When it comes to regulating vice i think simpler is better.
1. Uncapped sports betting can only be done on site with cash
2. Digital equivalents can only be funded with single flat monthly subscriptions. (Pay 20 dollars a month to receive 200 "sports betting chips" that you can wager on anything, you cannot buy additional chips either from users or the vendor) Users cannot have multiple accounts. The betting is 'fair' but the $ to Chip exchange rate is such that users are gambling 95-80% of the money they pay in subscriptions. (Otherwise the house makes no money)
Option 1 imposes significant friction on people looking to blow their life savings on sports betting. Option 2 makes personal bankruptcy nearly impossible.
What is a psychological weakness, and how is it to be distinguished from a preference that I disapprove of?
For example, is a propensity to be fooled by left-wing rhetoric a psychological weakness? Or to be swayed more than you should by anecdotal evidence? Or to be soft-hearted when it comes to animals? Or to be over-optimistic?
I don't say these questions are unanswerable in principled ways; I do say we need principled answers for Arnold's proposals to be acceptable, plausible though I find them.
The government doesn’t need to audit the business models of private gambling establishments to identify exploitive business models, it can audit government lotteries instead. And then punish themselves.
You couldn't devise anything worse for society than gambling. Why don't governments encourage citizens to practice a longer time preference, and educate themselves, to give their children a better life than they themselves have. Like the government of Singapore.
There is a casino in Singapore. Sing citizens are barred from entering it.
NB I live in Australia which does the exact opposite, and it's disgusting.
There's something deliciously ironic about expecting government, which lives and dies by the next election, to "encourage citizens to practice a longer time preference, and educate themselves, to give their children a better life than they themselves have", and then to say the near-dictatorial Singapore is a good example to follow.
You couldn't devise anything worse for society than making government responsible for everyone's personal decisions.
ETA Just for example, how does the Singapore government prevent their citizens from gambling in other countries? They can't, and by banning them from learning by experience at home, the government has left them ill-prepared for foreign casinos. That's hardly a recipe for a responsible citizenry.
"Why don't governments encourage citizens to practice a longer time preference, and educate themselves, to give their children a better life than they themselves have. Like the government of Singapore."
After seeing your response to Chartertopia I'm curious: What is your answer to this question? (Why don't governments encourage ...) Why don't they?
That's a good question & one that I've wondered about regarding diets and public health. I think the Sing gov't is both more paternal & concerned about the polity in aggregate over time. Whereas most other Western gov'ts are more concerned with the 'individual rights' of both citizens and corporations, until the next election.
I think all Western gov'ts would be better if they moved closer to the Singapore example.
& Singapore isn't perfect-its loose regulation of the Sing stock market is an embarassing outlier.
"with the tax revenue going to the gambling winners rather than to the government."
I'm missing something. Probably a couple things:
Are winners capped? Are we speaking of bettors who are black-balled for winning too often? If so, I would agree a company offering gambling services shouldn't be able to blackball winners, including card counters.
I guess I partly answered my next question about who gets the tax revenue, though I'd expect gambling companies to change rules (use even more decks and shuffle blackjack cards after each hand) or the bets they offer in order to reduce winners. Either way, doesn't much of the tax go to losers? My first thought was that their debts would be discounted or entirely cleared. Black balling losers might not be as easy as it sounds.
" I would say that if consumers over-spend and incur high interest charges because of what the credit card company is nudging them to do, then that is a business model issue."
When credit card companies, and other creditors offer teasers interest rates, surely they are making exactly that nudge. I'm not sure I agree with your premise though. Most retail companies do lots of things making such a nudge.
It's worth noting that cigarette and opioid manufacturers got in trouble for lying about the harms from their products. More than simply a nudge.
I had a little kerfuffle with a credit card company about 20 years ago. I had just bought a rural house and replaced a well and retaining wall for about $60,000 on the mortgage's line of credit, and the credit card company (I won't say who, it would lead too many on a wild goose chase) offered a transfer, 1.9% for the life of the loan, so of course I took it. I knew their game: they were hoping I'd miss a payment or two and they could jack up the rate. Stupid, since I was making the more expensive HELOC payments.
To make a long story short, Congress jacked up my monthly minimum payments considerably, the cc company followed suit on their own, to the point that even my full paycheck wouldn't cover it. I talked to a lawyer who said they certainly had violated the terms of service, but there was no practical solution. Bankruptcy would just max out whatever the judge thought I could pay and ignore the terms of service. A class action lawsuit would take forever and I might get a small check several years later.
I called the cc company, told them they better get ready to sue me, because I couldn't pay that much, I was sure they knew it, and I'd rather default than make any more payments, since I could at least tie them up in court for a long spell. Suddenly they got all apologetic and agree to cancel the last increase. Memory says someone else did start a class action lawsuit and I did get a $250 check, but I won't swear to that.
This pretty much sums up everything I have heard and read about the US judicial system -- slow, expensive, and more interested in ritual and procedure than justice. I've been to small claims court three times and won each time, but it was still several months.
This cc matter should have been a simple process: I show the terms of service, how they had violated it. They show whatever they had. I don't see how I could have lost, and they should have owed not only the return to the original monthly minimum and some punitive damages, but a refund of everything I'd overpaid, all my expenses, time off work, etc.
Getting back on target, I'd classify that 1.9% balance transfer as a teaser only because of their games, and I had not expected that.
I agree with the "weak", not so much even being a "solution". It seems more like the perfect arena for government intervention — poorly defined, open to wide varieties of interpretation, just begging for courts to create new precedent yearly, and everything so confused that every proposed solution can find some backer. Everything Baptists and bootleggers like.
Even from a costs and benefits angle, I can't see how saving 5% of the population from themselves is worth subjecting the other 95% to so much meddling. It wouldn't even pick the right 5%. Every proposed legislative fix would define a different 5%, and every new fix would be layered on top of the old, until half the population would be in one 5% bucket or another, and still leave some addicts unprotected and tugging heartstrings for more fixes.
Of course not trying to fix what can't be fixed is not an acceptable answer to government aficionados. What's the point of having a government if it can't be used to try to fix the unfixable? That's defeatist talk!
I'm no good at thank yous, but Thank You. I was disappointed to find your poetry is in English, though. Then I realized I don't know what language Vogons spoke, and the fish probably translated it all anyway.
Almost all businesses have some sort of 80/20 rule in which 20% of the customers account for 80% of the revenue and/or profit. As a result almost all businesses will optimize their processes to "exploit" this group, whether they be the psychologically weak, the "animal buyer," or the "Big Mac lover." Predation is in the eye of the beholder.
I think I've benefitted enormously over the course of my life by getting lots of stuff I value - either very cheaply or often for free - because of cross-subsidies funded with the revenues that industry collects the bulk of from a relatively small number of whales. It's not too much of a stretch to see the progressive income tax as an example of such a system, though I'm not nearly as happen with the quality of the subsidized goods and services.
Whether one sees the whales as victims of predation or taking the harpoons in stride is a matter of perspective, but it's usually no good projecting one's own relative ranking of subjective value onto another person when assessing the existence of exploitation or trying to assess its morality. I've known whales who are perfectly content being whales and dumping most of their disposable income into goods or services that I couldn't imagine doing unless I was under a wicked spell.
As an example, I've flown at every level from military sardine to private jet and the curve of the price one pays for every additional unit of comfort or pampering seems astonishingly and almost obscenely steep to me. And yet, there are plenty of people who are not so rich as to be insensitive to these expenditures but who are still willing to shell out the money for a trip with what seem to me only paltry upgrades and which gets them from A to B no quicker than the people in the cheapest seats.
So true. We have enjoyed the convenience--and sometimes necessity--of a credit card without paying anything. We pay the balance every month so get charged no interest. Our expense is paid by those who keep a large balance and pay the resulting charges.
Your claim in the last sentence is likely a myth. Pretty sure it was Freakonomics Radio that had a guest academic who said balance holders do not subsidize people who pay off their balances. CC companies make money on the fee they charge vendors and this take more than pays for the cost of servicing cardholders who pay off their balances each month.
I think it was the guy whom Russ Roberts interviewed on EconTalk back in April. I've forgotten his name but easy to find the link. Illuminating and I was 90% convinced.
You are absolutely correct that merchant fees are a substantial amount of what banks receive in their credit card business. My lack of interest payments is paid for both by merchant fees and by interest and fees from people who don't pay off their balance every month.
Are you saying that the banks keep two separate accounts, one for people who don't maintain a balance and are paid for by merchant fees, and one for people who do maintain a balance and pay for it themselves via interest and late fees?
Or are you saying that interest and fees are so relatively small that, to a first approximation, merchant fees pay for everyone?
Or perhaps that merchant fees pay for those who don't maintain a balance, while merchant fees plus interest and late fees pay for those who do maintain a balance, because those accounts are more costly for the bank to maintain?
I doubt the first two choices are true. I expect your third and final choice is true but it's not what I'm saying. I'm saying they make money on people who pay off their balances. Those people are not subsidized by people paying interest and extra fees and that banks have probably done pretty well optimizing what they make off of each group. I doubt if people outside the banks know which group is more profitable.
Aside: the ones paying interest could be divided into low and high risk but that's not really relevant to my point.
Aside2: promotional offers and rewards cards is a whole other can of worms.
I put myself through college playing poker mainly on the internet during the big boom. In this model there is no house and the house only makes money off "the rake", a small % taken out of each pot.
Poker famously has many players that are long term winners, though all of the data I have seen places these long term winners at less then 5% of all players (and the number of serious winners that could make a real long term living at it less then 1%).
My roommate in college (he was in a separate room on the same hall by the time he started playing poker) got into a terrible spiral doing online poker trying to emulate my success, and ended up writing bad checks and racking up $30,000 in debt. He went from a star student to nearly flunking out. Despite my close proximity to him I didn't even know his situation until it started to impact him in ways that couldn't be denied. It seems clear to me that the money I used to pay for college came from people like him.
The fact of there being this tiny group of long run winners is the entire advertising gimmick of the poker industry that they advertise, so they make no effort to limit winners (since the house doesn't participate in the risk, they don't care about winners). Many of the sites even bribed people to attempt to become serious winners (rake back programs, which reduce the rake that heavy players pay on their winning pots a little), since again by definition its a zero sum game and every transaction takes more rake out of the pot.
So online poker already runs on model Lyman Stone is proposing. And it was the original online gambling addiction problem. I could easily see the entire online sports betting model changed to this format (player vs player with a rake for the house) and it not impacting the exploitation level at all. Instead, a small group of heavy and sophisticated "gamblers" would be the house on the other side of the bets. I already believe this to be the case (there are literal hedge funds that try to exploit online gambling). In fact if I knew anything about sports betting I would bet this player vs player model already exists and I could provide an example (a fantasy sports league is like this).
Anyway, we already have awareness of the problem. It's that awareness doesn't matter. You either shut this stuff down or you don't.
I would dispute that 95% of people are fine. 95% of people have a bad habit they should probably stop and would properly recognize as a vice. Maybe the government can't police every vice out there, but I remember a time when for instance you didn't have casinos in every state. Probably a few less social security checks got shoved down slot machines.
I'm pretty sure that virtually all sports betting is already run parimutuel (I know horse and dog racing are) which is more or less what you described though poker is a bit unique in that players are always competing directly rather than against the house. Parimutuel is just a way to make any betting competition direct rather than against the house. The odds line is a reflection of the proportion of the money people are betting on each possible outcome, with the bookie taking a cut off the top before distributing the pot. Vegas gaming is a bit different since the odds can be calculated mathematically so when the law of large numbers kicks in, the house knows roughly how much money they will receive from a given amount of bets.
I do think you are correct to point out the fundamental problem is any betting establishment makes money off their take, and that is directly related to the amount of money bet. Changing the formula for distributing the money, even forcing the house to eat some losses, makes no difference to that. The only way to control gambling is to limit access to betting.
"Vegas gaming is a bit different since the odds can be calculated mathematically so when the law of large numbers kicks in"
There is an important distinction. "Mathematically" is imprecise in a way that makes it meaningless. The odds for roulette can calculated probabilistically. There is no human factors in the bets offered, only which ones are taken by bettors. Blackjack is played in a way that odds can't be calculated probabilistically, only statistically. It is not parimutuel in a way anything like a horse race. Not really in any way period.
Beyond "mathematically" being ambiguous, this is important for another reason I think was previously discussed in "In My Tribe" but maybe I saw it elsewhere. Some sports bets are easier for the top ~1% to win than others. Sports betting companies try to draw people into bets more difficult to win by skill and blackball the 1% who win, much like what happens to people who win blackjack.
The regulatory net could be cast pretty wide using a definition of those that "profit from their skill at finding psychological weaknesses in the population and exploiting them." Payday and title loan companies, check cashing services, for-profit colleges, debt settlement companies, extended warranty sellers, and so on. Or even, perhaps, social media platform?
When it comes to regulating vice i think simpler is better.
1. Uncapped sports betting can only be done on site with cash
2. Digital equivalents can only be funded with single flat monthly subscriptions. (Pay 20 dollars a month to receive 200 "sports betting chips" that you can wager on anything, you cannot buy additional chips either from users or the vendor) Users cannot have multiple accounts. The betting is 'fair' but the $ to Chip exchange rate is such that users are gambling 95-80% of the money they pay in subscriptions. (Otherwise the house makes no money)
Option 1 imposes significant friction on people looking to blow their life savings on sports betting. Option 2 makes personal bankruptcy nearly impossible.
Even simpler is to not regulate "vice" at all, since the prerequisite is defining vice, and no one will ever agree on that.
What is a psychological weakness, and how is it to be distinguished from a preference that I disapprove of?
For example, is a propensity to be fooled by left-wing rhetoric a psychological weakness? Or to be swayed more than you should by anecdotal evidence? Or to be soft-hearted when it comes to animals? Or to be over-optimistic?
I don't say these questions are unanswerable in principled ways; I do say we need principled answers for Arnold's proposals to be acceptable, plausible though I find them.
The government doesn’t need to audit the business models of private gambling establishments to identify exploitive business models, it can audit government lotteries instead. And then punish themselves.
You couldn't devise anything worse for society than gambling. Why don't governments encourage citizens to practice a longer time preference, and educate themselves, to give their children a better life than they themselves have. Like the government of Singapore.
There is a casino in Singapore. Sing citizens are barred from entering it.
NB I live in Australia which does the exact opposite, and it's disgusting.
There's something deliciously ironic about expecting government, which lives and dies by the next election, to "encourage citizens to practice a longer time preference, and educate themselves, to give their children a better life than they themselves have", and then to say the near-dictatorial Singapore is a good example to follow.
You couldn't devise anything worse for society than making government responsible for everyone's personal decisions.
ETA Just for example, how does the Singapore government prevent their citizens from gambling in other countries? They can't, and by banning them from learning by experience at home, the government has left them ill-prepared for foreign casinos. That's hardly a recipe for a responsible citizenry.
Idiotic response
I'd live in Sing except for one thing: the horrible tropical climate
But, thanks for playing!
"Why don't governments encourage citizens to practice a longer time preference, and educate themselves, to give their children a better life than they themselves have. Like the government of Singapore."
After seeing your response to Chartertopia I'm curious: What is your answer to this question? (Why don't governments encourage ...) Why don't they?
That's a good question & one that I've wondered about regarding diets and public health. I think the Sing gov't is both more paternal & concerned about the polity in aggregate over time. Whereas most other Western gov'ts are more concerned with the 'individual rights' of both citizens and corporations, until the next election.
I think all Western gov'ts would be better if they moved closer to the Singapore example.
& Singapore isn't perfect-its loose regulation of the Sing stock market is an embarassing outlier.
Why not a progressive tax on amounts' wagered/time period, low rate on small "for fun" wagers, higher on others. Or on payouts?
"Uncapping winners and protecting losers"
"with the tax revenue going to the gambling winners rather than to the government."
I'm missing something. Probably a couple things:
Are winners capped? Are we speaking of bettors who are black-balled for winning too often? If so, I would agree a company offering gambling services shouldn't be able to blackball winners, including card counters.
I guess I partly answered my next question about who gets the tax revenue, though I'd expect gambling companies to change rules (use even more decks and shuffle blackjack cards after each hand) or the bets they offer in order to reduce winners. Either way, doesn't much of the tax go to losers? My first thought was that their debts would be discounted or entirely cleared. Black balling losers might not be as easy as it sounds.
" I would say that if consumers over-spend and incur high interest charges because of what the credit card company is nudging them to do, then that is a business model issue."
When credit card companies, and other creditors offer teasers interest rates, surely they are making exactly that nudge. I'm not sure I agree with your premise though. Most retail companies do lots of things making such a nudge.
It's worth noting that cigarette and opioid manufacturers got in trouble for lying about the harms from their products. More than simply a nudge.
I had a little kerfuffle with a credit card company about 20 years ago. I had just bought a rural house and replaced a well and retaining wall for about $60,000 on the mortgage's line of credit, and the credit card company (I won't say who, it would lead too many on a wild goose chase) offered a transfer, 1.9% for the life of the loan, so of course I took it. I knew their game: they were hoping I'd miss a payment or two and they could jack up the rate. Stupid, since I was making the more expensive HELOC payments.
To make a long story short, Congress jacked up my monthly minimum payments considerably, the cc company followed suit on their own, to the point that even my full paycheck wouldn't cover it. I talked to a lawyer who said they certainly had violated the terms of service, but there was no practical solution. Bankruptcy would just max out whatever the judge thought I could pay and ignore the terms of service. A class action lawsuit would take forever and I might get a small check several years later.
I called the cc company, told them they better get ready to sue me, because I couldn't pay that much, I was sure they knew it, and I'd rather default than make any more payments, since I could at least tie them up in court for a long spell. Suddenly they got all apologetic and agree to cancel the last increase. Memory says someone else did start a class action lawsuit and I did get a $250 check, but I won't swear to that.
This pretty much sums up everything I have heard and read about the US judicial system -- slow, expensive, and more interested in ritual and procedure than justice. I've been to small claims court three times and won each time, but it was still several months.
This cc matter should have been a simple process: I show the terms of service, how they had violated it. They show whatever they had. I don't see how I could have lost, and they should have owed not only the return to the original monthly minimum and some punitive damages, but a refund of everything I'd overpaid, all my expenses, time off work, etc.
Getting back on target, I'd classify that 1.9% balance transfer as a teaser only because of their games, and I had not expected that.
Really interesting.
I agree with the "weak", not so much even being a "solution". It seems more like the perfect arena for government intervention — poorly defined, open to wide varieties of interpretation, just begging for courts to create new precedent yearly, and everything so confused that every proposed solution can find some backer. Everything Baptists and bootleggers like.
Even from a costs and benefits angle, I can't see how saving 5% of the population from themselves is worth subjecting the other 95% to so much meddling. It wouldn't even pick the right 5%. Every proposed legislative fix would define a different 5%, and every new fix would be layered on top of the old, until half the population would be in one 5% bucket or another, and still leave some addicts unprotected and tugging heartstrings for more fixes.
Of course not trying to fix what can't be fixed is not an acceptable answer to government aficionados. What's the point of having a government if it can't be used to try to fix the unfixable? That's defeatist talk!
A simple “like” doesn’t do justice to how much I enjoyed your response. I see a future in which I paraphrase you often.
I'm no good at thank yous, but Thank You. I was disappointed to find your poetry is in English, though. Then I realized I don't know what language Vogons spoke, and the fish probably translated it all anyway.
The thing about Vogon poetry is that it's awful in any language.
Almost all businesses have some sort of 80/20 rule in which 20% of the customers account for 80% of the revenue and/or profit. As a result almost all businesses will optimize their processes to "exploit" this group, whether they be the psychologically weak, the "animal buyer," or the "Big Mac lover." Predation is in the eye of the beholder.
I think I've benefitted enormously over the course of my life by getting lots of stuff I value - either very cheaply or often for free - because of cross-subsidies funded with the revenues that industry collects the bulk of from a relatively small number of whales. It's not too much of a stretch to see the progressive income tax as an example of such a system, though I'm not nearly as happen with the quality of the subsidized goods and services.
Whether one sees the whales as victims of predation or taking the harpoons in stride is a matter of perspective, but it's usually no good projecting one's own relative ranking of subjective value onto another person when assessing the existence of exploitation or trying to assess its morality. I've known whales who are perfectly content being whales and dumping most of their disposable income into goods or services that I couldn't imagine doing unless I was under a wicked spell.
As an example, I've flown at every level from military sardine to private jet and the curve of the price one pays for every additional unit of comfort or pampering seems astonishingly and almost obscenely steep to me. And yet, there are plenty of people who are not so rich as to be insensitive to these expenditures but who are still willing to shell out the money for a trip with what seem to me only paltry upgrades and which gets them from A to B no quicker than the people in the cheapest seats.
So true. We have enjoyed the convenience--and sometimes necessity--of a credit card without paying anything. We pay the balance every month so get charged no interest. Our expense is paid by those who keep a large balance and pay the resulting charges.
Your claim in the last sentence is likely a myth. Pretty sure it was Freakonomics Radio that had a guest academic who said balance holders do not subsidize people who pay off their balances. CC companies make money on the fee they charge vendors and this take more than pays for the cost of servicing cardholders who pay off their balances each month.
I think it was the guy whom Russ Roberts interviewed on EconTalk back in April. I've forgotten his name but easy to find the link. Illuminating and I was 90% convinced.
Yes, thanks for the correction. That is definitely what I heard except it was in May.
https://www.econtalk.org/inside-the-mysterious-world-of-credit-cards-with-patrick-mckenzie/
You're welcome.
You are absolutely correct that merchant fees are a substantial amount of what banks receive in their credit card business. My lack of interest payments is paid for both by merchant fees and by interest and fees from people who don't pay off their balance every month.
Are you saying that the banks keep two separate accounts, one for people who don't maintain a balance and are paid for by merchant fees, and one for people who do maintain a balance and pay for it themselves via interest and late fees?
Or are you saying that interest and fees are so relatively small that, to a first approximation, merchant fees pay for everyone?
Or perhaps that merchant fees pay for those who don't maintain a balance, while merchant fees plus interest and late fees pay for those who do maintain a balance, because those accounts are more costly for the bank to maintain?
I doubt the first two choices are true. I expect your third and final choice is true but it's not what I'm saying. I'm saying they make money on people who pay off their balances. Those people are not subsidized by people paying interest and extra fees and that banks have probably done pretty well optimizing what they make off of each group. I doubt if people outside the banks know which group is more profitable.
Aside: the ones paying interest could be divided into low and high risk but that's not really relevant to my point.
Aside2: promotional offers and rewards cards is a whole other can of worms.
I put myself through college playing poker mainly on the internet during the big boom. In this model there is no house and the house only makes money off "the rake", a small % taken out of each pot.
Poker famously has many players that are long term winners, though all of the data I have seen places these long term winners at less then 5% of all players (and the number of serious winners that could make a real long term living at it less then 1%).
My roommate in college (he was in a separate room on the same hall by the time he started playing poker) got into a terrible spiral doing online poker trying to emulate my success, and ended up writing bad checks and racking up $30,000 in debt. He went from a star student to nearly flunking out. Despite my close proximity to him I didn't even know his situation until it started to impact him in ways that couldn't be denied. It seems clear to me that the money I used to pay for college came from people like him.
The fact of there being this tiny group of long run winners is the entire advertising gimmick of the poker industry that they advertise, so they make no effort to limit winners (since the house doesn't participate in the risk, they don't care about winners). Many of the sites even bribed people to attempt to become serious winners (rake back programs, which reduce the rake that heavy players pay on their winning pots a little), since again by definition its a zero sum game and every transaction takes more rake out of the pot.
So online poker already runs on model Lyman Stone is proposing. And it was the original online gambling addiction problem. I could easily see the entire online sports betting model changed to this format (player vs player with a rake for the house) and it not impacting the exploitation level at all. Instead, a small group of heavy and sophisticated "gamblers" would be the house on the other side of the bets. I already believe this to be the case (there are literal hedge funds that try to exploit online gambling). In fact if I knew anything about sports betting I would bet this player vs player model already exists and I could provide an example (a fantasy sports league is like this).
Anyway, we already have awareness of the problem. It's that awareness doesn't matter. You either shut this stuff down or you don't.
I would dispute that 95% of people are fine. 95% of people have a bad habit they should probably stop and would properly recognize as a vice. Maybe the government can't police every vice out there, but I remember a time when for instance you didn't have casinos in every state. Probably a few less social security checks got shoved down slot machines.
https://www.youtube.com/watch?v=2luhwy3KAE0
https://www.youtube.com/watch?v=Q1a36V737qk
https://www.youtube.com/watch?v=KJWEJuKXZyk
I'm pretty sure that virtually all sports betting is already run parimutuel (I know horse and dog racing are) which is more or less what you described though poker is a bit unique in that players are always competing directly rather than against the house. Parimutuel is just a way to make any betting competition direct rather than against the house. The odds line is a reflection of the proportion of the money people are betting on each possible outcome, with the bookie taking a cut off the top before distributing the pot. Vegas gaming is a bit different since the odds can be calculated mathematically so when the law of large numbers kicks in, the house knows roughly how much money they will receive from a given amount of bets.
I do think you are correct to point out the fundamental problem is any betting establishment makes money off their take, and that is directly related to the amount of money bet. Changing the formula for distributing the money, even forcing the house to eat some losses, makes no difference to that. The only way to control gambling is to limit access to betting.
"Vegas gaming is a bit different since the odds can be calculated mathematically so when the law of large numbers kicks in"
There is an important distinction. "Mathematically" is imprecise in a way that makes it meaningless. The odds for roulette can calculated probabilistically. There is no human factors in the bets offered, only which ones are taken by bettors. Blackjack is played in a way that odds can't be calculated probabilistically, only statistically. It is not parimutuel in a way anything like a horse race. Not really in any way period.
Beyond "mathematically" being ambiguous, this is important for another reason I think was previously discussed in "In My Tribe" but maybe I saw it elsewhere. Some sports bets are easier for the top ~1% to win than others. Sports betting companies try to draw people into bets more difficult to win by skill and blackball the 1% who win, much like what happens to people who win blackjack.
The regulatory net could be cast pretty wide using a definition of those that "profit from their skill at finding psychological weaknesses in the population and exploiting them." Payday and title loan companies, check cashing services, for-profit colleges, debt settlement companies, extended warranty sellers, and so on. Or even, perhaps, social media platform?
Yes. But one could probably make the argument for every retail company and maybe even every entity selling anything.
Perhaps even government itself.