Welcome back to a Numbers Game with Ryan Gerdusky. I want to thank you all for joining me again. Please like and subscribe to this podcast. It really means a lot, and if you give me a five star review, that's extra special. In the twenty nineteen movie Uncut Gems, Adam Sandler's character Howard Rattner exclaims, I made a risk, you gamble, and it's about to pay off for a lot of Americans. That's a lot of the last month has been when March Madness happened, it was about gambling, specifically online sports gambling, and that's what I want to talk about during this episode. According to the CBS News, three billion dollars in wages were placed in the last few weeks on the NCAA tournament. Online sports scambling has become a revolutionized industry in the last half decades since the Supreme Court declared that the Professional Amateur Sports Protection Act of nineteen ninety two, otherwise known as PASSPA, was unconstitutional. Signed by former President George HW. Bush, PASPA effectively outlawed sports gambling by corporations in most parts of the country, with the exceptions of four states Nevada, Delaware, Oregon and Massachusetts. Since the twenty eighteen decision by the Supreme Court, thirty United States have legalized sports gambling, which is Alabama, Alaska, California, Georgia, Hawaii, Idaho, Minnesota, Oklahoma, South Carolina, Texas, and Utah being the last holdouts of the sports gambling industry. With the market open and a majority of the country, thirty five different companies now operate sports gambling, like FanDuel Caesars Drafting. Those are the largest and their primary target are young men drawn to the industry. Well, how big is the industry? In twenty twenty four, more than one hundred and fifty billion dollars in bets were wager that's just in one year. That's larger than the GDP of Mississippi. Players are not only able to wager on games, but individual plays, leagues, individual players. This easy access to sports gambling on one's phone has led to a rise in gambling addiction, debt, and customers who are increasingly getting younger and younger when they start placing bets. A twenty twenty three survey from the NCAA found that fifty eight percent of eighteen to twenty two year olds placed at least one online sports bet. In the last decade, that number increased to seventy percent. For college kids living on campuses. Those young gamblers lose on average ten to three hundred dollars per day. If they did that every day, that means that sports gambling could be easily a larger part of their budget than their food, their rent, their social life. In three years since online sports gambling became legal in New Jersey, the number of people calling the state's gambling help hotline has tripled, with the largest demographic coming from Man between the ages of twenty five and thirty four. This is not you know, your average gambler. This is not somebody who in old man who would bring you to the race streets at the racetrack, my grandpa, the Usperman racetrack. But bring you know, bring some money from the social Security check to the racetrack and bet on the ponies, or go to the casino and hit some slots. These are young men who are increasingly becoming addicted to the lore that you can become wealthy just by betting from your phone. One gambling addiction counselor noted that her youngest client was a fifteen year old boy who spent nearly nine hundred thousand dollars on FanDuel using his parents' credit card and grandparents' Social Security checks while making bets at school. A lot of state governments are also making a lot of money, and they're hoping to make more using online sports gambling taxes. In twenty twenty, three states collected nearly one point eight billion dollars in tax revenue from sports gambling, but it's not evenly divided across all thirty nine states. New York raked in the most with eight hundred million dollars in a single year, while South Dakota only made one hundred thousand dollars. But all this money is really worth it for the states, bankruptcies have exploded that legalized online sports gambling. One study had that the number increased for twenty five to thirty percent in three to four years after the state legalized the industry. Young Men in low income areas are increasingly at risk, with a noted decline in their credit score of point five percent and debt collections up eight percent. The whole industry becomes even more sinister in nature when you realize that certain companies really just run monopolies in their respected states. Take the state of Florida. In twenty twenty one, Florida offered an exclusive sports gambling license to the Seminole Indian Tribe, and in return, the tribe had to agree to pay two point five billion dollars over the first five years, with revenue sharing continued until the agreement expires in twenty fifty one. After a prolonged court battle, they open up in November twenty twenty three and the tribe man operating deal with hard Rock Digital. Other companies like FanDuel and Sports can try to make their way into the industry in the state, but to no avail. Their only avenue is to work in partnership with hard Rock. In just the first forty five days after hard Rock has a monopoly in the state went live, addiction to hotline calls increased by one hundred and thirty eight percent. With convenience of mobile apps, individuals can place any time, anywhere, any place, and the companies know it because they monitor you. Is essentially a data company. They sit there and they know when you're most likely to bet, what advertisements make you want to bet more, and methods to keep you hooked using AI to make gambling more addictive and luring end users at younger ages with greater frequency, because essentially, these data companies are in the business of creating addicts. A study from the Southern Methodist University monitored seven hundred thousand online sports betters and found that less than five percent actually withdrew money from their betting apps, you know, anything, more than they deposit it. That five percent won more than one hundred million dollars, which was covered by the best place by eighty percent of betters. The bottom three percent of betters made up all the money for the profit they live off. Of the bottom three the people who are the most addicted, the most degenerative gamblers. They those industries prey on them to make money. That's how they sit there, and they actually draw, you know, profits from these things. And these are people who will go into debt. These are people who will steal from friends and families. If their addiction gets worth, they will sit there and mortgage their house and steal from their kids' college fund. This has all been happening over the last seven years. If you're one of these winners, people who do exceedly well online sports gambling companies are allowed to limit the amount of money you can gamble with. They limit their losses and your gains. And while many states force online sports betting companies to dissuade attics, most targeted advertisements and notifications directly encourage people to gamble frequently. I quoted the movie Uncut Gems the top of the show, and a film about a jeweler who is addictioned to gambling and the rush it gives him ultimately puts himself in a situation that costs his life. Millions of Americans are putting themselves in a financially precarry situation at a very very young age, and state governments are giving them the green light in the name of tax dollars. You're listening to It's a Numbers Game with Ryan Gerdosky. We'll be right back. My guest this week is Charles van Lehman. He is a fellow at the Manhattan Institute and overall a very smart guy. Charles, thank you for being here.

Welcome back to a Numbers Game with Ryan Gerdusky. I want to thank you all for joining me again. Please like and subscribe to this podcast. It really means a lot, and if you give me a five star review, that's extra special. In the twenty nineteen movie Uncut Gems, Adam Sandler's character Howard Rattner exclaims, I made a risk, you gamble, and it's about to pay off for a lot of Americans. That's a lot of the last month has been when March Madness happened, it was about gambling, specifically online sports gambling, and that's what I want to talk about during this episode. According to the CBS News, three billion dollars in wages were placed in the last few weeks on the NCAA tournament. Online sports scambling has become a revolutionized industry in the last half decades since the Supreme Court declared that the Professional Amateur Sports Protection Act of nineteen ninety two, otherwise known as PASSPA, was unconstitutional. Signed by former President George HW. Bush, PASPA effectively outlawed sports gambling by corporations in most parts of the country, with the exceptions of four states Nevada, Delaware, Oregon and Massachusetts. Since the twenty eighteen decision by the Supreme Court, thirty United States have legalized sports gambling, which is Alabama, Alaska, California, Georgia, Hawaii, Idaho, Minnesota, Oklahoma, South Carolina, Texas, and Utah being the last holdouts of the sports gambling industry. With the market open and a majority of the country, thirty five different companies now operate sports gambling, like FanDuel Caesars Drafting. Those are the largest and their primary target are young men drawn to the industry. Well, how big is the industry? In twenty twenty four, more than one hundred and fifty billion dollars in bets were wager that's just in one year. That's larger than the GDP of Mississippi. Players are not only able to wager on games, but individual plays, leagues, individual players. This easy access to sports gambling on one's phone has led to a rise in gambling addiction, debt, and customers who are increasingly getting younger and younger when they start placing bets. A twenty twenty three survey from the NCAA found that fifty eight percent of eighteen to twenty two year olds placed at least one online sports bet. In the last decade, that number increased to seventy percent. For college kids living on campuses. Those young gamblers lose on average ten to three hundred dollars per day. If they did that every day, that means that sports gambling could be easily a larger part of their budget than their food, their rent, their social life. In three years since online sports gambling became legal in New Jersey, the number of people calling the state's gambling help hotline has tripled, with the largest demographic coming from Man between the ages of twenty five and thirty four. This is not you know, your average gambler. This is not somebody who in old man who would bring you to the race streets at the racetrack, my grandpa, the Usperman racetrack. But bring you know, bring some money from the social Security check to the racetrack and bet on the ponies, or go to the casino and hit some slots. These are young men who are increasingly becoming addicted to the lore that you can become wealthy just by betting from your phone. One gambling addiction counselor noted that her youngest client was a fifteen year old boy who spent nearly nine hundred thousand dollars on FanDuel using his parents' credit card and grandparents' Social Security checks while making bets at school. A lot of state governments are also making a lot of money, and they're hoping to make more using online sports gambling taxes. In twenty twenty, three states collected nearly one point eight billion dollars in tax revenue from sports gambling, but it's not evenly divided across all thirty nine states. New York raked in the most with eight hundred million dollars in a single year, while South Dakota only made one hundred thousand dollars. But all this money is really worth it for the states, bankruptcies have exploded that legalized online sports gambling. One study had that the number increased for twenty five to thirty percent in three to four years after the state legalized the industry. Young Men in low income areas are increasingly at risk, with a noted decline in their credit score of point five percent and debt collections up eight percent. The whole industry becomes even more sinister in nature when you realize that certain companies really just run monopolies in their respected states. Take the state of Florida. In twenty twenty one, Florida offered an exclusive sports gambling license to the Seminole Indian Tribe, and in return, the tribe had to agree to pay two point five billion dollars over the first five years, with revenue sharing continued until the agreement expires in twenty fifty one. After a prolonged court battle, they open up in November twenty twenty three and the tribe man operating deal with hard Rock Digital. Other companies like FanDuel and Sports can try to make their way into the industry in the state, but to no avail. Their only avenue is to work in partnership with hard Rock. In just the first forty five days after hard Rock has a monopoly in the state went live, addiction to hotline calls increased by one hundred and thirty eight percent. With convenience of mobile apps, individuals can place any time, anywhere, any place, and the companies know it because they monitor you. Is essentially a data company. They sit there and they know when you're most likely to bet, what advertisements make you want to bet more, and methods to keep you hooked using AI to make gambling more addictive and luring end users at younger ages with greater frequency, because essentially, these data companies are in the business of creating addicts. A study from the Southern Methodist University monitored seven hundred thousand online sports betters and found that less than five percent actually withdrew money from their betting apps, you know, anything, more than they deposit it. That five percent won more than one hundred million dollars, which was covered by the best place by eighty percent of betters. The bottom three percent of betters made up all the money for the profit they live off. Of the bottom three the people who are the most addicted, the most degenerative gamblers. They those industries prey on them to make money. That's how they sit there, and they actually draw, you know, profits from these things. And these are people who will go into debt. These are people who will steal from friends and families. If their addiction gets worth, they will sit there and mortgage their house and steal from their kids' college fund. This has all been happening over the last seven years. If you're one of these winners, people who do exceedly well online sports gambling companies are allowed to limit the amount of money you can gamble with. They limit their losses and your gains. And while many states force online sports betting companies to dissuade attics, most targeted advertisements and notifications directly encourage people to gamble frequently. I quoted the movie Uncut Gems the top of the show, and a film about a jeweler who is addictioned to gambling and the rush it gives him ultimately puts himself in a situation that costs his life. Millions of Americans are putting themselves in a financially precarry situation at a very very young age, and state governments are giving them the green light in the name of tax dollars. You're listening to It's a Numbers Game with Ryan Gerdosky. We'll be right back. My guest this week is Charles van Lehman. He is a fellow at the Manhattan Institute and overall a very smart guy. Charles, thank you for being here.

Absolutely happy to be here, so, Charles.

Absolutely happy to be here, so, Charles.

In September twenty four you wrote an article for The Atlantic saying that online sports gambling not only was bad, but probably should be abolished. How did you come to that opinion. That's a very different opinion.

In September twenty four you wrote an article for The Atlantic saying that online sports gambling not only was bad, but probably should be abolished. How did you come to that opinion. That's a very different opinion.

I know. Well, there are a couple of different answers there. One answer is that I am more gung co about prohibiting things than many other people are, and I can explain why. But the more approximate relevant answer is I looked at the social science on what has happened with online sports gambling since it was legalized essentially nationwide in twenty eighteen, and I concluded it's been basically all downside and very little upside. It's important to note for the benefit of the audience that you know, back in the dystopian age of twenty seventeen, sports gambling online sports gambling was essentially legal nationwide. There were like a couple of carveouts thanks to this law from the nineteen nineties called the Professional Amateur Sports Protection Act PASPA, which basically which prohibited sports gambling because at the time, members of Congress, all the major sports leagues, everybody sort of agreed sports gambling was going to corrupt the game, it was going to be a huge issue. Fast forward to twenty eighteen, NC double A and New Jersey are in a lawsuit. Although they basically are colluding at this point for whether or not this story yeah, yeah, whether or not laws constitutional Supreme Court says no, it's not. The door is open for sports gambling legalization. Over the ensuing six seven years, sports gambling is legalized. I think the figure is now forty out of fifty states have leader sports gambling. Yeah, thirty nine plus DC I always get them. Yeah, and Missouri there are There are ballot initiatives and legislative action all the time. I've been asked to comment on both Hawaii and Minnesota's efforts to legalize in recent weeks. So it's going to continue to move because of the way that sports gambling rolled out across different states at different times. You can empirically and I can get how this works, but you can get a really good idea of what the effects of sports scambling are. You can pretty effectively overcome the correlation causation problem and say with a strong certainty what happens when you legalize sports gambling. And so there are a couple of research papers that basically look at really big groups of people, really groups of consumers in states that haven't have not legalized sports gambling. Point active legalization and all of the effects are like pretty remarkably bad. You see large increases in de delinquency, large increases in risk of bankruptcy or bankruptcy rises twenty to thirty percent against a small baseline, but still. One of my favorite figures is that for every dollar that people spend on sports gambling, they end up forgoing two dollars in investment, so like two dollars that don't go into your Schwab account or whatever. And all of those harms concentrate among the most precarious households. So the households that have a history of bankruptcy, their bankruptcy risk goes up, have a history of overdrawing their account, the risk goes up, and particularly.

I know. Well, there are a couple of different answers there. One answer is that I am more gung co about prohibiting things than many other people are, and I can explain why. But the more approximate relevant answer is I looked at the social science on what has happened with online sports gambling since it was legalized essentially nationwide in twenty eighteen, and I concluded it's been basically all downside and very little upside. It's important to note for the benefit of the audience that you know, back in the dystopian age of twenty seventeen, sports gambling online sports gambling was essentially legal nationwide. There were like a couple of carveouts thanks to this law from the nineteen nineties called the Professional Amateur Sports Protection Act PASPA, which basically which prohibited sports gambling because at the time, members of Congress, all the major sports leagues, everybody sort of agreed sports gambling was going to corrupt the game, it was going to be a huge issue. Fast forward to twenty eighteen, NC double A and New Jersey are in a lawsuit. Although they basically are colluding at this point for whether or not this story yeah, yeah, whether or not laws constitutional Supreme Court says no, it's not. The door is open for sports gambling legalization. Over the ensuing six seven years, sports gambling is legalized. I think the figure is now forty out of fifty states have leader sports gambling. Yeah, thirty nine plus DC I always get them. Yeah, and Missouri there are There are ballot initiatives and legislative action all the time. I've been asked to comment on both Hawaii and Minnesota's efforts to legalize in recent weeks. So it's going to continue to move because of the way that sports gambling rolled out across different states at different times. You can empirically and I can get how this works, but you can get a really good idea of what the effects of sports scambling are. You can pretty effectively overcome the correlation causation problem and say with a strong certainty what happens when you legalize sports gambling. And so there are a couple of research papers that basically look at really big groups of people, really groups of consumers in states that haven't have not legalized sports gambling. Point active legalization and all of the effects are like pretty remarkably bad. You see large increases in de delinquency, large increases in risk of bankruptcy or bankruptcy rises twenty to thirty percent against a small baseline, but still. One of my favorite figures is that for every dollar that people spend on sports gambling, they end up forgoing two dollars in investment, so like two dollars that don't go into your Schwab account or whatever. And all of those harms concentrate among the most precarious households. So the households that have a history of bankruptcy, their bankruptcy risk goes up, have a history of overdrawing their account, the risk goes up, and particularly.

Who are not typically good with money to begin with, become worse.

Who are not typically good with money to begin with, become worse.

Yes, yes, precisely. Again, you see this in particular among young men in poor counties. That's really where the effects ends of concentrating. And so you get this picture of like, do you know sports gamblers?

Yes, yes, precisely. Again, you see this in particular among young men in poor counties. That's really where the effects ends of concentrating. And so you get this picture of like, do you know sports gamblers?

My brother gambles on sports, but like I think like very little, but I don't follow any sports, so I don't know. I'm not I am the worst person to talk about sports on period, but like I kind of know, but I would never. I don't have any interest.

My brother gambles on sports, but like I think like very little, but I don't follow any sports, so I don't know. I'm not I am the worst person to talk about sports on period, but like I kind of know, but I would never. I don't have any interest.

I don't know.

I don't know.

To me, going to a craps table is the only fun game because it's a communal game. Everything else is like antisocial in a certain way and just not as fun.

To me, going to a craps table is the only fun game because it's a communal game. Everything else is like antisocial in a certain way and just not as fun.

If you ask around, you know somebody who knows somebody who's thousands of dollars tens of thousands of dollars in the hole on a sports scambling app right now, And that guy is probably young, almost certainly male, probably not particularly skilled, probably particularly highly educated, really cannot be afford to be that deep in debt. We're pretty sure that those people's lives have gotten a lot worse by virtue legal lations sports. Yeah.

If you ask around, you know somebody who knows somebody who's thousands of dollars tens of thousands of dollars in the hole on a sports scambling app right now, And that guy is probably young, almost certainly male, probably not particularly skilled, probably particularly highly educated, really cannot be afford to be that deep in debt. We're pretty sure that those people's lives have gotten a lot worse by virtue legal lations sports. Yeah.

I saw this one interview with this one debt gambling counselor, and she said her youngest gambling client or a gambling adic client, was fifteen years old and had spent nine hundred thousand dollars basically taking his grandma's social Security and his parents' credit card their knowledge, and just like over the course of several years, nine hundred thousand dollars at fifteen years old.

I saw this one interview with this one debt gambling counselor, and she said her youngest gambling client or a gambling adic client, was fifteen years old and had spent nine hundred thousand dollars basically taking his grandma's social Security and his parents' credit card their knowledge, and just like over the course of several years, nine hundred thousand dollars at fifteen years old.

What is so?

What is so?

The the goal for states is they're constantly told more tax revenue, more tax revenue, what I've read is that there is a huge difference in what states are making a lot of money for tax revenue and what states are making. Me a little like South Dakota's making one hundred thousand dollars a year for tax revenue, New york'sick eight making eight hundred million dollars. Is the is it worth it to these states? Like, is the financial cost from the deprivation of social capital from the increase in bankruptcies? Is that worth one hundred thousand dollars in South Dakota?

The the goal for states is they're constantly told more tax revenue, more tax revenue, what I've read is that there is a huge difference in what states are making a lot of money for tax revenue and what states are making. Me a little like South Dakota's making one hundred thousand dollars a year for tax revenue, New york'sick eight making eight hundred million dollars. Is the is it worth it to these states? Like, is the financial cost from the deprivation of social capital from the increase in bankruptcies? Is that worth one hundred thousand dollars in South Dakota?

I mean, no, it's my answer. You know, I think the important thing there is that like that's going to be a function of demand. Taxation is like you know, how big is the market is it's just a percentage of the transaction, and so the more transactions, the more tax revenue. So yeah, I mean, like, if you add up all the sports gambling revenue in a given quarter, New York ends up being I forget what the exact fraction is, but it's somewhere between a quarter and a half of all of the revenue. But like, objectively speaking, even in New York, you're not getting that much money if you think about it as a fraction of total government outlays. It's consistently under one percent across states. I think Indiana, it's like one percent of all their revenue comes to sports scampling. You get less out of sports scambling then you get from alcohol taxes, tobacco taxes, from marijuana taxes, all those things.

I mean, no, it's my answer. You know, I think the important thing there is that like that's going to be a function of demand. Taxation is like you know, how big is the market is it's just a percentage of the transaction, and so the more transactions, the more tax revenue. So yeah, I mean, like, if you add up all the sports gambling revenue in a given quarter, New York ends up being I forget what the exact fraction is, but it's somewhere between a quarter and a half of all of the revenue. But like, objectively speaking, even in New York, you're not getting that much money if you think about it as a fraction of total government outlays. It's consistently under one percent across states. I think Indiana, it's like one percent of all their revenue comes to sports scampling. You get less out of sports scambling then you get from alcohol taxes, tobacco taxes, from marijuana taxes, all those things.

Now, scambling is not like the equivalent of like o zembic is to like the Netherlands or Denmark.

Now, scambling is not like the equivalent of like o zembic is to like the Netherlands or Denmark.

Yeah, to Denmark. No, it's and this is like always true. Taxing sin is not a great way to generate revenue. Is a good rule of thumb, Like you just you don't get a lot of money out of it, partially because the goal of syn taxes is mostly to deter the behavior, not to generate revenue. Like ultimately, unfortunately, you get the most revenue out of taxing productive activities like generating income or being a business or owning a home.

Yeah, to Denmark. No, it's and this is like always true. Taxing sin is not a great way to generate revenue. Is a good rule of thumb, Like you just you don't get a lot of money out of it, partially because the goal of syn taxes is mostly to deter the behavior, not to generate revenue. Like ultimately, unfortunately, you get the most revenue out of taxing productive activities like generating income or being a business or owning a home.

Yeah yeah, so how much does because what everything I've done research on AI seems to play a very important part of the online sports gambling industry because it is built to learn when you're most likely to make a bet, how to make you more addictive, what things appeal to you. Has I mean, AI is always has been around, obviously since twenty eighteen, but it's become much more advanced in the last seven years. How much has that played a part into the growing addiction.

Yeah yeah, so how much does because what everything I've done research on AI seems to play a very important part of the online sports gambling industry because it is built to learn when you're most likely to make a bet, how to make you more addictive, what things appeal to you. Has I mean, AI is always has been around, obviously since twenty eighteen, but it's become much more advanced in the last seven years. How much has that played a part into the growing addiction.

I mean tremendously. And I would talk more broadly about the category of machine learning, because you know some machine many AI things and machine learning things. This doesn't really matter for purposes of the conversation. But yeah, you know, when you interact with an app, whether it's a sports gambling app or a social media app, that app is collecting information about you, it's collecting information about everybody else who's using the app too, And then you apply machine learning algorithms to all of that data and you can start to recognize patterns in the space of gambling. And this is true before legalization. This is true in casinos for example. This is true of like slot machines. Gambling follows an eighty twenty law. Twenty percent of your users are in the generally eighty percent of your revenue. It's actually like probably more than that, like more concern to that. It's probably like three to five percent of your users are doing ninety percent of your revenue. By some estimates, I think it's five percent of fifty and ten percent is closer to ninety And so you can pick those guys out and then you can say, when does he gamble? Does he do it at night? Can I send him a prompt to reinforce him at night? What is the line that I can offer him to bet a little bit more? And you can do this all automatically. It's very straightforward from a machine learning perspective, because all it is is pattern recognition. But this gets, by the way, to a deeper point about like my argument for prohibition as opposed to sort of regulation, which is that capitalism is great. I like capitalism. Capitalism is about the efficient alignment of the interests of buyers and sellers. And when that the things that the buyer wants are good for him, that's great. When the thing that the buyer wants room are bad for him and he compulsively consumes them because he's addicted to them, that's not great. And in that situation you end up applying free market innovation to the problem of getting people to like ruin their lives. I've called this the iron law of liberalization. It's like when you liberalize goods, when you liberalize advice goods, the market applies its innovative capacity to it, and you end up with a much more potent, much more sellable product. Basically, whether it is marijuana, whether it is gambling, whether it is mushrooms, you see the same trend.

I mean tremendously. And I would talk more broadly about the category of machine learning, because you know some machine many AI things and machine learning things. This doesn't really matter for purposes of the conversation. But yeah, you know, when you interact with an app, whether it's a sports gambling app or a social media app, that app is collecting information about you, it's collecting information about everybody else who's using the app too, And then you apply machine learning algorithms to all of that data and you can start to recognize patterns in the space of gambling. And this is true before legalization. This is true in casinos for example. This is true of like slot machines. Gambling follows an eighty twenty law. Twenty percent of your users are in the generally eighty percent of your revenue. It's actually like probably more than that, like more concern to that. It's probably like three to five percent of your users are doing ninety percent of your revenue. By some estimates, I think it's five percent of fifty and ten percent is closer to ninety And so you can pick those guys out and then you can say, when does he gamble? Does he do it at night? Can I send him a prompt to reinforce him at night? What is the line that I can offer him to bet a little bit more? And you can do this all automatically. It's very straightforward from a machine learning perspective, because all it is is pattern recognition. But this gets, by the way, to a deeper point about like my argument for prohibition as opposed to sort of regulation, which is that capitalism is great. I like capitalism. Capitalism is about the efficient alignment of the interests of buyers and sellers. And when that the things that the buyer wants are good for him, that's great. When the thing that the buyer wants room are bad for him and he compulsively consumes them because he's addicted to them, that's not great. And in that situation you end up applying free market innovation to the problem of getting people to like ruin their lives. I've called this the iron law of liberalization. It's like when you liberalize goods, when you liberalize advice goods, the market applies its innovative capacity to it, and you end up with a much more potent, much more sellable product. Basically, whether it is marijuana, whether it is gambling, whether it is mushrooms, you see the same trend.

So how much if banning is not possible because a lot of says don't want to ban it, they've just been legalizing it, how much can we trust the industry to regulate.

So how much if banning is not possible because a lot of says don't want to ban it, they've just been legalizing it, how much can we trust the industry to regulate.

Itself as a historical matter by analysis other industries, not at all. The industry will sort of come out. I mean, the industry's line is basically we want self opt out, and I'm like, that's great, but what is actually it means I can put my hand up and say, don't let me gamble anymore. It's like, so you know, I can put myself on a list, and it's like that's great, but actually not very helpful for somebody who's in active addiction, because like addiction is reinforcing. Like you know, my friend Keith Humphries is a Stanford addiction specialist, likes to say addiction is a chronic disease, but it's not a chronic disease like like you know, MS or whatever, because you in sometimes enjoy having it, that's why you're addicted to it. So people are not going to opt themselves out. And the reality is you look at vice industries, they are they have every rational interest in encouraging people to do bad things like I, you know, I think that's bad, but ultimately just sort of very predictable. This is true for big tobacco, This is true for the sales for pornography, for the seals in marijuana. Like the market interest, the market interest encourages the bad behavior because that's how you end up making a profit. And so you know, from a regulatory perspective, two things are true. One is I don't really think the industry is going to regulate itself. Two is that any efficacious regulation is going to be something that the industry fights tooth and nail, because you're going to end up sort of taking out that like ability to target the ten to twenty percent that makes up all of their profit.

Itself as a historical matter by analysis other industries, not at all. The industry will sort of come out. I mean, the industry's line is basically we want self opt out, and I'm like, that's great, but what is actually it means I can put my hand up and say, don't let me gamble anymore. It's like, so you know, I can put myself on a list, and it's like that's great, but actually not very helpful for somebody who's in active addiction, because like addiction is reinforcing. Like you know, my friend Keith Humphries is a Stanford addiction specialist, likes to say addiction is a chronic disease, but it's not a chronic disease like like you know, MS or whatever, because you in sometimes enjoy having it, that's why you're addicted to it. So people are not going to opt themselves out. And the reality is you look at vice industries, they are they have every rational interest in encouraging people to do bad things like I, you know, I think that's bad, but ultimately just sort of very predictable. This is true for big tobacco, This is true for the sales for pornography, for the seals in marijuana. Like the market interest, the market interest encourages the bad behavior because that's how you end up making a profit. And so you know, from a regulatory perspective, two things are true. One is I don't really think the industry is going to regulate itself. Two is that any efficacious regulation is going to be something that the industry fights tooth and nail, because you're going to end up sort of taking out that like ability to target the ten to twenty percent that makes up all of their profit.

Right, And I read in sports gambling it's like the bottom three percent of losers pay some substantially higher amount of the entire industry, Like they depend on the most degenerative gamblers who are so deeply addictive, who like you know, cash their house out to sit there and gamble. It is they can't function as an industry without the deeply addictive right.

Right, And I read in sports gambling it's like the bottom three percent of losers pay some substantially higher amount of the entire industry, Like they depend on the most degenerative gamblers who are so deeply addictive, who like you know, cash their house out to sit there and gamble. It is they can't function as an industry without the deeply addictive right.

You call those, you call those whales, And this is the again, this is the law across all addictive goods. Is that, like, you know, the way to think about it is, I don't know how often your brother bets, but let's say he bets on the game every Sunday. If you have a guy who's placing I don't know, ten bets a day, then he's doing seven hundred bets a week, which means that he is generating more revenue than your brother, brother, and six hundred and ninety eight other people who bet only once a week. That's how you end up with that, like preatodynamic, But if you can find the guy who bets ten times a day, he is worth way more effort than identifying the six hundred and ninety nine other people because he will give you exponentially more revenue. So like, yeah, it's it's just that's how the math ends up working out. Is that guy dominates. He dominates as a term in the equation.

You call those, you call those whales, And this is the again, this is the law across all addictive goods. Is that, like, you know, the way to think about it is, I don't know how often your brother bets, but let's say he bets on the game every Sunday. If you have a guy who's placing I don't know, ten bets a day, then he's doing seven hundred bets a week, which means that he is generating more revenue than your brother, brother, and six hundred and ninety eight other people who bet only once a week. That's how you end up with that, like preatodynamic, But if you can find the guy who bets ten times a day, he is worth way more effort than identifying the six hundred and ninety nine other people because he will give you exponentially more revenue. So like, yeah, it's it's just that's how the math ends up working out. Is that guy dominates. He dominates as a term in the equation.

And there's nothing that they can like, they don't have to sit there and say, here's what I make a year, So I make one hundred thousand dollars a year or whatever, I can't possibly give you a million dollars. Like, there's nothing that this I mean this.

And there's nothing that they can like, they don't have to sit there and say, here's what I make a year, So I make one hundred thousand dollars a year or whatever, I can't possibly give you a million dollars. Like, there's nothing that this I mean this.

This gets to the regulatory problem, right, because there are there are regulatory proposals that suggest things like deposit limits or having some third party confirmation that this person is able to put money down, or saying people can only put down a debit card, they can't put down a credit card. But like the industry will fight this tooth and nail because that's where all their money comes from, right, And the industry in many senses has a head start on all of this. You may remember the big sports books Draft Draft King's FanDuel existed prior to twenty eighteen. They were doing this sort of like gray area, like fantasy sports. You could, you know, build of fancy sports. Like. The entire reason for that was to establish an infrastructure so that that once sports gambling became legal, they were in a position to dominate the marketplace.

This gets to the regulatory problem, right, because there are there are regulatory proposals that suggest things like deposit limits or having some third party confirmation that this person is able to put money down, or saying people can only put down a debit card, they can't put down a credit card. But like the industry will fight this tooth and nail because that's where all their money comes from, right, And the industry in many senses has a head start on all of this. You may remember the big sports books Draft Draft King's FanDuel existed prior to twenty eighteen. They were doing this sort of like gray area, like fantasy sports. You could, you know, build of fancy sports. Like. The entire reason for that was to establish an infrastructure so that that once sports gambling became legal, they were in a position to dominate the marketplace.

And they have essential monopolies in certain states. Yeah, every single not every and not everyone has a license in every single state because of it. Earlier in the podcast, why is this so pervasive among young men.

And they have essential monopolies in certain states. Yeah, every single not every and not everyone has a license in every single state because of it. Earlier in the podcast, why is this so pervasive among young men.

That's a great question, and I think there are lots of different levels on which one could answer it, and you can think about it very abstractly, as you know. One answer that I like is it's just that, you know, there is this sense of hustle culture among young men that like, the way to make it is to get rich quick, and gambling offers a way to get rich quick. But at a deeper level, it's just because young men are stupid, Like and we've been young men. I've been there exactly, I know exactly what it's like. Young Men are highly impulsive, they're prone to showing off. They like they they have a much higher risk tolerance than they're sex same age peers or their same sex higher age peers. Like you did stupid stuff when you were a young.

That's a great question, and I think there are lots of different levels on which one could answer it, and you can think about it very abstractly, as you know. One answer that I like is it's just that, you know, there is this sense of hustle culture among young men that like, the way to make it is to get rich quick, and gambling offers a way to get rich quick. But at a deeper level, it's just because young men are stupid, Like and we've been young men. I've been there exactly, I know exactly what it's like. Young Men are highly impulsive, they're prone to showing off. They like they they have a much higher risk tolerance than they're sex same age peers or their same sex higher age peers. Like you did stupid stuff when you were a young.

Man from two or seventeen twenty two. I was probably clinically insane. They probably could have locked me up because absolutely absolutely right.

Man from two or seventeen twenty two. I was probably clinically insane. They probably could have locked me up because absolutely absolutely right.

And can you imagine if somebody been like, here's a phone, you can bet thousands and thousands of dollars, and hey, you could make it big, like terrible idea.

And can you imagine if somebody been like, here's a phone, you can bet thousands and thousands of dollars, and hey, you could make it big, like terrible idea.

Yeah, and that I had like one hundred dollars credit Lindo when I was like saying eighteen years old, I.

Yeah, and that I had like one hundred dollars credit Lindo when I was like saying eighteen years old, I.

Think about this a lot. If you look at if you look at trends in uh fireworks associated deaths every year, there's like big spikes on exactly the days that you would expect. It's July fourth, one hundred firework deaths. But like, if you look into the data, it's all young man, it's just like dudes doing stupid stuff with fireworks and let me launch.

Think about this a lot. If you look at if you look at trends in uh fireworks associated deaths every year, there's like big spikes on exactly the days that you would expect. It's July fourth, one hundred firework deaths. But like, if you look into the data, it's all young man, it's just like dudes doing stupid stuff with fireworks and let me launch.

One off my ass or like or whatever.

One off my ass or like or whatever.

Exactly. Yeah, and if you could monetize that stupidity, like you'd make a lot of money. And in some senses, sports gambling is monetizing that stupidity.

Exactly. Yeah, and if you could monetize that stupidity, like you'd make a lot of money. And in some senses, sports gambling is monetizing that stupidity.

What how would ban work?

What how would ban work?

Like?

Like?

How is it just pull the licensing from it? Or I mean it's because it's not legal for a nationwide sports gambling. It's only legal in states. So would a state just pull the licensing? How would that work if they wanted to ban it?

How is it just pull the licensing from it? Or I mean it's because it's not legal for a nationwide sports gambling. It's only legal in states. So would a state just pull the licensing? How would that work if they wanted to ban it?

Yeah? So, and I want to back it up a little bit to talk about the logic because I think again, just to be very clear, between the early nineteen nineties and twenty eighteen, this was the status quote you could not legally specifically you could not legally run a sports gambling concern. States and private companies could not operate a sports gambling business for profit or for state revenue. You and I could have made a bet that would have been completely legal. That would have been fine.

Yeah? So, and I want to back it up a little bit to talk about the logic because I think again, just to be very clear, between the early nineteen nineties and twenty eighteen, this was the status quote you could not legally specifically you could not legally run a sports gambling concern. States and private companies could not operate a sports gambling business for profit or for state revenue. You and I could have made a bet that would have been completely legal. That would have been fine.

It's like we could have done the Super Bowl.

It's like we could have done the Super Bowl.

Yes, exactly. Yeah. So the issue is that commercial interests or state interests cannot participate in that exchange. They can't try to profit off of that exchange. That's a really easy thing to prohibit because particularly large companies have a very strong and incentive to follow the law because otherwise they get hosed. It's really bad for your profit if you don't follow the law. The federal government will come after.

Yes, exactly. Yeah. So the issue is that commercial interests or state interests cannot participate in that exchange. They can't try to profit off of that exchange. That's a really easy thing to prohibit because particularly large companies have a very strong and incentive to follow the law because otherwise they get hosed. It's really bad for your profit if you don't follow the law. The federal government will come after.

You write that down.

You write that down.

Yeah, oka recommend sorongly recommend following law. No, but so like so, like, all you have to do at a state level is just say this is not worth it. You have to win the political battle, which is really hard. But then all you do is you say we're going to march the number of licenses down to zero over the next five years, and we're going to be a law, and then it's done. Like you can have cross state you know, some cross state issues like people will go, I touch to somebody who would like stand in the corner of his apartment in New York so he could gamble in New Jersey. People will use VPNs, but you'll substantially reduce the level of usage. And we know this because that's what it was like in twenty seventeen. And also theoretically do things at the federal level. Part of the issue with the pass as it was overturned is that is the specific state carve outs. I think there's an open question of if you could have a nationwide, across the board ban on sports gambling, because there is you know, there is some nexus to interstate commerce basically anytime you use the Internet. So like the FEDS probably have the capacity to ban it writ large, but there's an open question there.

Yeah, oka recommend sorongly recommend following law. No, but so like so, like, all you have to do at a state level is just say this is not worth it. You have to win the political battle, which is really hard. But then all you do is you say we're going to march the number of licenses down to zero over the next five years, and we're going to be a law, and then it's done. Like you can have cross state you know, some cross state issues like people will go, I touch to somebody who would like stand in the corner of his apartment in New York so he could gamble in New Jersey. People will use VPNs, but you'll substantially reduce the level of usage. And we know this because that's what it was like in twenty seventeen. And also theoretically do things at the federal level. Part of the issue with the pass as it was overturned is that is the specific state carve outs. I think there's an open question of if you could have a nationwide, across the board ban on sports gambling, because there is you know, there is some nexus to interstate commerce basically anytime you use the Internet. So like the FEDS probably have the capacity to ban it writ large, but there's an open question there.

Well, thank you so much for being on this podcast. You are so smart on this and many other topics. How can people read more of your stuff? Where could they go? How can they find you?

Well, thank you so much for being on this podcast. You are so smart on this and many other topics. How can people read more of your stuff? Where could they go? How can they find you?

Absolutely? I'm over on X Formally on Twitter, I'm at Charles F. Lehmann L e hm An you can also find me. I'm on substack. I'm at the Causal c A U S A L Fallacy, which nobody can ever find. It's really self defeating. I can explain it. It's like a wonky reference. And then I'm also I'm at City Journal, which is the flagship publication of the Manhattanants Too, where we publish lots of good things every week citydask journal dot org.

Absolutely? I'm over on X Formally on Twitter, I'm at Charles F. Lehmann L e hm An you can also find me. I'm on substack. I'm at the Causal c A U S A L Fallacy, which nobody can ever find. It's really self defeating. I can explain it. It's like a wonky reference. And then I'm also I'm at City Journal, which is the flagship publication of the Manhattanants Too, where we publish lots of good things every week citydask journal dot org.

Most of your stuff. It's really really good City Journal. So thank you so much being on this podcast.

Most of your stuff. It's really really good City Journal. So thank you so much being on this podcast.

I really appreciate it absolutely thanks having me on.

I really appreciate it absolutely thanks having me on.

You're listening to It's The Numbers Game with Ryan Gardowski. We'll be right back after this message. Now is the time for the Ask Me Anything segment of the show, where you get to ask me any question quite literally about anything. If you want to be part of the topic, please email me Ryan at Numbers Game podcast dot com. That's Ryan at Numbers Game podcast dot com. It's a plural numbers and maybe I'll be talking about your question next week. This question came from a listener named Julie. She said, Ryan, do you miss DNN.

You're listening to It's The Numbers Game with Ryan Gardowski. We'll be right back after this message. Now is the time for the Ask Me Anything segment of the show, where you get to ask me any question quite literally about anything. If you want to be part of the topic, please email me Ryan at Numbers Game podcast dot com. That's Ryan at Numbers Game podcast dot com. It's a plural numbers and maybe I'll be talking about your question next week. This question came from a listener named Julie. She said, Ryan, do you miss DNN.

No?

No?

I miss when I watched clips online because I don't really watch it on TV. When I watch it online and I see someone making an ass nine statement in common and you want to scream the television and I wish I was there to sit there and debate them. That's really the only part I miss. I miss the makeup and hair people. They were really nice. But I don't miss being on cable News. You know, I never worked for them. It wasn't like I lost the paycheck. You do it for free. Is that they're kind of promote yourself and your ideas, and I thought I made pretty smart ones. But whatever I mean. Actually, it's so funny. I saw ed Martin the other day and he said he's also been from Scena, and he said, we need to start a club that we can all get together with and hang out about it. But I don't miss cable News. I don't miss seeing him, particularly because I don't think that you get all that much enjoyment out of just screaming at another person during the course of an hour long show or even fifteen minutes. It was great while last and then yeah, that's that anyway. Thank you so much for listening this week. I hope you listen back later on this week for the second episode, where it will be wonderful. I think we're gonna have our guests and culter to talk about judges, So please like and subscribe to this podcast on iHeartRadio, app, Apple Podcasts, or wherever you get your podcasts. See you later this week.

I miss when I watched clips online because I don't really watch it on TV. When I watch it online and I see someone making an ass nine statement in common and you want to scream the television and I wish I was there to sit there and debate them. That's really the only part I miss. I miss the makeup and hair people. They were really nice. But I don't miss being on cable News. You know, I never worked for them. It wasn't like I lost the paycheck. You do it for free. Is that they're kind of promote yourself and your ideas, and I thought I made pretty smart ones. But whatever I mean. Actually, it's so funny. I saw ed Martin the other day and he said he's also been from Scena, and he said, we need to start a club that we can all get together with and hang out about it. But I don't miss cable News. I don't miss seeing him, particularly because I don't think that you get all that much enjoyment out of just screaming at another person during the course of an hour long show or even fifteen minutes. It was great while last and then yeah, that's that anyway. Thank you so much for listening this week. I hope you listen back later on this week for the second episode, where it will be wonderful. I think we're gonna have our guests and culter to talk about judges, So please like and subscribe to this podcast on iHeartRadio, app, Apple Podcasts, or wherever you get your podcasts. See you later this week.