over a compact that would allow the Seminoles to offer blackjack at their casinos. After months of debate, a settlement was reached that gave the Seminoles their blackjack and a twenty year exclusivity on Vegas style slot machines as well.

With Republicans in power in Florida, Abruzzo and his party will have their work cut out for them to push an intrastate online gambling bill through Florida’s legislature. There is hope however small and however odd that it comes in the form of that $4 billion deficit. According to the opinion of gaming analyst Steve Schwartz, “It is likely with a $4 billion budget deficit that Florida legislators will approve the online gambling bill. The revenue may be too much to ignore for lawmakers looking to win over public support.”

And stubbornly refusing to legalize and regulate online gambling in Florida and ignoring the potential significant revenue in order to save Floridians from themselves and to uphold person feelings about online gambling will not do much to win public support. But while there is hope that Republicans will not turn their back on some much needed revenue, never underestimate the stubbornness of Republicans who know what is best for everyone.

According to a recent data survey by Global Betting and Gaming Consultants that I read, the online gambling industry has grown by 12%. Considering the marvelous state of the economy, that is quite a growth rate over the last twelve months. The GBGC puts the worth of the online gambling industry at $29.3 billion with the potential to reach over $40 billion within the next three years. While that is the entire online gambling industry and not just Florida, that is still a very large market with a lot of growth happening; and such growth Florida cannot afford to ignore. Literally.

Virginia to Ban Internet Gambling Cafes

Monday, February 28th, 2011

internet-cafe12-1-10The U.S. state of Virginia is one signature away from closing a loophole that has allowed Internet gambling cafes to thrive. Governor Bob McDonnell’s signature on the bipartisan legislation would tighten the gambling laws in the Commonwealth and more clearly define what gambling is illegal and what counts as a gambling device.

The legislation was introduced as companion bills in the House and Senate, HB 1584 and SB 1195, and easily passed with little opposition. On Tuesday, the House passed the bill by a 98-0 vote. On Thursday, the state’s Senate passed the bill by a 37-1 vote, with two senators abstaining from the vote.

Virginia has very strict gambling laws. Charitable gambling, racetracks and other pari-mutuel gambling and the lottery are legal, but casino games are banned, including tribal casinos. Because all casino games are banned, it was understood that such a ban included online gambling. However, Internet sweepstakes cafes found a loophole that they cleverly exploited to create thriving gambling businesses.

The businesses usually offer a number of technology-related services, like copying and faxing, but their main draw is selling time on the computer to use the Internet. The cafes give sweepstakes points to the customers for the time they buy on the Internet. Players can also earn money by gaining points when playing the casino games. Because they did not pay to wager on the games and instead only paid for time on the computer, a loophole in the law said that the gambling cafes were not gambling businesses and the computer terminals were not gambling machines.

The new bill, which is expected to be signed by Governor McDonnell, would close that loophole by saying that the activities are only legal they aren’t related to illegal casino games, if they don’t involve the use of a gambling device (which has been redefined) and if any purchase “is merely incidental to the chance to win money.” Since purchasing time on the computer is required to win money, that purchase is not incidental to the chance to win. Therefore, the business model incorporated by the gambling cafes would be illegal.

Delegate Clay Athey issued a press release saying that “the Virginia General Assembly stood up today for Virginia values and left in Las Vegas what belongs in Las Vegas.” If the bill becomes law, businesses would still be able to sell time on the Internet as long as the time isn’t used to take part in casino games or other forms of gambling.

Red Rock Casino Resort Review: One Couple’s Experience

Saturday, February 26th, 2011

RedRock1Whether you’ve been to Las Vegas before, or are a Sin City virgin, there’s a casino resort you should seriously look into staying at. It’s Station Casinos Red Rock Resort – a “locals” casino that’s just as good as anything on the Las Vegas Strip.

Generally, locals casinos are thought of as being less superior than the flashy resort casinos on the Strip. And while this depends on what you personally value as superior, it is indeed true that most locals casinos are more “no frills”. And that’s exactly how the locals want it – lower stakes, better odds, cheap food and cheap drinks (free if your gambling, of course). While it can be nice luxuriating in the ritz and glamour of some of the nicer casino resorts on the Strip, there’s a price that comes with it.

That’s what I personally love about the Red Rock Casino Resort. Not only does Red Rock offer the perks and amenities you would expect to receive from a high-end Strip casino resort, the prices are still accommodating to locals. And by that I mean everything. $5 Black jack tables, $5 Breakfast buffet, $7 lunch, an unbeatable $12 dinner feast as good as the best all-you-can-eat buffet’s on the Strip, $3 domestic beers, $20 concert tickets and rooms starting around $165/night. If you catch a special, you can find rooms for around $100. On that note, Red Rock is hosting a $105/night special (as you may have already noticed on the accompanying picture). Be ready to pay a $25/day resort fee, which is worth the cost. This includes daily free wireless internet in your room as well as daily access to the spa and gym. I highly recommend the outdoor spa area, which offers several cabanas and a lap pool in a more secluded, landscaped setting.

RedRock-LoungeOriginally opened in 2006, Red Rock Resort is home to eleven different dining venues, a first-class spa, cabana lined swimming/wading pools/hot tubs amidst a beautifully landscaped outdoor area, a 94,000 square feet convention center, concert lounge, trendy bars, a hip dance club, outdoor entertainment oasis, sprawling casino with over 3,000 slots and video poker games, a sportsbook, bingo hall, bowling alley and a 200 ft. hotel tower with 815 rooms, offering either a view of the beautiful Red Rock Canyon or the Strip. The entire resort encompasses 70 acres in Summerlin, Nevada.

RedRock-RoomSo yes, while you are not staying in Las Vegas, per say, the Strip is so close that you can indeed see it from your room (check out the pic seen here). I personally opted for the Canyon view, which was a phenomenal view to wake up to, not to mention at dusk when the sun’s rays cast a beautiful glow on the reddish colored mountains. However, the glow of the Strip at night certainly offers its own beauty. The Strip is is just a 15 minute drive away, made possible by a free shuttle that leaves Red Rock several times a day. Parking (and driving) can be a nightmare around Las Vegas Boulevard, so don’t forget about the shuttle. On that note, there is also free shuttle service to and from McCarran Airport.

RedRock-PoolI’ve stayed on the Strip – the Mirage, MGM’s Signature, the Wynn Encore…the best that Vegas has to offer. And the Red Rock is at the top of my list. The truth of the matter is that you the majority of your time is going to be spent in or around the casino resort you are staying at. Not one time did my wife and I feel under-stimulated or the need to leave Red Rock. The only time we did (and this is another huge “pro” for staying at Red Rock in my book) was to do a drive-and-hike through the nearby Red Rock Canyon. It was literally a five minute drive, and was the most memorable experience of our trip. The photo below is one I captured with my very own camera, if I do say so myself!

A view from down inside the Red Rock Canyon...the "Ice Box" trail.

If you are interested in spending some time at the Red Rock Canyon, check out the Adventure packages on the Red Rock website. They offer great package deals that include a multi-night stay with skiing, horseback riding and kayaking adventures. My wife and I opted to rent a car at the concierge (there are several ready to drive) for $50, and spent the entire day at the canyon. There are biking packages available too, but I would not recommend these unless you are an avid biker and in good shape. Entrance into the park is just $7. Once you’re inside, I would recommend making a stop at the visitor center and getting some advice on the various trails throughout the park. You can opt to drive the entire thing or do some hiking as well. You will get through the park via a winding, one-way, paved road that runs about 7 miles long with several pull-off points where you can park and go hiking down the trails if you’re inclined.

RedRockRoomViewAll in all, I give Red Rock nine out of ten stars. Everything from the interior design (invoking the surrounding landscape of the beautiful Red Rock Canyon) to the hospitality service was on point. The only reason I do not give ten stars was because of my experience at T-Bones steakhouse. Extremely overpriced, my wife and I were sorely unimpressed. To top it off, the Maitre d’ never took the time to even ask us if we were enjoying ourselves, and yet did so at every surrounding table, one of which was in arm’s length and home to a couple who complained the entire night (about the food and speed of service). We should have listened to the sportsbook teller who told us to go eat across the street at BJ’s. Honestly, I wouldn’t even mention this, but it was the one thing that stood out in my mind as “not enjoyable”.

Granted, T-Bones was offering a $5 special that consisted of a myriad of large and tasty appetizers and mixed drinks – all for $5. It was available from 5-7 pm, and while I’m not sure if it was a limited-time-offer, is worth taking advantage of if you can. Just remember that you have to order in the piano bar section, which is preferred anyhow.

RedRock-outdoorspaceRed Rock truly has something for everyone – even the youngsters. Not that you would know it, but Red Rock is one of the most kid-friendly casino resorts in Las Vegas. A KidsQuest facility is located at Red Rock, offering child care services and a floor to ceiling climbing structure and maze. I love kids, but let’s face it – Las Vegas is a playground for adults. I didn’t see any kids running around the casino or hotel (a good thing), so don’t let the kid-friendly status scare you off. And if you have kids and can’t get away without bringing them along, by all means bring ’em. Whether you have kids or not, want to gamble or not, or just need to get away, Red Rock Resort has you covered.

A Vegas in Spain? Adelson, Sands Looking to Make it So

Friday, February 25th, 2011

The Las Vegas Sands has significant brick and mortar interests in the United States. They then built themselves up in Asia, specifically in Macau, while they wait for Las Vegas to recover in the US recession. But there has always been an interest in creating a Euro-Vegas. Now the Las Vegas Sands and its Chairman, Sheldon Adelson, are eyeing Spain to be the home of a mini Las Vegas style strip.

Of all of the brick and mortar casino companies and corporations, the Las Vegas Sands Corp. is in the best position to move forward and make a Euro-Vegas happen. “Euro-Vegas has been talked about for many years by various gaming interests with no movement to date. Las Vegas Sands is by far the most credible and capable to pursue such a project,” said Union Gaming Group principal Bill Lerner.

To go along with its recognized ability to build the beginnings of a Euro-Vegas, the Las Vegas Sands is on the prowl for a new casino project. The casino corporation just opened a new entertainment feature at their Marina Bay Sands in Singapore, but that is no deterrent for the casino giant. Adelson said that the Las Vegas Sands was eyeing to begin a $20 billion project in either Madrid or Barcelona. “We are seriously looking at dong what we call a ‘Strip,’ which is essentially a mini Las Vegas. We are looking to do that in Europe and we are sort of zeroing in on Spain,” Adelson said.

This comes after reports of Adelson having met with the new Florida governor, Rick Scott. With the state looking at a potential bill to allow large scale, Las Vegas style destination casino resorts and Adelson’s lunch with the governor, rumors started flying that the Las Vegas Sands was going to be one of the lucky casino companies that would get to build a destination casino resort in Florida. However, the bill is only a potential bill and it does not appear that Florida is moving forward in the direction of destination casino resorts…at this time.

Then came word that the Las Vegas Sands and Adelson were eyeing Spain to build a Euro-Vegas. The plans for a Sands project in Spain, according to Adelson, would have 20,000 hotel rooms, retail offerings and convention space; it is predicted that the Las Vegas Sands’ Euro-Vegas project could generate 180,000 jobs. Rather than one huge casino resort, it sounds like the plan would feature several smaller casino resorts to give the feeling of multiple casinos and creating that Vegas Strip feeling.

And finally, “The rain in Spain falls mainly on the plain.” Sorry, could not help myself.

What to make of the New Jersey Online Gambling Poll

Friday, February 25th, 2011

Fairleigh dickinson u-logoThe staff of Online Casino Suite is unanimous in our support for online gambling regulation in the U.S. state of New Jersey. However, we are split on confidence that such a thing will happen. Some worry that because Christie is a Republican with greater political aspirations, he could back away from the controversial bill and veto it. I was much more confident, seeing nothing in Christie’s platform or ideology that would prevent signing it. And then something happened that shook even my confidence: the Feirleigh Dickinson poll.

As OCS reported two days ago, a poll conducted by Fairleigh Dickinson University’s PublicMind said that only 26% of New Jersey residents support online gambling while 67% oppose the idea. That’s certainly not good news for proponents of the legislation. As someone who criticized the Obama administration for “ignoring the will of the people” regarding healthcare reform, the stimulus bill and other unpopular laws, Christie might not be willing to sign legislation that is now found to be unpopular in New Jersey. To be honest, I’m shocked that this poll or another like it wasn’t released sooner. Is there seriously no one who polled the residents about this before the bill was drafted?

If Christie is unsure about whether to sign the bill, the PublicMind poll is a good reason to use his veto. The important thing to ask is what the poll means. Are a majority of Jerseyans against online gambling? Well, maybe.

PublicMind1500x1350It’s important to remember that polls aren’t always accurate gauges of public opinion. To begin with, there is the typical response bias, which means that the results can be skewed by how the question is asked (is it a push poll?) or how the responder thinks the question should be answered. There is also a strong bias in that when polling people, you only get answers from people who elect to participate in the poll. Those with no strong feelings on a subject are less likely to respond. Polls can also have sampling errors. All of this is why it’s important to get polling data from multiple sources. We don’t have that. Instead, we have only one source: PublicMind, the opinion research center of Fairleigh Dickinson University.

Since that is the only data we have, let’s look deeper at the poll itself. Between February 7, 2011 and February 13, 2011, PublicMind conducted a telephone poll of a randomly selected sample of 801 registered voters in the state of New Jersey. They list the margin of error as +/-3.5%. As to how the questions are worded, that seems to have been done in a fair way in regards to online gambling.

The sports betting questions were a little more leading. For example, one question said that “Some people say lots of people bet on sports anyway, so government should allow it and tax it. Others say legal betting on sports is a bad idea because it promotes too much gambling and can corrupt sports. Which comes closer to your view?” To that question, 55% said to allow it and 37% said sports betting is a bad idea. A simpler question, which simply asked if sports betting should be legalized, without mentioning corrupting sports, got an answer of 62% in favor and 32% opposed. It’s the same question, but got a different response because of how it was worded.

Now let’s look at the questions for online gambling. None of the questions mentioned anything negative or positive about online gambling. They didn’t mention problem gambling, crime, reducing the state’s deficit, increasing freedom or anything like that. A typical question was “do you favor or oppose allowing New Jersey casinos to run betting games online, over the internet, for people in New Jersey?” There is no chance for that wording to sway anyone and to that particular question, 27% were in favor, 65% opposed and 8% unsure.

Another interesting thing is that 75% of respondents said that over the past 12 months they had never participated in an office betting pool for the Super Bowl or any other game. In another question, 66% of respondents said that they had not been to a casino or slots parlor. That means that the people who responded to the survey tended to not participate in gambling in any form. Does that skew the results? Perhaps.

Everyone who participated in the survey was also asked to identify their political party (Democrat, independent or Republican). There was no statistically significant difference between political party and their opinion on internet gambling, suggesting that the opinions are rather bipartisan. Men were slightly more likely to favor online gambling than women, though.

After reading the entire survey, it certainly seems fair, but I would like to see a poll from more than one source on this issue. Until another one comes along, though, the only data we have shows that the majority of New Jersey residents oppose online gambling. That means Governor Christie’s decision just got a lot tougher.

Slot Machine Dispenses Drinks Instead of Money

Thursday, February 24th, 2011

No, this is not something I made up. This is a real slot machine, and it is completely different from the beverage on demand system that are to be installed in the slot machines of the four Caesar’s brick and mortar casinos in New Jersey.

The BarBot, as it is so charmingly called, was the creation by a team of hackers from NYC Resistor for a hacker competition. The competition was hosted by Vimby and Scion. The team of hackers searched Craigslist before buying a $3,000 slot machine, which they then hacked into in order to create the BarBot. The slot machine now pays out alcoholic drinks instead of coins or credits. Reportedly the modified slot machine took 320 hours to complete.

As for how the BarBot works, it works just like an ordinary slot machine. Players insert their money and set the reels to spinning. If a winning combination is landed the slot machine’s computer sends messages to the drink mixing portion of the contraption which then pulls the correct liquors using blood pumps to be mixed into a drink. The drink made depends on what winning combination. Only standard drinks, such as drinks found in a bartender’s manual, are mixed by the BarBot so there is no danger of being served a strange drink. This slot machine even tells you what drink it is serving you, which I think is polite of it.

Before you go getting all excited though, this slot machine was created for a competition and is not on its way to the G2E conference or to casino floors. For one thing it would likely be an easy thing to become intoxicated while playing the reels of the BarBot; and casinos are not allowed to let patrons gamble when intoxicated—it is all a part of responsible gambling.

But I can think of a market for this little device—and I use the word ‘little’ loosely: the college market. Well the college students who are of age to drink. Or maybe a night club would make a good home for a BarBot. It would need a home where it is considered okay to drink and where other forms of gambling were not available. College students, such as frat houses, might not be the best idea now that I am thinking about it. It would be too easy for underage students to access it. But a 21 and up night club might be okay. After all you get carded going in. In theory everyone inside is of legal age to drink, that is if the bouncer is not swayed a pretty young thing.

However I do think it unlikely that the BarBot is going to become a mass produced slot machine. While the idea is novel and the slot machine is creating some stir in the online news sphere, the novelty that is making it attractive is what is likely to cause it to not be mass-produced. It is a rather inventive slot machine though, and I am sure its creators and their friends will enjoy it immensely.

A Las Vegas-Themed Airline? Huh?

Thursday, February 24th, 2011

lv-air-planeThis is a bad time to start a new business in America, especially in Las Vegas. It’s hard to get loans and just as hard to get customers. It’s also an especially bad time for airlines. Various smaller airlines have been going out of business since 9/11, when enhanced security combined with a recession combined with people nervous about flying combined with rising oil prices created the perfect storm to put airlines in the red.

Now the crisis in the Middle East, combined with the White House’s energy policies, has oil prices rising again (they’ve risen almost 60% in two years). So you might think this is the worst possible time to start a new airline business in Nevada. You might, but Sean Smith would disagree. Sean Smith is a Nevada businessman who wants to start a charter flight business called LV Air. The airline would have a Las Vegas theme.

Wait, a Vegas-themed airline? Does that mean people will be able to play slots onboard? Maybe have a game of blackjack? Sadly, no. According to the website, the airline will allow passengers to “experience the luxury, the service, and the brands that illustrate the world of Las Vegas when you board your aircraft.” Okay, so it’s all about the presentation and first-class customer service that we associate with ritzy Vegas resorts. The website says that the airlines would offer everything from “in-flight texting and video, to iPad personal movie viewers, to hologram safety briefings from your favorite Las Vegas celebrities.” Right now I am picturing a hologram of Wayne Newton telling the passengers where the emergency exits are located. Or maybe Tom Jones. Just as long as it’s not Celine Dion…

Smith plans to offer VIP charter flights on leased Boeing 767’s between Las Vegas and John F. Kennedy International Airport in New York. Smith told the Las Vegas Sun that the key to his business would be working with the casinos on the Las Vegas Strip. He needs to reach an agreement with the casinos where they would buy seats on the flights and then give them away as comps to their top customers. In return, he would share a database of potential New York customers with the casinos.

It’s a deal that would benefit both parties. As Smith said, “the goal is to fill Las Vegas hotel rooms with players, conventioneers and vacationers from the northeast by drawing a straight line between the customer at his home to the casino floor and back again.” It’s certainly a risky plan, but most successful businesses have started out with significant risks. Smith hopes to get his business up and running by August.

Think You Can Predict the Future? Don’t Bet On It

Thursday, February 24th, 2011

Stossel_9.9Everyone has an opinion and it seems that everyone thinks they know what is going to happen in the future. Whether it’s election results, who will win awards, what price gas will reach, whether certain legislation will pass or who will win a game, everyone seems to think they know. In America, there is the saying of “putting your money where your mouth is.” The problem is, in America that is often illegal.

Gambling on lottery tickets is legal in 43 states and most states allow some form of casino gambling if it is confined to a casino (or done at an online casino, despite the misconception that it is banned by UIGEA). However, prediction betting is illegal in the United States, with the exception of sports betting, which is legal in Nevada.

Libertarian journalist John Stossel recently wrote an opinion column titled Why Does Government Suppress Information? Without even reading it, I knew the answer: it makes people easier to control. His column went on to discuss prediction markets, why they are important and why they should be legal.

In the column, Stossel uses the Hollywood Stock Exchange as an example. The website opened to allow users to simulate the buying and selling shares of films, directors and actors. Their value goes up or down depending on what happens in the future for those real people and products. If a movie tanks, its value goes down. If an actor signs a huge contract, his value goes up. The Hollywood Stock Exchange also allows betting on other movie-related things, such as who will win at the Oscars.

Richard Jacobs, Hollywood Stock Exchange’s president, wanted the company to allow betting using real money. To bypass the law against event betting, he called the company a “futures market,” which is perfectly legal. The politicians didn’t buy it, and in the Barney Frank-Chris Dodd abomination that was their financial reform bill, they made sure that Hollywood Stock Exchange could not use real money without breaking the law.

Jacobs believes that Frank and Dodd caved to pressure from the Hollywood production studios. He said that studios wanted his business to be killed because they didn’t want a public discussion of their plans and finances. Interestingly, Stossel pointed out that Dodd, who lost his job in November, is rumored to be appointed to the head of the major lobby for movie studios. I’m sure that in no way influenced his decision, though.

Hollywood Stock Exchange’s paid betting plans were halted because Dodd and Frank ruled that it was “speculation” and “gambling” rather than a legal futures exchange. But why would anyone want to wager on movies and why does it matter? The most obvious reason is freedom to spend your money as you please, but there is something else as well. Being able to put your money where your mouth is creates more accurate predictions.

When trying to predict future events in politics and other subjects, people turn to pundits, analysts and polls. According to Stossel, prediction markets are more accurate than any of them. Studies have shown that prediction markets, where people bet on what outcome they think will happen, have half the margin of error of national polls. They also outperform pundits, on average (though that obviously depends on who the pundit is).

The reason for this, according to Stossel, is simple. When someone has to put their money where their mouth is, they are more likely to choose wisely (or not choose at all). Stossel says that “people are more careful when they have real money on the line, and the chance of losing money weeds out the frivolous guessers. Prediction markets are valuable for predicting all kinds of things because the prospect of making money attracts people with knowledge, judgment and a good sense of the future.” I couldn’t have said it better myself.