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This whole regulation is unneeded. You can bring your money to a casino and put it all on zero. Or buy a thousand lottery tickets. But investing in risky busin

This whole regulation is unneeded. You can bring your money to a casino and put it all on zero. Or buy a thousand lottery tickets. But investing in risky businesses needs to be walled off to the wealthy. What we really need is the real consequences for fraud / false financial claims.

TaylorGood 9y ago
In comparison it becomes laughable. Old rules?
Zelphyr 9y ago
The Libertarian in me agrees but then I think of the psychology of how people approach casino gambling vs business investing. For the former, I feel like people know going in that the odds are in favor of the house and they come to terms with that by saying to themselves that its entertainment. In other words, they kind-of expect to get screwed. In business investing its the opposite. They really do think they stand a chance at making millions even when the odds may actually be worse than gambling in some cases, especially if they fail to do their due diligence. So maybe instead of regulation we simply need a legal, notarized document signed for every investment that states "I am aware that I stand a very high chance of losing all of my money and relinquish my rights to sue anyone involved unless outright fraud has been established." Probably still wouldn't work, but its worth consideration.
- gascan 9y ago
  unless outright fraud has been established I've always suspected that was part of the reason- it's simply far easier to defraud small fry who don't have the experience to spot fraud or the resources to prosecute it.
  - JumpCrisscross 9y ago
    > it's simply far easier to defraud small fry who don't have the experience to spot fraud or the resources to prosecute it Legal and diligence costs on most illiquid investments are tens of thousands of dollars. Anyone investing small amounts (a) can’t afford the diligence, (b) probably doesn’t know what they’re doing and (c) can’t afford to lose even that small amount. That attracts a specific variety of fraudster (see Bitconnect). We’ve seen this happen every time we break the wall between markets with high and low information assymetry.
- tomkarlo 9y ago
  Generally any compliant securities issuance will have something to this effect - the "Risk Factors" section. The problem is it's often drowned out the broader hype of an offering, or a seller will say "they make us say that, don't worry about it." Unscrupulous issuers have historically targeted less-sophisticated buyers who are less likely to be experienced investors - and also less likely to retain their own counsel to review an offering. Hence the accredited req.
arcticbull 9y ago
At the casino your risks are known, and well-defined. In blackjack with basic strategy your expected value is, what, 49%? Craps, it's similar. Just look it up. Nobody at the table playing, or even running the show, can manipulate the outcome except by changing the parameters of the game as posted in the (I assume) regulated odds boards. Investing in an unregulated market is absolutely nothing like that. Your outcome is undefined, but you're subject to front-running, tape painting, wash trading, fake news stories and tens of other well-known scams. The regulations aren't to stop the poor from making money. If it were a sure-fire way to make money, everyone would just do it all the time. It's the Trumpian "trade wars are easy to win" argument. If it's easy, everyone would win, so nobody would win, end of story. It's to limit people to what they can afford to lose (or at least try). And it's done in the social good also, as people who become insolvent then utilize the social safety net to get back on their feet. Yes, we need the real consequences, and what you're describing is literally regulation.
- mancerayder 9y ago
  But don't they, even in Blackjack, use multiple card decks to kill the odds calculation unless you're Rain Man? Sorry, but if cryptocurrency is prone to manipulation and fraud (it is), casinos are tens times worse because not only do they do that, as the House must win as a business strategy, but they appeal to people who have addiction issues. I'm not against casinos but to defend them against cryptocurrency trading and suggest average Joe is better off playing Roulette is in my opinion a misplaced attempt at morality.
  - tomkarlo 9y ago
    That's to make it difficult for a player to calculate the odds of a particular hand. The odds of the overall game are still pre-defined and regulated. Casinos can't/won't promise that you'll make money by playing their games. Securities are generally purchased with the expectation that you'll make money, and are marketed up to the allowable line of suggesting they are good ways to make money. Allowing people to play a game where the odds are openly against them, vs. buying a security where they're being told the odds favor them but it may be otherwise, are very different propositions when you're asking if they're "fraud".
tomkarlo 9y ago
Casinos (and lotteries) are subject to heavy regulation, including oversight on the odds of the games they offer. The problem with back-end enforcement (and those laws do exist) is that it doesn't remove the incentive to try issuing a scam-ish security and hope you will evade prosecution, and the damage done can take years to unwind, if it's even possible at all. This is why there are regulations on public offerings of securities to non-accredited investors.
- bufferoverflow 9y ago
  Really? 1) So what lottery odds are not allowed? 2) Can you name a single lottery with odds in your favor? Cause with cryptocurrencies, so far, the investors have made money on average.
  - tomkarlo 9y ago
    1) Here's the lottery code for CA. Payouts are regulated - by it's nature, the odds of a lottery depend on the number of tickets, but typically, there are strict rules about the minimum % of receipts paid back to winners (which is effectively equivalent to setting house odds), and in many cases, only the state government can run them. http://static.www.calottery.com/~/media/Publications/Lottery_Regulations/Lottery%20Act%20for%20Website%2007-14.pdf http://static.www.calottery.com/~/media/Publications/Lottery... 2.) There's been multiple cases where lotteries were -accidentally- setup such that the odds were in the favor of players if they pursued the right strategy. Here's one: https://www.theatlantic.com/business/archive/2016/02/how-mit-students-gamed-the-lottery/470349/ https://www.theatlantic.com/business/archive/2016/02/how-mit... A history of gains to investors aren't an definite indicatio that an investment is good, or that the overall odds favor the investor. If I go into a casino and win roulette 3 times in a row, that doesn't mean the wheel is biased in my favor. Similarly, in most ponzi schemes, all of the early investors make money. (And even in a non-fraudulent situation, simply having an investment go up doesn't mean it was a good investment, when examined on a risk-adjusted basis vs. other alternate options.)
cies 9y ago
> But investing in risky businesses needs to be walled off to the wealthy. What we really need is the real consequences for fraud / false financial claims. Thanks for saying this. So true.
techman9 9y ago
You wildly overestimate how good most people are at evaluating risks. This isn't a couple hundred bucks over a weekend in vegas we're talking about, it's peoples' life savings or retirement accounts or childrens' college funds. If given the opportunity to invest in something with potentially extreme returns and poorly represented risks, many people will take it either because they don't understand the risk involved or are not very good at internalizing the probability that they lose money. Just look at the ICO scams that abound today or the 2008 financial crisis. While massive deregulation is nice in spirit and would theoretically allow people more financial freedom, I can't imagine it being viable (at least without a ton more compulsory financial education).
- hndamien 9y ago
  You underestimate how much people plough into gambling, where the house will win if you play long enough.
- bufferoverflow 9y ago
  > This isn't a couple hundred bucks over a weekend in vegas we're talking about, it's peoples' life savings or retirement accounts or childrens' college funds. You think people had never lost their life savings in casinos or lotteries? I can walk into a casino and bet $5K on every roulette roll. I personally know people who lost $30-40K in Atlantic City casinos.
themagician 9y ago
Lol. It’s not about risk, it’s about keeping poor people out of the market. It’s why they are trying to change the rules to make it even harder—because there are simply too many people with a million in cash liquidity today. Can’t have that.
pbreit 9y ago
Gambling is one of the most heavily regulated businesses on the planet.
- bufferoverflow 9y ago
  Yet anybody can walk into a casino and gamble.
deleted 9y ago
[deleted]

TaylorGood 9y ago

In comparison it becomes laughable. Old rules?

Zelphyr 9y ago

The Libertarian in me agrees but then I think of the psychology of how people approach casino gambling vs business investing. For the former, I feel like people know going in that the odds are in favor of the house and they come to terms with that by saying to themselves that its entertainment. In other words, they kind-of expect to get screwed. In business investing its the opposite. They really do think they stand a chance at making millions even when the odds may actually be worse than gambling in some cases, especially if they fail to do their due diligence. So maybe instead of regulation we simply need a legal, notarized document signed for every investment that states "I am aware that I stand a very high chance of losing all of my money and relinquish my rights to sue anyone involved unless outright fraud has been established." Probably still wouldn't work, but its worth consideration.

gascan 9y ago
unless outright fraud has been established I've always suspected that was part of the reason- it's simply far easier to defraud small fry who don't have the experience to spot fraud or the resources to prosecute it.
- JumpCrisscross 9y ago
  > it's simply far easier to defraud small fry who don't have the experience to spot fraud or the resources to prosecute it Legal and diligence costs on most illiquid investments are tens of thousands of dollars. Anyone investing small amounts (a) can’t afford the diligence, (b) probably doesn’t know what they’re doing and (c) can’t afford to lose even that small amount. That attracts a specific variety of fraudster (see Bitconnect). We’ve seen this happen every time we break the wall between markets with high and low information assymetry.
tomkarlo 9y ago
Generally any compliant securities issuance will have something to this effect - the "Risk Factors" section. The problem is it's often drowned out the broader hype of an offering, or a seller will say "they make us say that, don't worry about it." Unscrupulous issuers have historically targeted less-sophisticated buyers who are less likely to be experienced investors - and also less likely to retain their own counsel to review an offering. Hence the accredited req.

arcticbull 9y ago

At the casino your risks are known, and well-defined. In blackjack with basic strategy your expected value is, what, 49%? Craps, it's similar. Just look it up. Nobody at the table playing, or even running the show, can manipulate the outcome except by changing the parameters of the game as posted in the (I assume) regulated odds boards. Investing in an unregulated market is absolutely nothing like that. Your outcome is undefined, but you're subject to front-running, tape painting, wash trading, fake news stories and tens of other well-known scams. The regulations aren't to stop the poor from making money. If it were a sure-fire way to make money, everyone would just do it all the time. It's the Trumpian "trade wars are easy to win" argument. If it's easy, everyone would win, so nobody would win, end of story. It's to limit people to what they can afford to lose (or at least try). And it's done in the social good also, as people who become insolvent then utilize the social safety net to get back on their feet. Yes, we need the real consequences, and what you're describing is literally regulation.

mancerayder 9y ago
But don't they, even in Blackjack, use multiple card decks to kill the odds calculation unless you're Rain Man? Sorry, but if cryptocurrency is prone to manipulation and fraud (it is), casinos are tens times worse because not only do they do that, as the House must win as a business strategy, but they appeal to people who have addiction issues. I'm not against casinos but to defend them against cryptocurrency trading and suggest average Joe is better off playing Roulette is in my opinion a misplaced attempt at morality.
- tomkarlo 9y ago
  That's to make it difficult for a player to calculate the odds of a particular hand. The odds of the overall game are still pre-defined and regulated. Casinos can't/won't promise that you'll make money by playing their games. Securities are generally purchased with the expectation that you'll make money, and are marketed up to the allowable line of suggesting they are good ways to make money. Allowing people to play a game where the odds are openly against them, vs. buying a security where they're being told the odds favor them but it may be otherwise, are very different propositions when you're asking if they're "fraud".

tomkarlo 9y ago

Casinos (and lotteries) are subject to heavy regulation, including oversight on the odds of the games they offer. The problem with back-end enforcement (and those laws do exist) is that it doesn't remove the incentive to try issuing a scam-ish security and hope you will evade prosecution, and the damage done can take years to unwind, if it's even possible at all. This is why there are regulations on public offerings of securities to non-accredited investors.

bufferoverflow 9y ago
Really? 1) So what lottery odds are not allowed? 2) Can you name a single lottery with odds in your favor? Cause with cryptocurrencies, so far, the investors have made money on average.
- tomkarlo 9y ago
  1) Here's the lottery code for CA. Payouts are regulated - by it's nature, the odds of a lottery depend on the number of tickets, but typically, there are strict rules about the minimum % of receipts paid back to winners (which is effectively equivalent to setting house odds), and in many cases, only the state government can run them. http://static.www.calottery.com/~/media/Publications/Lottery_Regulations/Lottery%20Act%20for%20Website%2007-14.pdf http://static.www.calottery.com/~/media/Publications/Lottery... 2.) There's been multiple cases where lotteries were -accidentally- setup such that the odds were in the favor of players if they pursued the right strategy. Here's one: https://www.theatlantic.com/business/archive/2016/02/how-mit-students-gamed-the-lottery/470349/ https://www.theatlantic.com/business/archive/2016/02/how-mit... A history of gains to investors aren't an definite indicatio that an investment is good, or that the overall odds favor the investor. If I go into a casino and win roulette 3 times in a row, that doesn't mean the wheel is biased in my favor. Similarly, in most ponzi schemes, all of the early investors make money. (And even in a non-fraudulent situation, simply having an investment go up doesn't mean it was a good investment, when examined on a risk-adjusted basis vs. other alternate options.)

cies 9y ago

> But investing in risky businesses needs to be walled off to the wealthy. What we really need is the real consequences for fraud / false financial claims. Thanks for saying this. So true.

techman9 9y ago

You wildly overestimate how good most people are at evaluating risks. This isn't a couple hundred bucks over a weekend in vegas we're talking about, it's peoples' life savings or retirement accounts or childrens' college funds. If given the opportunity to invest in something with potentially extreme returns and poorly represented risks, many people will take it either because they don't understand the risk involved or are not very good at internalizing the probability that they lose money. Just look at the ICO scams that abound today or the 2008 financial crisis. While massive deregulation is nice in spirit and would theoretically allow people more financial freedom, I can't imagine it being viable (at least without a ton more compulsory financial education).

hndamien 9y ago
You underestimate how much people plough into gambling, where the house will win if you play long enough.
bufferoverflow 9y ago
> This isn't a couple hundred bucks over a weekend in vegas we're talking about, it's peoples' life savings or retirement accounts or childrens' college funds. You think people had never lost their life savings in casinos or lotteries? I can walk into a casino and bet $5K on every roulette roll. I personally know people who lost $30-40K in Atlantic City casinos.

themagician 9y ago

Lol. It’s not about risk, it’s about keeping poor people out of the market. It’s why they are trying to change the rules to make it even harder—because there are simply too many people with a million in cash liquidity today. Can’t have that.

pbreit 9y ago

Gambling is one of the most heavily regulated businesses on the planet.

bufferoverflow 9y ago
Yet anybody can walk into a casino and gamble.

deleted 9y ago

[deleted]