investing

Rule 21, Political Elections, and Investing

June 20, 2024 By Thomas Talbott

Rule 21

Tucupita Marcano, a promising young infielder for the San Diego Padres, will never professionally play baseball again. He didn’t have a debilitating injury or just quit. He is banned for life because of the application of the infamous Rule 21, which has been in place since 1927 and must be prominently posted in each clubhouse. Simply put, Rule 21 says that if you engage in betting in baseball and your own team is involved, then you are eliminated from Major League Baseball (MLB) forever.[1] (As you might remember, this rule was famously applied decades ago to Pete Rose.) According to MLB, Marcano, age 24, “placed hundreds of bets on baseball, including wagers on games involving the Pittsburgh Pirates when he was with the team last season.”[2] While he lost most of his $150,000 bets (95.7% of them to be exact)[3], his greater loss is a salary of over $700,000 a year.[4]

The 2018 Supreme Court ruling that legalized sports gambling in 38 states[5] has transformed the industry into a substantial economic force. Professional sports, already a major financial sector, has seen significant revenue growth through legalized gambling, which now contributes via official partnerships, data licensing, and heightened fan engagement.[6]

The gambling industry strategically targets its advertising towards men, especially younger men. Mainstream media has begun to notice trends in gambling behaviors, highlighting that young men are more susceptible to developing compulsive gambling issues than any other demographic segment. Gabe Lacques of US Today writes, “According to the Responsible Gambling Council, people between the ages of 18 and 24 are “at high risk of developing gambling problems,” thanks to a still-developing brain, and incomplete emotional and logical development.”[7] The quest for those dopamine hits from winnings can soon lead to an addiction, producing mega billions for this commercialized enterprise. With apps like FanDuel on the smartphone, the gambling snare can happen anytime, anywhere.

However, the widespread issues and insurmountable problems of gambling extend far beyond professional sports. It also permeates collegiate and university athletics, fixed boxing matches and horse races. It has utilized March Madness brackets and fantasy football teams, and has even attempted to sway political elections.

Political Elections

Writing in the Los Angeles Times, in an article entitled “Opinion: Why the push to legalize gambling on U.S. elections is so dangerous,” Dennis Kelleher and Lisa Gilbert inform us, “Free and fair elections, the foundation of our democracy, face an unprecedented array of threats as the next one approaches. While some of these threats are well-known, others go largely unnoticed, with potentially serious consequences. Among the latter is a dangerous attempt to persuade one of our financial regulators to essentially authorize gambling on election results.”[8]

Kelleher and Gilbert get right to the point. “First and foremost, the ability to “win” tens or hundreds of millions of dollars gambling on elections would create powerful new incentives for bad actors to influence voters and manipulate the results to favor their bets.”[9] Highly realistic “deepfakes” (“synthetic media created with the aid of artificial intelligence”)[10] could be deployed at critical moments during the election cycle, such as the eve of a presidential debate. While these videos or voice recordings might be satirical or overt parodies, their underlying purpose is to influence voter perception and decision-making.

Albert Mohler sums up the problem of legalizing election gambling very well. “Our elections are problematic enough; can you imagine adding the uncertainty of having untold amounts of money based on legal gambling when it comes to electoral results? If that were to happen, in all honesty, we might never know if we had a fair election again, ever.”[11]

Gambling and Investing

Some recognize the bad moral pathologies of gambling, but then question, “isn’t investing also a form of gambling?” While there are actual gambling systems based on the stock market, the stock market is not inherently a gambling system. Investing and gambling share some surface similarities, primarily because both involve risking money with the expectation of future financial gain. And in both cases, participants must make decisions based on uncertain outcomes, often using a mix of skill, strategy, risk tolerance and/or emotional fortitude.

However, the differences between investing and gambling are profound. Investing is generally grounded in economic theories and financial principles, aiming to generate wealth over a long-term horizon through informed analysis and strategic asset allocation. Investors often rely on comprehensive data, market trends, and economic indicators to make decisions, reflecting a systematic approach that emphasizes diversification, risk management, and expected value.

As I wrote in early 2021, “Investing isn’t looking for a quick buck; it is about real growth, real innovation, and real economic gains. It is about people employed and companies growing by offering competitive goods and services, all of which produce a thriving society. One hopes that by owning a company or shares in a company, some of the wealth that the company produces will come back to them. The economic reality is that over time investors have done well by leaving their money invested in the stock market.”[12]

Conversely, gambling is fundamentally different in its approach and underlying mechanics. Gambling activities, such as sports betting, casino games, and lotteries, are primarily based on chance or “luck” with immediate outcomes largely unpredictable and independent of skill or strategy. That predominant reliance on “luck” means that gamblers face a zero-sum game where the probability of loss typically outweighs the probability of gain. Furthermore, gambling operations are designed to favor “the house,” ensuring profitability for the operators while creating an inherent disadvantage for participants. Hence, gambling often results in wealth redistribution without generating additional economic value or promoting common human flourishing.

The historical and cultural context further underscores the distinctions between gambling and investing. As Fiona Nicoll argues, “for the past 2 centuries discursive practices of finance sought to foster careful accumulation and prudent decision-making, while those of gambling tended toward undisciplined expenditure and compromised willpower.”[13]

In Summary

In light of the various discussions on gambling, investing, and their societal impacts, the application of Rule 21 to Tucupita Marcano by MLB exemplifies the severe consequences of violating rules intended to maintain integrity within professional sports. Marcano’s story also highlights the stark contrast between the disciplined and strategic world of investing, aimed at economic growth and innovation, and the more impulsive and riskier realm of gambling, which often leads to financial losses and societal challenges. Legalizing election gambling will exacerbate existing challenges to our societal norms and erode the foundation of the democratic process. Playing by the rules and using a discipline approach to investing will allow one to growth wealth and avoid personal and financial pitfalls.

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[1] https://content.mlb.com/documents/8/2/2/296982822/Major_League_Rule_21.pdf

[2] https://www.espn.com/mlb/story/_/id/40275531/tucupita-marcano-gets-life-mlb-ban-betting-baseball

[3] https://www.usatoday.com/story/sports/mlb/columnist/gabe-lacques/2024/06/04/mlb-gambling-scandal-tucupita-marcano-lifetime-suspension/73971414007/

[4] https://salarysport.com/baseball/player/tucupita-marcano/

[5] https://www.usatoday.com/story/sports/2018/05/14/supreme-court-sports-betting-paspa-law-new-jersey/440710002/

[6] https://www.usatoday.com/story/sports/mlb/columnist/gabe-lacques/2024/06/04/mlb-gambling-scandal-tucupita-marcano-lifetime-suspension/73971414007/

[7] Ibid

[8] https://www.latimes.com/opinion/story/2024-05-28/election-gambling-congress-investing-market-commodities-kalshi

[9] ibid

[10] https://www.newsweek.com/deepfakes-could-destroy-2024-election-1790037