Gambling - Other Uses of The Term "gambling"

Other Uses of The Term "gambling"

Many risk-return choices are sometimes referred to colloquially as "gambling." Whether this terminology is acceptable is a matter of debate:

• Emotional or physical risk-taking, where the risk-return ratio is not quantifiable (e.g., skydiving, campaigning for political office, asking someone for a date, etc.)
• Insurance is a method of shifting risk from one party to another. Insurers use actuarial methods to calculate appropriate premiums, which is similar to calculating gambling odds. Insurers set their premiums to obtain a long term positive expected return in the same manner that professional gamblers select which bets to make. While insurance is sometimes distinguished from gambling by the requirement of an insurable interest, the equivalent in gambling is simply betting against one's own best interests (e.g., a sports coach betting against his own team to mitigate the financial repercussions of a losing season).
• Situations where the possible return is a secondary reason for the wager/purchase (e.g. buying a raffle ticket to support a charitable cause)

Investments are also usually not considered gambling, although some investments can involve significant risk. Examples of investments include stocks, bonds and real estate. Starting a business can also be considered a form of investment. Investments are generally not considered gambling when they meet the following criteria:

• Economic utility
• Positive expected returns (at least in the long term)
• Underlying value independent of the risk being undertaken

Some speculative investment activities are particularly risky, but are sometimes perceived to be different from gambling:

• Foreign currency exchange (forex) transactions
• Prediction markets
• Securities derivatives, such as options or futures, where the value of the derivative is dependent on the value of the underlying asset at a specific point in time (typically the derivative's associated expiration date)