If they charge for on demand content, then people will just go back to downloading it for free.

There is a difference though, in that the bid/ask spread can be negligibly low compared to the stock price, while the bookmaker will make sure that the odds he gives allow him a certain minimum profit.

You do actually see odds like that in poker cash games when a good player gets his money in before all the last cards come down against someone on a draw. But I get what you're saying. My problem is that the label gambling generally carries a negative moral connotation, which most certainly shouldn't be applied to a game where you make money in the long run (that goes double for people who say that the stock market is just gambling). What I was trying to do way up there was limit the definition of gambling so that games which any rational person would play would not be included. But I understand that, even in this case, it is nothing more than a wager.

Here's where I have to disagree. The difference with trading options is that you can trade them without exchanging the underlying asset. The options market allows you to buy and sell the contracts before the expiration date, so it is possible to make or lose money off of options without ever owning any assets. That's a big departure from trading stock, real-estate or commodities, where you have ownership or partial ownership of a tangible asset. Option markets are no different, in my view, than a prediction market, where you are also buying and selling contracts which offer a payout only after the expiry date. Yes, in the end, the payout is settled in the same way as a bet, but what happens after the expiry date is somewhat irrelevant because by that point the contract market is closed. Let me illustrate this more directly: At Intrade, you can create a contract where the closing price of the contract is a function of the outcome of the event. So let's create the following contract:

These contract are based on the closing price of Citigroup stock, C, on June 19th, 2009. If the stock price is at 4 dollars or lower, the contract pays out zero. Otherwise, the contract pays out (X/10 - .4), where X is the closing price of C on June 19th. These contracts may only be purchased in groups of 10.

Now, up until June 19th, this market should function identically to that for these options. In both cases, the price of the contract is determined by the performance of a real asset (Citigroup stock), and in both cases people are only trading contracts, and not anything tangible, while the market is open. The only difference is that, when the market closes on June 19th, people left holding the options will get stock which they can sell for cash, while people holding the Intrade contracts will get their cash directly. And as for the people who had already made their profits in the respective markets and do not hold any contracts, there is NO difference between them. They have made their money solely by trading contracts whose price is determined by a stock, while never trading the stock itself. Now you can say that these people are all gamblers, or all investors, but I find it hard to argue that the ones who traded options contracts (but not stock) are investors, while the ones who traded prediction contracts (but not stock) are gamblers.

It's my understanding that when you go to a bookie, you get different odds on each outcome, so you do not have the ability to bet for A and against A at the same odds. If the payout for A is 20:1, then the payout for 'not A' is set below 1:20 specifically so that you are not able to break even if you bet on both. For instance, one of the sets of odds being offered for the Stanley cup final has Pittsburgh to win at 1.4:1 but Detroit to win at 1:1.6, even though they are mutually exclusive and the only two options. You cannot bet 'against Pittsburgh' at 1:1.4, only for Detroit at 1:1.6. If you bet 1 dollar on PIT and 1.6 on DET, you will have negative EV, since you can only break even if DET wins, but will lose 20 cents if PIT wins.

But when that value isn't negative, the cost of the contract is more than that difference. Look at the ask for these call options. They are all set so that the cost of the buying the options is higher than your intrinsic value. Yet people still buy them because it is not the intrinsic value which drives the options market, but the speculative value, exactly as in the prediction market. The most dramatic case of this is when the spot price is below the strike price. Here there is NO intrinsic value other than its speculative value, yet those options are still traded as well. That would most definitely fit your definition of gambling.

And yet it is far, far safer than putting your money in any investment, which clashes with the intuitive understanding that gambling is somehow riskier than investing.

Sorry, I just managed to read your post today.

You are mostly correct, but there is a difference between the odds a bookmaker sets and the price of a commodity on an open market. The bookmaker, if he wants to make a profit, sets the odds at slightly worse than fair value (fair value being what an open market would set them at). In a pure market, if you bought and sold short on a stock at the same price, you would end up even at the end of the day no matter what happened. If you went to a bookie and bet the same amount of money on every outcome, you would still lose money. The safest market 'bet' gives you 0 EV, while the safest bookie bet gives you negative EV.

In the case of a bookie's odds, yes. I was mainly talking about odds for most casino games, which are fixed by the laws of probability and the profit margin the casino wishes to see.

That's a fair definition, but I wonder in which bin you would put something like stock options. Stock options are a contract that allow the buyer to buy stock at a particular price. While the stock may have non-speculative value, the option does not. Yet options are traded on a market as well, and are generally considered investments (if risky ones). Wouldn't your definition put options in the gambling category?

I also have to point out that under your definition, a game with, say, a 70% chance of you winning 1$ and a 30% chance of you losing 1$ could be considered gambling. This makes little sense to me intuitively, since the chances of you losing money drop exponentially the longer you play, and thus do not fit the traditional notion of gambling.

Not only is that complete bullshit, but there was a recent case where just the opposite happened:

Maureen Dowd plagiarizes a Talking Points Memo Blog

Yes, that's right, although there are fundamental differences between betting and Intrade in other aspects. See my reply to porges.

It's because the contract's price is not random at all, but determined by market demand for the contract. In a lot of ways, these Intrade contracts function the same way as stock options. There is a risk you take that the price will go down, but risk and randomness are not the same thing. In this instance, the difference is that you can research the subject of the contract to make a determination as to whether it is fairly valued.

It's true that some people consider investing money in anything with non-negligible risk of loss to be gambling, but I'm not one of them. If you pressed me, I would say that you are only gambling if you play a game with a negative expected value (for example, all casino games), or a game where the odds are so low that, even with a positive expected value, you would have an almost 0% chance of winning within your lifetime (for example, lotteries).

Yeah, most of us in North America are familiar with prediction markets like Intrade. Those aren't considered gambling sites, since what you are actually doing is trading a contract that pays out if the event happens. I can illustrate the difference between this and a bet with an example.

Say I buy 1000 contracts of "Bin Laden to be captured by end of May 2009" for 5 cents each. Each contract pays out 100 cents if he is captured. Now say tomorrow the BBC reports that the US has engaged Al-Quaeda in a region in Pakistan where Bin Laden is thought to be hiding. Some people interpret that as a sign that the US is close to capturing Bin Laden and they start buying the same contracts. The price goes up to 25 cents per contract. I can then sell my contracts for a 200 dollar profit. I can do this whether or not they actually find him in the end (although I'll be kicking myself if they find him and I sold at 25 cents). On the other hand, if I make a bet of 50 dollars at 20:1 odds that they find Osama by the end of May 2009, and they don't, then I lose that money.

Yeah, we'll sponsor our own vice bill!
With blackjack!
And hookers!

50 bucks says the bill fails.

That's Obama talking, right?

Obama blocks release of torture photos

Obama administration invokes 'state secrets' claim to defend Bush's wiretapping program.

Obama administration threatens Britain to keep torture evidence concealed

You have your answer.

The amazing thing about the album, which I found out from the NPR link, is the huge number of talented artists involved in the project:

Have you actually listened to it?

It doesn't even remotely sound like techno or disco.

Well, nobody who speaks German could be a bad man.

Well as long as this Star Trek doesn't end with a montage of dancing robots...