Abstract
In Speculation: A History of the Fine Line between Gambling and Investing, 1 Stuart Banner provides a comprehensive look at a hair‐splitting question that has befuddled lawmakers and judges for over a century: What is the dividing line between gambling and investing?
Banner—a professor of legal history at the University of California, Los Angeles (UCLA)—expertly delves into archived primary sources for the content that drives the book. For example, he accessed papers belonging to Supreme Court justices, U.S. presidents, and others in his research for the book. Banner's thorough research shines throughout. Here is an excerpt the author found from a book published in 1944:
“When as a young and unknown man I started to be successful I was referred to as a gambler,” the banker Ernest Cassel once said. “My operations increased in scope. Then I was a speculator. The sphere of my activities continued to expand and presently I was known as a banker. Actually I had been doing the same thing all the time.” (p. 1)
Speculation contains countless other nuggets.
In the first chapter, Banner recounts how President Abraham Lincoln dealt with fluctuating currency values and gold prices during the Civil War. The author also found a reference to “stockjobbing” and “speculating” in President George Washington's papers from 1779. Banner found a 1791 letter from Thomas Jefferson that used the word “gaming” in the context of complaining about low productivity among workers. The author also tracked down a 1792 letter penned by Alexander Hamilton recommending that “there should be a line of separation … between respectable stockholders and dealers in the funds, and mere unprincipled Gamblers” (p. 29).
The book also includes a plethora of substantive content that is particularly relevant today.
Speculation outlines all of the early legal cases where “American courts enforced contracts for wagers on the outcome of horse races,” with one of the cases dating back to 1799 (p. 41). Banner chronicles how judges shifted over time and evidenced increased reluctance to enforce agreements premised on purported gambling. For example, the author cites a Tennessee Supreme Court judge who pondered the issue and made the following observation: “[Gaming] depends upon hazard and chance; so do all insurances depend upon hazard and chance. What is the difference?” (p. 47).
Of the nine chapters in the book, chapter 2 is the most informative. Titled “Betting on Prices,” the chapter outlines the two major developments that nudged the courts to rule in the area. First, Banner cites the “continued growth of organized markets in options and futures” (p. 66). Second, there was a “gradual shift in the common law's treatment of gambling” (p. 67). And what was the result? Enter the now‐discarded “intent‐to‐deliver rule,” which reigned in speculation on prices or futures when one of the parties never took physical possession of the goods.
In chapter 2, Banner also provides a textured discussion of so‐called “bucket shops.” Described as “a simulated brokerage, where customers could go to ‘buy’ or ‘sell’ stocks or commodities” (p. 92), bucket shops were vigorously opposed by recognized exchanges that viewed them as direct competitors for customers and liquidity. One tool the exchanges used to attack the bucket shops was restricting data sources (i.e., stock prices). Indeed, Banner's discussion of the bucket shop debate 100 years ago is particularly relevant today with increased attention over whether real‐time data can be owned in the sports wagering context.
With various states—and perhaps Congress—exploring sports betting and other types of wagering, Speculation deserves a spot on the bookshelf of anyone researching or working in the space.