Welcome to the largest community of tipsters. Gambling as a tax on desperation.

During the recent hockey and current football World Cups, a wave of opposition has risen against the multitude of advertising for various types of gambling. Even traditionally right-wing conservative and Catholic voters can correctly identify the destructive and immoral influence on the most vulnerable parts of the population. However, gambling is not just betting on whether Spain or England will win the championship. Capitalism has reached a stage where hope—how to escape precarious employment and rising living costs—is mainly offered through forms of gambling—fraudulent cryptocurrencies, trading on the stock exchange, or betting on prediction markets. The entry of SpaceX into the stock market, however, shows us that—as Free Europe has long known—everything is a scam.

Our eldest son is at a stage in life where he is learning to read – and reads everything he sees around him, including graffiti, advertisements, and billboards on the streets. Sometimes I explain to him what the abbreviation ACAB means, but most often we just encounter another advertisement for a casino or online betting.

Although this is just my anecdotal observation, I feel that advertisements for various types of gambling make up the majority of billboards along roads. And not only there. During the last hockey World Cup, gambling accounted for more than half of the advertising time in Slovak broadcasts of the matches.

Criticism of gambling can unite people across the political spectrum. Although its disproportionate and often destructive impact on the poor and marginalized makes it a natural leftist issue, the most common opponents—at least in Slovakia—are conservative and Catholic voices. It was primarily conservative activists who fought for a ban on gambling in Bratislava – and whose first attempts were thwarted by city councilors, now close allies of Mayor Matúš Vallo, although he ultimately managed to implement a ban during his first term. The exploitation and abuse of the weakest in this sphere are so enormous that even those who usually defend "ordinary" capitalist exploitation cannot ignore it.

However, in these lines I want to show that this difference is largely artificial. Especially in the context of increasing income inequality, precarious work, and the costs of a decent life, gambling – and other economic activities that are essentially indistinguishable from gambling – remain the only hope for ordinary people to advance in the social hierarchy and secure economic stability.

Betting on the future

In the case of gambling, it is not about any Marxist theorizing. It is about behavior empirically observed over the long term: small bets through lotteries and similar types (where no high entry fee is required, no skill to control the game like poker is needed, and bets can be placed without minimum "training" – e.g., online or at the post office) tend to increase during economic crises, unlike other consumption. We see this in data from Italy, Iceland, Ireland. For people experiencing unemployment, income decline, and deteriorating living standards during a crisis, the lottery is a "low-threshold" way to nurture hope that their situation might improve. It is all the more perverse when lotteries are operated by states or state-owned companies—like the Slovak TIPOS. It effectively acts as a regressive tax on poverty and despair—and, in the Slovak context, with a relatively trivial contribution to the state budget. Between 2018 and 2020, TIPOS brought the state only around 50 million euros annually (equivalent to one kilometer of highway tunnel).

Similarly paradoxical behavior—an increase in spending on seemingly unnecessary consumption during economic crises—is not only seen with gambling. In economic and psychological literature, you can find the concept of the lipstick effect (lipstick effect). During recessions, spending on beautifying cosmetics (like lipstick) or fashion increases—but only among women. The primary psychological explanation is strategic attractiveness—the attempt to secure economic stability during an economic crisis by gaining a desirable romantic partner. It is a similar effect to gambling—"I won't spend much on a new lipstick," but maybe "something will come of it."

There is also a supplementary explanation, less gender-stereotypical and ultimately helping us understand another broader phenomenon associated with recessions. A study of the lipstick effect during the COVID-19 pandemic showed that it also exists in periods when it makes no obvious sense—in times of lockdowns, women had no one to "show off" to, yet they still spent more on fashion and beautifying cosmetics. The authors of the study interpret this as a "self-focused lipstick effect"—during times of uncertainty, women in this study focused not on attracting a partner but on discovering their own identity and taste. They wanted to please themselves as everything around them was falling apart.

Similar behavior can be seen in the popularity of seemingly pointless consumer internet fads like Labubu dolls or Pokémon cards. It is not cheap, but relatively accessible entertainment that also contains an element of gambling (you don't know which doll or cards you'll get in a pack). It is not a gendered attempt to attract a partner but a self-preservation mechanism to survive in an economy where you have no hope that the few euros you save (if you don't buy Labubu) will help you save for an apartment or retirement.

At the same time, we see a meteoric rise in so-called prediction markets like Polymarket and Kalshi, where you can bet on anything from the second coming of Christ to the exact words someone will say in a podcast. Some highly informed users have made millions by timing bets on what the US president will do regarding the war in Iran. That is, you don't bet—you enter into a contract about the future. The founders of these platforms try to convince us (and regulatory authorities) that it is not gambling but trading securities. These are not bets but financial derivatives. Just like futures contracts for oil or currency swaps.

In a way, they are right—but they are saying something different from what they are trying to achieve. Yes, Polymarket is like trading securities because trading securities is inherently gambling. Every option, every futures contract, every swap, every derivative—all are bets on the future. More or less based on insider knowledge of what might happen—just like betting on Liverpool.

And nothing else than gambling as a path to wealth is offered by hordes of internet influencers. From average finance bros convincing you that Bitcoin or some other latest stablecoin is "to the moon," to millionaires like Milan Dubec, who has popularized the mantra "apartments, apartments, apartments," to (mostly women) influencers trying to lure you into the latest MLM pyramid scheme with essential oils or cosmetics.

The house always wins

To my son, I explain that casinos exist only because people lose in them. "The house always wins." Those who own casinos get rich off the misery of ordinary people who come to gamble.

Financial capitalism works exactly the same way. Cryptocurrency scams happen daily today, e.g., through so-called rug pulls (literally pulling the rug out from under). Someone (e.g., the US president and his wife) creates a new cryptocurrency, initially accessible only to themselves and close associates. Then they hype it through social media, and ordinary investors buy it with the hope of quick profit and endless growth. When the value of the cryptocurrency rises sufficiently, the founders pull the metaphorical rug out—selling all their positions with huge gains, the price crashes, and the rest are left with worthless zeros and ones in their digital wallets.

Many of us live under the belief that cryptocurrencies are speculative, somewhat dubious investments, but stock markets at least represent real companies, so it’s not just gambling. However, the recent IPO of SpaceX, Elon Musk’s first billion-dollar company, shows all signs of a rug pull. The fundamentals of SpaceX are, to be generous, “average”: the last quarters have shown consistent losses and stagnating revenues. The shareholder structure is set so that Elon Musk and other insiders have tenfold voting rights, and there is no shareholder democracy. Investors (and Musk himself, along with early employees) have had capital sunk into this private company for years, with its value so far only on paper. The IPO now provides an exit opportunity—realizing profits. To maximize profit, SpaceX needs massive and continuous demand from ordinary and institutional investors (pension funds, ETFs). That’s why it issues an extraordinary 30% of all shares for free trading and has lobbied the NASDAQ to change its rules so that SpaceX can enter the top 100 most valuable companies in the index after just three weeks of trading, not three months. This, along with the personality cult around Elon Musk, will give trading in SpaceX shares a huge boost through automatic purchases by large pension and investment funds that track NASDAQ indices. In the coming months, all original SpaceX investors will be able to cash out their shares, leaving the rest of the ordinary population with scraps of a company that is huge but not very profitable. The house always wins.

And even if ordinary investors unite for a seemingly good cause, the casino holds all the cards. The subreddit r/wallstreetbets is a community of amateur investors that became famous during the GameStop short squeeze (and similar companies like AMC). They united against investors betting on the decline of these companies’ stocks (shorting). They drove up the stock prices of the failing physical video game stores primarily through simple trading via mobile apps. The goal was to cause hedge funds such huge losses that they would have to abandon their bets on falling stock prices. But when it seemed they might succeed, the big players intervened. Apps like Robinhood and eToro disabled the ability to buy GameStop and other affected stocks. Hedge funds lost billions, and there is reason to suspect they exploited their privileged position in the US economy and politics to stop trading and thus their losses. Whether it was unfair conduct or spontaneous mutual solidarity among capitalists, the story repeats itself. The house always wins.

Everyday sports betting, lotteries, "unnecessary" trendy purchases, spending "on oneself," prediction markets, or chasing illusory wealth on the stock exchange and in cryptocurrencies—all are gambling and attempts to entertain oneself in the face of despair. In an economy where ordinary paths to a comfortable middle-class life are failing, gambling will always be a desperate attempt by ordinary people to "win" capitalism and secure protection from precariousness and exploitation. Ultimately, however, they only lead to a world of the first billionaire and inequality reaching the level of the Gilded Age.

I wish my conservative friends who fight against gambling would realize that it is no longer hidden only in casinos and betting offices. It is everywhere around us.

The author is an economist and data analyst

The text was created with the support of the Rosa Luxemburg Foundation, with representation in the Czech Republic. The publisher is fully responsible for the content; the views expressed in the text do not necessarily reflect the Foundation's position.