Robot Gamblers Are Making People Poor

This will be my least-read newsletter of the month. But I’m going to need a couple days off from Trump-Harris between now and November 5 and this story is interesting: The legalization of online gambling was a mistake and at some point the federal government should fix it.

There’s a practical aspect to this discussion: Why was it a mistake? What has happened? But also an ideological aspect: How much freedom should people have to hurt themselves? And how much freedom should people have to take advantage of others?

In short: This is the kind of conversation that I’d like to have here pretty much every day—if we lived in a world where the authoritarian crisis was over and our democracy was stable.

So for a minute, let’s pretend that we’re in that place and have the luxury to talk policy.

Because here’s the hook: Robots have taken over online gambling and they’re transferring wealth from uneducated poor people to corporations and wealthy hustlers.

This is not something society should allow.

Start with poker.

I linked to a Bloomberg story yesterday about a Russian bot operation that grew to devour the world of online poker. It’s really long and maybe you didn’t read it, so the relevant points are:

• If you play online poker, there’s a good chance the “people” you’re playing against are bots.

• These bots are significantly better at poker than most of the best professionals.

• So your money gets siphoned in two directions: The bots (who are controlled by a third party) win most of your money while the online poker site takes a percentage of all the action (this is called the rake).

How prevalent is this dynamic? Vitaly Lunkin, a professional poker player, told Bloomberg, “I believe there is no clean game online.”

Sounds bad, right? Normal people who don’t know better show up to play poker online and discover that they can’t win because they’re getting pantsed by robots.

But the full story is actually worse.

Because as the bots began taking over, online poker sites noticed that IRL human players quickly got turned off by losing so much, so quickly. This hurt the poker sites, because remember: They make their money from the rake. They need people playing.

So these poker sites started hiring the companies that built the bots—as consultants. These consultants were then paid to optimize the behavior of the robots so that human players would be allowed to win just often enough to keep them playing.

In other words: The online poker websites paid the robots’ owners to slow down the rate of siphoning so that the human marks wouldn’t realize they were getting scammed.

The word you’re reaching for is “predatory.”

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Yesterday the Atlantic published a piece by Charles Fain Lehman about what happened in America after we legalized online sports betting.

Online sports betting is also beset by bots—if you are a normal human being who pulls out his phone to bet on an NBA game, you’re not really betting against other bags of meat. You’re part of a pool of fish who are getting speared by professionals who use a combination of bots and big data at industrial levels. And just like with online poker, the betting websites make their money on the volume of transactions.

But unlike the online poker, the online sports betting sites have bigger hooks into their marks. Here’s Bhaskar Sunkara:

[W]e can seamlessly place bets on our addictive smartphones and we don’t just bet before the games, we can bet on the outcome of every play, with AI models generating odds in real time.

Sports betting apps store dozens of data points on every customer: they know what you like to bet on, when to send you push notifications, and what offers can draw you back in if you haven’t gambled in a while.

What Lehman focuses on in the Atlantic, however, isn’t the crooked nature of online sports betting, but its economic and sociological costs:

Because different states legalized sports gambling at different times, social scientists can compare different measures of well-being in states that did legalize with those that did not, before and after legalization.

Alarming patterns have started to emerge. Two recent working papers look at the economic impacts of legalization. One, by Northwestern University’s Scott Baker and colleagues, finds that legal sports gambling depletes households’ savings. Specifically, for every $1 spent on betting, households put $2 less into investment accounts. States see big increases in the risk of overdrafting a bank account or maxing out a credit card. These effects are strongest among already precarious households.

A second paper, from the economists Brett Hollenbeck of UCLA and Poet Larsen and Davide Proserpio of the University of Southern California, tells a similar story. Looking specifically at online sports gambling, they find that legalization increases the risk that a household goes bankrupt by 25 to 30 percent, and increases debt delinquency. These problems seem to concentrate among young men living in low-income counties—further evidence that those most hurt by sports gambling are the least well-off.

Not great, Bob.

When you put it all together you have a picture of online gambling as a wealth transfer—from younger, poorer, more vulnerable people to small groups of wealthy intellectual elites.

And this wealth transfer is facilitated by giant corporations who manipulate personal data and use mobile technology to keep the marks coming back so that they can skim off the top.

At least when you’re in a casino, you eventually have to walk out the door. With online sports betting, the casino is in your pocket. All day, every day.

There’s no reason we should allow this kind of predatory business to exist.

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Or should we?

Gambling—or, ahem, gaming—was a conservative cause back in the day for two reasons. The first was purely transactional: The gaming industry spread a lot of money around in conservative circles. The second was that the libertarian corner of the conservative movement believed that people should be allowed to do whatever they wanted. Guns, cigarettes, heroin, slot machines—you name it.

As one of Nate Silver’s village people, I never liked the libertarian arguments on gambling.

First of all, the libertarian view always fades out before the consequences set in. Oh sure, libertarians will say that people should be allowed to harm themselves and then suffer the consequences. But that’s not how society works. The entire idea of modern liberal society is that we’ve tried to create some social insurance to insulate people from terrible consequences—whether self-imposed or otherwise.

The shortest counterargument to libertarians has always been this: If you smoke your whole life and get lung cancer, you are not left to die alone in the street. Medicare pays for your treatment. We don’t just leave people to experience the full consequences of their actions, no matter what. And if we did, our world would be an even nastier, sadder place.

Which is why it is proper for the government in a free society to establish reasonable limits on behavior.

Isn’t this nice, by the way? We’re not talking about fascism or overturning elections. We’re not worried about the future of democracy. We’re trying to think through an actual policy problem together.

It’s my sincere hope that we can have this kind of conversation at The Bulwark every single day—if/when America’s authoritarian moment is ended.

If this sort of thing interests you, I hope you’ll join us. We’re working to save democracy so that we can get back to doing the work of democracy.

When it comes to gambling, the big argument used to be about state lotteries. These lotteries are taxes on the poor—a way for the government to raise funds without being on the hook for raising actual taxes on everyone.

But at least lotteries function like taxes in that the funds they raise are spent on social services within the state.

Online gambling isn’t even a tax. It’s a pure wealth transfer.

There’s no productive economic activity associated with online gambling. No measurable value is created.

Online gambling is nothing more than a vampire industry which funnels money from normal citizens to elites and corporations, often under false—or at least dubious—pretenses. And it leaves a trail of economic misery that the rest of society then has to manage.

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The good news is that there should be a political coalition to roll back online sports betting.

Liberals have always been anti-gambling. At least some of the new populist Republicans should be open to the issue, too. After all, it’s primarily their voters (young, lower-education men) who are getting fleeced by online sports betting.

Shouldn’t a guy like JD Vance—ultra-populist, Catholic integralist—be a natural ally in such a policy space?

And sure, I understand that Adelson and Wynn money will keep most Republicans bought. But not all of them.

This is the kind of targeted policy space where we could build a bipartisan coalition and make a real difference in the lives of a specific cohort of Americans.

But only if the Republican party returns to being a normal, healthy institution.

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As an aspiring thru hiker, I was keeping an eye on Tara Dower over the last few days because she just crushed the Appalachian Trail speed record. Holy crap:

Tara Dower, a 31-year-old ultrarunner and long-distance hiker born in North Carolina and based in Virginia, reached Georgia’s Springer Mountain, the southern terminus of the Appalachian Trail, at 11:53 P.M. She completed the arduous southern thru-hike of the iconic trail, crossing 14 states and 2,197 miles, in 40 days, 18 hours, and 5 minutes. It’s the fastest known time for hiking the iconic trail in either direction.

Her finishing time cleaves approximately 13 hours off the 2018 benchmark set by Belgian runner Karel Sabbe, who in 2018 hiked the trail from south to north. It also returns the overall record to a woman for the first time since 2015, when Scott Jurek eclipsed Jennifer Pharr Davis’ then-record by only three hours. What’s even more impressive is that Dower, who goes by the trail name “Candy Mama,” had to come from behind to topple Sabbe’s record after falling off pace during a particularly rainy spell in New England.

“The number of people that have hiked the Appalachian Trail before Tara in less than 50 days is ten, only one of them a woman,” explained Liz Derstine, who set the women’s record for a northbound hike in 2020 at 51 days and joined Dower for a stretch of the trail earlier this week.

“And Tara has done it faster than all of them, including the men,” Derstine added. “This is one of the greatest achievements of all time. It’s huge.”

Statistics aside, what’s most remarkable about Dower’s achievement may be her rapid and unexpected rise through the ranks of distance hikers and runners. Less than a decade ago, when Dower was a student at East Carolina University, she became fascinated by the Appalachian Trail after idly watching a National Geographic documentary. She graduated in 2016, and the next year she set off northward from Springer Mountain, making it only 80 miles before her grandparents picked her up. . . .

Appalachian Trail guru Warren Doyle told me that one of Dower’s secrets to success was her consistent speed on the trail. On most days she hiked slower than Sabbe’s pace, he said, but she traversed more total miles. “She put in longer workdays,” Doyle explained Friday, just as Dower neared the North Carolina-Georgia border. “I hope this puts it to rest: It’s not about speed. It’s about endurance. It’s not the Fastest Known Time. It’s the Shortest Known Time.” . . .

Dower and Wilmarth slept in a Ford Transit van nicknamed “Burly,” while Komlo trailed them in her Dodge Durango. They worked relentlessly to get her in bed by 10 P.M. and up at 3 A.M., feeding her upwards of 10,000 calories each day. They also replenished Dower’s massive snack box of, as Komlo put it, “not a lot of healthy stuff” with Rice Krispies Treats, Twizzlers, Gushers. Four times a day, Dower downed a 320-calorie protein shake.

Read it all in glorious detail.