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Speculation and Gambling

Speculation and Gambling

The Merriam-Webster dictionary defines speculation as “an act of assuming unusual business risk in the hopes of obtaining gain.” Likewise, it describes gambling as “the practice of risking money or other stakes in a bet”. Though the definition shows that both involve risk, there are still some distinctions between the two. This article discusses each difference between speculation and gambling, as well as their features and similarities.

Difference Between Speculation and Gambling Games

These are words that a few people use interchangeably, even though they mean different things. To differentiate between the two, it is essential to understand what each one means.

What Is Speculation

Speculation involves the investment of funds in a business, asset, or commodity where the outcome is uncertain. No one knows what a speculation’s outcome will be, which is why it is risky.

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How Speculation Work

Speculators invest their money in specific commodities or businesses with the expectation that they will yield positive returns in the future.

Speculators often use analytic skills to study stock markets, customer information data, and any other information related to what they are investing in.

Though skills used in speculation may help increase the chances of getting positive returns, the speculations’ results remain highly uncertain.

What Is Gambling

Gambling is much different from investing or speculation. It involves placing a bet on something with a highly uncertain outcome. Unlike speculators, gamblers usually place their wagers on games, not businesses or commodities.

Gambling games
Gamblers bet on games, not businesses

Similar to speculation, the outcome of gambling is highly unpredictable.

The chances are even worse for gamblers. In the long run, the odds are always against the gambler.

Investing, Speculation vs Gambling

All these activities involve allocating money to a specific thing with the expectation that such will yield profit after some time. In investing and speculation, such a thing may be an asset, a stock, or even a digital currency. However, money is often placed as a bet on the outcome of an event or a casino game. The table below highlights the significant differences between investing, speculation vs gambling in the USA.

Investing and SpeculationGambling
Usually takes a more extended period, although it can sometimes be short-term.
It is short-term. You may win or lose within the snap of a finger.
The risk and return ratio are the same, which means lower risks usually mean lower returns, and higher returns often come with higher risks.
Risk and return have no correlation. The chances of losing are high whether you bet a large or small amount.
Requires specific skills and expertise such as technical analysis.
It is primarily based on luck. Some gambling games, like slots, require little to no skill at all.
Funds are often invested in commodities or businesses in the stock markets.
Funds are often used to place bets on games and sports events in casinos.
Stock markets are almost always appreciating. Hence, an investor will most likely enjoy a positive return in the long run.
In gambling, the casinos always have an edge, and the odds are always against the bettor. Hence, the chances of a negative outcome are higher in the long run.

What Do Gambling and Speculation Have in Common

Though different, both speculation and gambling in the USA have a handful of similar characteristics. Check out some of them below:

  • The main purpose of these things is to increase wealth. Though sometimes gamblers bet for fun, there is still some hope that they can win real money and increase wealth.
  • Though the risk is higher in gambling, both activities still share the same features of uncertain outcomes and the risk of a loss.
  • These things often involve the use of capital which the person carrying out the activity invests in the hopes of making a profit or winning more money. In gambling, this is called the wager amount.
FAQ

No. Though both activities involve some capital and risk, they have significant differences.

Yes. While you can make money from speculation, it is also possible to lose money. The expected return from speculation is uncertain. It may be positive or negative.

No. We have highlighted the differences between gambling and investing in the table above.

Yes. It is possible to earn real money from gambling.

Investing requires skills, while gambling is mainly a matter of luck.

Publication author
Donald Peterson
Author of articles
Donald Peterson is an avid gambler from Edmonton, Alberta, who also writes about his experience with casinos. He’s been in the business for over 10 years, following the ever-changing industry landscape. His articles are aimed at helping beginners with choosing casinos, suitable games, and strategies.
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