Betting on Everything

Investing and gambling occupy two different regulatory worlds—as different as New York and Las Vegas. But how and where to draw the line between these activities has flummoxed lawmakers for centuries. This Article seeks to add a new chapter to that debate in light of three recent developments: sports gambling’s legalization and rapid growth; the increased prominence of retail investors (and the risky investment products they are purchasing); and the rise and widespread acceptance of event contracts—including those related to elections that were first available during the 2024 election cycle.

     Part I of this Article reviews the Commodity Futures Trading Commission’s rationales for recently attempting to ban election and sports-related event contracts as gambling. Part II applies those same rationales—a lack of hedging and pricing utility, opaque information sources, market manipulation concerns, and participant harm—to derivatives and securities investment products as well as gambling activities. It finds that those criteria fail to distinguish many recently popularized investment products from some gambling products, in particular sports gambling. Part III then searches for a workable principle to distinguish investing from gambling by aggregating distinctions proposed by jurists and scholars. Of these five potential heuristics—information-gathering potential, risk profile, time horizon, the existence of an underlying asset, and extant versus created risk—only the last principle sufficiently separates the two activities. Part IV concludes by framing this heuristic’s normative implications, describing an improved understanding of today’s market structures, and sketching two preliminary prescriptions for rethinking gambling and investing regulation.