Dear British Lawmakers: Investing is Not Gambling!

In a recent report, British Lawmakers - namely the U.K.’s Treasury Committee - claimed that cryptocurrency trading should be treated as gambling. An argument I was shocked to read in 2023; a time in which there are abundant resources available to help understand innovative technologies and explore existing use cases. To say that investing is equal to gambling in the eyes of regulation simply because an asset has the potential to decrease in value is a very interesting attempt at degrading crypto, to say the least. Stocks, real estate, commodities, etc., all have the potential to lose value; so why not regard these as gambling as well?

Well, the Committee's case is that cryptos have “no intrinsic value” and that they are not “backed by anything” - arguments the industry has faced for essentially its entire existence; an argument I believe to be deeply rooted in misinformation. Bitcoin, for example, has been stated to be backed by the largest computing network in the world. To say that this has no value is, quite frankly, beyond the pale.

Additionally, investing and gambling are often confused by the uninitiated; a.k.a. "finance people." However, there are key differences between the two.

Gambling is the act of risking money on an uncertain outcome with the hope of winning a prize. The outcome of a gamble is typically determined by chance, and there is no way to guarantee a win or even maximize your chances based on any sort of data and facts. Sure, you can try and count cards in an attempt to increase your probability at the risk of being thrown out by the casino, but even then, most casinos modify the games to be in their favor the vast majority of the time.

Investing, on the other hand, is the act of putting money into something with the hope of making a profit. The outcome of an investment is not determined by chance, but rather by the performance of the asset that is being invested in. It is this last point that I want to focus on. When you gamble, let’s say at the slots for example, you are relying on blind luck to walk away with a win, and some are willing to do this despite the number of times they lost because of the belief that “this one will hit” when there is absolutely nothing to base that claim on. Unless you’re Rusty from the “Ocean’s” franchise, no form of slots is based on any sort of thinking. Investing, on the other hand, pulls into account numerous pieces of data, information, and analytics to make a well-educated buy, sell, or hold decision - you are not placing a random amount of money on a random color; you are deliberately choosing a specific coin or stock based on some analysis.

Now, the level of analysis conducted is the most important when it comes to investing. While a simple price analysis forms the basis of investment decisions, sophisticated investors spend hours, days, weeks, etc., considering every other aspect before making a decision. In crypto, another large piece of data comes from market sentiment - often leading to a sort of “self-fulfilling prophecy” when a herd moves together, not to mention the whole “HODL” aspect which is a long-term strategy. Obviously enough, none of this exists in gambling, so it is always surprising when the two get confused for one another by governmental agencies no less!

It is important to note that there is no such thing as a guaranteed investment. Even if an investment is well-researched and has the potential to generate a profit, there is always the risk of losing money. However, the risk of losing money is much lower with investing than it is with gambling.

For these reasons, it is wholely uninformed to call investing gambling. Investing is a long-term activity that is based on research and analysis, and it has the potential to generate a profit. Gambling, on the other hand, is a short-term activity that is based on dumb luck, and it more often has the potential to lose money.

I would not at all be surprised if the fallout of this report leads to more widespread skepticism in governments around the world to be able to properly evaluate future technologies and make the right decisions on how to govern them.