How Does Gambling Work? What’s the Difference Between That and “Gaming”?

| June 10, 2017 12:00 am PST

When you’re writing for a gambling blog, it’s easy to get bogged down in some of the minutia of advanced gambling topics. But sometimes it’s better to cover some of the most basic of subjects.

This blog is obviously about gambling in general, and my colleagues and I have covered almost every aspect of the subject you can think of—from how card counting works to how the house edge in a casino game is calculated.

Today I’m going to back up and cover the basics of what gambling is and how gambling works.

What Do We Mean When We Talk About Gambling?

You’re gambling when you risk something valuable on an event that might or might happen. If you lose a gamble, you lose whatever you were risking. When you win, you get paid off with a prize. The amount that you risk versus the prize amount is agreed to before you place your wager.

When people gamble on a roll of the dice at the craps table, a spin of the roulette wheel, or a hand of poker, they’re risking money to win more money. The payoffs for the various bets on craps or roulette are standard. In games like poker, though, the payoff amount changes based on how much action you see in each hand.

People gamble on all kinds of things. We cover casino games extensively on this site. But people also gamble between themselves playing card games like spades or bridge at home. They might bet on the outcome of a game of billiards or darts at the local bar. Bingo games and lottery games count, too.

It’s the placing of a bet that makes an activity “gambling”. You’ll sometimes see people claim that poker isn’t gambling if you play well because of the skill element. That’s a potentially interesting argument, but I disagree. Just because you have the edge doesn’t mean you’re not risking your money.

And if you’re risking your money on the chance to win more money, you’re gambling.

What’s the Difference Between “Gaming” and “Gambling”?

“Gaming” is an expression with multiple meanings. I hear it used most often to describe people who are into video games. I’ve also heard it used to refer to other types of games people play—board games, roleplaying games, and card games.

In the context of “gambling”, “gaming” refers to legal casino gambling. It’s a term popularized by the industry itself. “Gaming” sounds like less of a sin or seedy experience than the word “gambling”. This is largely a United States convention; other countries don’t necessarily have the same connotations for gambling.

England, for example, has offered multiple legal gambling activities for years. In the United States, the only legal sports books are in Nevada. But in England, you can find a sports book on almost any street corner. This is an example of a broader difference between European sensibilities about behavior and America’s more Puritanical sensibilities.

Gambling is huge business throughout the word, though. In 2014, the market in its entirety represented $423 billion worldwide. Lotteries represent the largest gambling activity in the world, too. In fact, almost 1/3 of the worldwide gambling market is made up of people playing the lottery.

Gambling and the Law

As with many activities that are deemed “sinful” by a percentage of the population, gambling is usually regulated by your local government. These laws vary dramatically based on your jurisdiction. In the United States, we see a patchwork quilt of laws and regulations at the state level, with a couple of big laws at the federal level.

In some countries in the Middle East, all forms of gambling are illegal. I have a friend who can’t even play chess legally. In other countries, especially smaller ones like Costa Rica, gambling laws are lax. This has led to the rise of offshore sportsbooks and online casinos that accept players from the United States.

From a legal perspective, the element of skill sometimes does affect whether an activity constitutes gambling. This is called the “dominant factor” text. Most states don’t have a list of specific games that are legal or illegal. They instead have blanket bans on gambling or certain forms of gambling—usually in the form of exceptions to those blanket bans.

But some states make exceptions for games which consist largely of a skill element rather than just being based on chance.

Some states, too, have legalized and regulated casinos. Nevada is the most prominent example, of course, as it’s home to Reno and Las Vegas. But New Jersey also has legal, regulated casinos in Atlantic City.

Other states allow the local native American tribes to operate casinos. And still others (like Texas) offer almost no legal kinds of private gambling at all.

The one major exception throughout most of the United States is the lottery. Almost every state has a legal lottery, and this makes up the bulk of the gambling revenue in the country.

If you’re experiencing some cognitive dissonance right now, I don’t blame you. I, too, think it’s odd that the same government that restricts gambling among private citizens so strictly also runs its own gambling operation.

Imagine if the state governments were running their own liquor stores during Prohibition.

How Old Must You Be to Gamble?

Strictly speaking, most people start gambling at a young age. It seems to me that gambling is an intrinsic part of human nature.

But one restriction by the government that I favor is requiring people to be a certain age before participating. I think this is especially important if we’re talking about people participating in a gambling business. Twelve-year-old’s have no business playing blackjack for money, and I think we can all agree to that.

Legal gambling ages vary by jurisdiction, but appropriate ages mirror those of the age requirements for drinking, or joining the military, or getting married. In some places, the minimum gambling age is 18. In most, it’s more likely to be 21.

Even offshore gambling companies have strict requirements related to their customers’ ages. If you’ve ever joined an online casino, you’ll probably remember having to provide identification when you set up your account. This is part of their age verification process. Most online casinos require their players to be at least 21 years old to participate.

Is Gambling a Sin?

If you Google the phrase “is gambling a sin”, you’ll find plenty of religious sites expressing their opinion that gambling is indeed a sin.

I think it’s a little more complicated than a black and white issue. Religious beliefs vary. According to this page from the Wikipedia, there are over 4200 major religions in the world. I know of a lot of churches with hardline opinions on various activities that seem to think gambling is okay if it’s limited to a game of bingo.

It’s hard to make a solid case that gambling is or isn’t a sin, as the entire concept of “sin” is specific to individual religions. Catholics probably have a much different opinion on the matter than someone participating in one of the newer, smaller religions like Dudeism or Jediism.

Some Things Aren’t Gambling

Investment and business activities, like stock market trading and insurance, are generally NOT considered gambling. One might think there’s risk and reward, but there’s a significant difference between these kinds of activities and those that gamblers engage.

Probably the biggest difference is that investing in the stock market or buying/selling insurance isn’t done for entertainment. These are financial activities with a distinct social purpose. Companies use the stock market to raise assets so that they can conduct business. Individuals buy insurance to protect themselves in case of disasters. Companies sell insurance as a financial instrument to make profits.

Some might argue that if you buy car insurance, you’re betting that you’ll be in a wreck, and the casino is betting that you won’t be in a wreck. I think that’s silly.

What Types of Gambling Are There?

Gambling can be categorized in various ways. These are the categories I think are most useful:

Casino Gambling

Casino Games

These are games offered by a casino. The odds of winning a casino game and the payout odds are different, so the casino always has a mathematical edge over the player. In the short run, players can and do sometimes win. But in the long run, the casino always wins.

You can further subcategorize casino games into table games and gambling machines. Table games include dice games, spinning wheel games (like roulette), and card games (like blackjack or Pai Gow poker). Gambling machines include slot machines, video blackjack, and video poker.

The most important thing to remember about casino games is that the house always has an edge. If you play any of these games long enough, you’ll eventually lose all your money.

Poker

Poker Games

Poker games sometimes get lumped in with casino games, but there’s a crucial difference. In poker, you’re wagering your money against the other players at the table. The casino takes a small (usually 5%) cut of each pot to make the game profitable for them. But when you win or lose, you’re winning or losing money from the other players at the table.

One of the implications of this is that if you’re more skilled than the other players at the table, playing poker can be a positive expectation gamble. In other words, in the long run, you can expect to win more than you will lose in poker.

Sports Betting

Sports Betting

This is where you place bets on the outcomes of sporting events. These bets are often placed between individuals, but they’re even more often placed with bookmakers—companies which specialize in taking sports bets. These companies make their money from the “vig”, the extra money you risk. For example, at most books, you must wager $110 to win $100.

You can lump betting on horse and dog races into this category, although most bookmakers don’t take bets on these events. If you’re betting on horses or dogs, you’re betting through a racebook, and that works differently.

Lottery

Bingo Games

Everyone’s played bingo, so I don’t think I have to describe it in detail here. But bingo usually creates the prize pool from the players’ contributions when they buy their bingo cards. This is the most socially acceptable type of gambling in the world.

Pari-Mutuel Betting

Lottery Games

At one time, most states didn’t offer a lottery. Organized crime ran their own lottery games. If you’ve heard the expression “running numbers” in old gangster movies, that’s what they were talking about.

Now, 48 of the 50 states offer lottery games. Like casino games, the odds are in the house’s favor. Only in the case of the lottery, the state is the house. And the house edge is huge.

Conclusion

That’s about as succinct an explanation of what gambling is and how it works as I can write. You’ll find answers to lots of other questions related to specific subtopics throughout this blog, and I encourage you to read as many of these posts as you can.

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