By Robert B. Reich
April 11, 2012
Anyone who says you can get rich through gambling is a fool or a knave. Multiply the size of the prize by your chance of winning it and you'll always get a number far lower than what you put into the pot. The only sure winners are the organizers -- casino owners, state lotteries and con artists of all kinds.
Yet America is now opening the floodgates to organized gambling.
In December, the Department of Justice announced it was reversing its position that all Internet gambling was illegal.
That decision is about to create a boom in online gambling. New Jersey is close to approving a bill to allow gambling online in virtual Atlantic City casinos. Delaware, Nevada, California and Florida are considering similar bills. Within the year, high-stakes poker will be available on every work desk and mobile phone in the nation.
Meanwhile, states are increasingly dependent on revenues from casinos, lotteries and the "Mega Millions" game (in which 42 states pool their grand prize) to partly refill state coffers.
Given who plays, this is one of the most regressive taxes in the nation. In the most recent Mega Millions game -- whose winning tickets were drawn two weeks ago and whose jackpot rose to $640 million -- lottery ticket buyers shelled out some $1.5 billion, most of which went to state governments.
Why should governments use taxpayer dollars to actively market games to Americans -- many of them low-income and vulnerable to get-rich-quick pitches, who don't know the odds are stacked against them and in favor of the government?
As if all this weren't enough, we now have the "Jumpstart Our Business Startups" or misleadingly named "JOBS" Act, which President Barack Obama signed into law last Thursday. It's almost designed for con artists.
It allows so-called "crowdfunding," by which people whose net worth is less than $100,000 can gamble away (that is, invest) up to 5 percent of their annual incomes in any get-rich-quick scam (start-up) that any huckster (entrepreneur) may sell them.
Forget the usual investor disclosures or other protections. In the interest of "streamlining" investment in small companies, Congress has streamlined the way to fraud.
Although start-ups under the JOBS Act will have to market themselves through third-party portals approved by the Securities and Exchange Commission, this is like limiting Bernie Madoff to making pitches over the radio.
As it is, the SEC can barely keep track of Wall Street, let alone thousands of Internet portals. Small wonder SEC Chairman Mary Schapiro had been one of most outspoken critics of the bill.
The JOBS Act was sold to Congress as a way to promote jobs (note the acronym) on the supposition that small start-ups create huge numbers of them. That itself was a con.
Start-ups don't create lots of jobs. The assertion they do comes from research by the Kauffman Foundation, which counted as a "start-up job" every laid-off worker who has morphed into an independent contractor.
Over the last four years, millions of Americans who have lost their jobs have involuntarily made themselves available for contract work, with none of the security or benefits of a full-time, salaried employee. To assume they're all start-up businesses, and conclude from this that start-ups are generating millions of jobs, is a wild stretch.
I'm all in favor of more entrepreneurship, and it's good to give investors another way to participate in emerging companies. But the so-called JOBS Act doesn't do nearly enough to protect the vulnerable.
America's capital market is already a casino. Millions of Americans lost their shirts in the wake of the crash of 2008, after having gotten mortgages from fast-talking bank lenders who assured them home prices would continue to rise and who didn't disclose the fine print. They were conned.
Haven't we learned a lesson? In whatever form it comes, gambling is a scam. Regardless of whether it's peddled as a sure-thing investment opportunity, a state lottery, a virtual online gambling casino or the real thing, the house always wins.
Organized gambling is OK if you know what you're doing. Some people like the thrill, even when they know the odds are stacked against them.
But get-rich-quick schemes prey upon people who are particularly vulnerable -- who assume they can't make it big any other way, who often find it hardest to assess the odds, and whose families can least afford to lose the money.
Yet, step by step, we're turning America into a giant casino.
Former U.S. Labor Secretary Robert Reich is now Chancellor's Professor of Public Policy at the University of California at Berkeley. Mr. Reich has written 13 books, including the recent national best-seller, "Aftershock: The Next Economy and America's Future," and his new e-book, "Beyond Outrage."
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