GameStop Highlights The Absurdity Of US Online Gambling Laws

The tale of GameStop, and how a Reddit army managed to roil the financial markets raises all manner of issues for financial regulators and poses some questions for the legislators regarding attitudes to online gambling.

It would be no exaggeration to say that in the past ten days, the antics (which will go down as the GameStop saga) of a bunch of determined amateur day traders banding together under the auspices of Reddit forum WallStreetBets has thrown the financial establishment into a panic.

The pumping of certain key stocks, including GameStop to force a short squeeze on many humiliated billion-dollar hedge funds is a David versus Goliath tale for the ages. And that it is GameStop at the center of the imbroglio is all the more astounding.

BettingUSA has previously written about the gamification of day trading, in part encouraged by the antics of Barstool’s Dave ‘Davey Day Trader’ Portnoy through the spring and summer.

At the time, the worry was that this so-called ‘dumb money’ in thousands of Robinhood and ETrade accounts was piling into ‘sure things’ such as the tech giants – and DraftKings and Penn National – on little more than a whim and a stimulus check through the post.

Now, though, after GameStop, the fear is much more foundational. After several hedge fund bailouts and a recapitalization for Robinhood, the SEC and Congressional members are expressing concerns that this activity might yet shake the foundations of the whole system.

Dumb Money Gets Smart

What seems striking to outside eyes – confession time, I’m a Brit – is what appears to be the disparity in terms of ease of access for Average Joe Public and their online alter-egos (DeepF***ingValue being prominent) to complicated stock-market trading strategies, and the inability for a majority of Americans to gamble online.

Why is it perfectly acceptable to take out a leveraged position on an option on a company’s shares, but playing a slot machine online or placing a bet on a football game is considered beyond the pale in so many states?

Despite the gains since the fall of PASPA in May 2018, the attitudes of many legislators and regulators to online gambling remains disastrously outdated.

All due respect for the recently departed, but how is it that the figurehead for the ancien régime in US gaming, Sheldon Adelson, could be praised by his successor at Las Vegas Sands CEO Rob Goldstein as “understood digital.” Honestly. Adelson understood digital in the same way the dinosaurs understood meteorites.

And as for what Goldstein called Adelson’s “outsized ethical concern”? Please, really.

OK Boomer

Goldstein’s comments highlight, perhaps unintentionally, a somewhat overlooked factor in the debate around the further rollout of online gaming and betting in the US. That is the generational divide.

In fact, arguably not enough has been made of the evidence from New Jersey. For example, Golden Nugget Online Gaming recently spoke about the demographic differences between land-based gamblers, average age 52, and online where that number is 42.

Moreover, when it comes to generational divides, arguably, we haven’t seen anything yet. The divide between boomers and what might broadly be counted as Gen Xers becomes a chasm compared to millennials and Gen Zs’ online habits. The generations for which gaming is second nature and where, for instance, esports is among the natural arenas for risk-taking.

GameStop Is a Microcosm of the Divide

What is striking about the WallStreetBets crowd is their campaign’s vociferousness and how they are framing the debate as a generational challenge. “Look through WallStreetBets traffic and disparaging references to boomers come thick and fast,” wrote Bloomberg’s John Authers in his newsletter last week.

Gambling is arguably caught in the middle of the crossfire from what Authers sees as a growing “generational conflict.” When it comes to online, the lawmakers and the land-based gaming establishment are very much older generation, too hooked up on the land-based pork-barrel politics of yesterday to understand the extent to which online is changing the nature of the equation.

One might argue that online gambling could act as an escape valve. How many of these Redditors and Robinhood day traders might be happier betting on a few spins of the wheel or the outcome of the Super Bowl this coming weekend if given a chance? After all, it is notable that the Reddit forum that caused the melt-up in GameStop had the word bets in its name.

After nearly a year when land-based gaming has been severely restricted and eons since online gambling first became a thing, it is about time legislators loosened their ties over online gambling. They owe it to younger generations to do the right thing. It might, just might, save us an epoch-defining Wall Street crash.

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