Gambling is on the Rise – So Why Is Investing Still Banned?

Gambling is increasingly legal in the United States. New casinos are popping up outside of Las Vegas, and professional sports leagues that used to oppose sports betting are now embracing it. With the exception of certain age restrictions, gambling is open to the general public despite its dubious social benefits. But startup investing is not.

It's not investing in a venture capital fund or a fund that invests in collected art. These activities are restricted to so-called “accredited investors”. Instead of investing in startups that might succeed, people in the US risk money by playing casino games that they might lose.

Accredited investor rules restrict many types of investments to so-called “sophisticated investors.” But they don't measure complexity by knowledge or experience – there is no test. They are measured by wealth. In the eyes of the government, being wealthy means earning at least $200,000 in annual income — five times what the median American makes — or a net worth of more than $1 million.

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It is irrelevant how much a person knows about the investment. That means a 60-year-old who inherited a family construction business can invest in free AI startups, but a 24-year-old with a degree in machine learning cannot.

Leaving aside the inconvenient fact that most financial disasters involve one wealthy person interacting with others – Lehman Brothers, Bernie Madoff, Silvergate Bank, etc. – such laws are classical and grossly unfair. They exist to protect ordinary people from risky investments, but they are run by the same government that encourages them to gamble on the next Powerball jackpot. The lottery has terrible odds, even by gambling standards, because it is a government monopoly. But it goes directly to the poor. That is why economists call it “regressive tax”.

These variables play a minor role in wealth inequality. One of the main reasons why “the rich get richer” is because property values ​​exceed wages. In contrast, those who earn their wealth through investments have done better than those who work for a living. And while many types of investments have performed well in recent decades, those reserved for the “already rich” have done better.

Crypto has been different. Since its inception, Bitcoin (BTC) has been a rare investment that has been available to the public and has excelled. Ethereum (ETH) too, thanks to its global population. But the US government has since weighed in and told us that the Ethereum ICO violated the law. Not that anyone is hurt by it, the Ethereum Foundation is always above board. It was illegal because ordinary people were allowed to participate. If the government had its way, the 1 million percent refund would go to those who need it least.

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These rules are one of the reasons why most crypto projects now raise money from venture-capital funds (whose own investors must be accredited) or angel investors (who must also be accredited). It is also the reason why most crypto projects limit the eligible recipients for their airdrops. This government claims to protect people. But that government doesn't matter on the same day the complex is announced to countless people before the next fan sports match. More than half of Americans have reportedly gambled in the past year, but less than 20% qualify as accredited gamblers.

Crypto often serves as a mirror to the world we live in, forcing us to think deeply about how things work today for the simple reason that we have an alternative. We often think of the mirror as technology, but some of the most familiar images it presents are our aging legal and regulatory systems. Not a very flattering look.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.