United

Solana

Gary

mirror

Gambling is increasingly legal in the United States. New casinos keep popping up in places outside of Las Vegas, and professional sports leagues that used to oppose sports betting are now embracing it. Except for certain age restrictions, gambling is open to the general public, despite its dubious social benefits. Startup investing however is not.&nbsp;
Neither is investing in a venture capital fund or a fund that invests in collectible art. These activities are limited to so-called “accredited investors.” The American government would rather people risk money playing casino games they are likely to lose than to invest in a startup that might succeed. 
Accredited investor laws restrict many kinds of investing to so-called “sophisticated investors.” But they don’t measure sophistication by knowledge or experience — there is no test to take. They measure it by wealth. In the eyes of the government, being sophisticated <a href="https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-3" target="_blank" rel="noopener nofollow">means</a> having an annual income of at least $200,000 — five times what the median American makes — or a net worth greater than $1 million. 
Related: <a href="https://cointelegraph.com/news/solana-illustrates-dark-side-monolithic-blockchains">Solana illustrates the dark side of monolithic blockchains</a>
How much someone knows about the investment is irrelevant. That means a 60-year old who inherited the family construction business can freely invest in AI startups but a 24-year old with a degree in machine learning cannot.
<figure>
 <img src="https://s3.cointelegraph.com/uploads/2024-05/b5006f46-9482-495d-8940-c662c1a71072.jpg" alt="" title="">
 <figcaption style="text-align: center;">
 Requirements to be considered an accredited investor. Source: Finhaven
 </figcaption>
</figure>
Setting aside the inconvenient fact that most financial calamities involve one group of affluent people interacting with others — the Lehman Brothers, Bernie Madoff, <a href="https://cointelegraph.com/news/judge-advances-class-suit-silvergate-aided-ftx-fraud">Silvergate Bank</a>, etc. — such laws are classist and deeply unfair. They exist to protect ordinary people from risky investments, but are enforced by the same government that encourages them to bet on the next Powerball jackpot. The lottery has terrible odds, even by gambling standards, because it’s a government monopoly. Yet it’s directly marketed to the poor. That’s why economists refer to it as a “regressive tax.”
These dynamics play an underrated role in wealth inequality. One of the main reasons why “the rich have gotten richer” is because asset prices have outperformed wages for a long time. Put differently, those who derive their wealth from their investments have done better than those who work for a living. And while many kinds of investments have performed well in recent decades, the ones reserved for the "already rich" have done best.
<figure>
 <img src="https://s3.cointelegraph.com/uploads/2024-05/ec51d477-8c86-445b-ada8-43730db3c127.jpg">
 <figcaption style="text-align: center;">
 Sport betting is "live and legal" in 38 states across the United States. Source: AmericanGaming.org
 </figcaption>
</figure>
Crypto has been the exception. Since inception, Bitcoin (<a href="https://cointelegraph.com/bitcoin-price">BTC</a>) has been the rare investment that has both been available to the public and outperformed. Ethereum (<a href="https://cointelegraph.com/ethereum-price">ETH</a>) too, thanks to its universally accessible crowdfunding. But the U.S. government has since weighed in and told us that the Ethereum ICO broke the law. Not because anyone was harmed by it, the Ethereum foundation has always been above board. It was illegal because ordinary people were allowed to participate. If the government had had its way, the 1 million percent return would have gone to those who needed it least.
Related: <a href="https://cointelegraph.com/news/gary-gensler-hurting-little-guys-for-wall-street">Gary Gensler is hurting the little guys for Wall Street</a>
These rules are one reason why most crypto projects now only raise money from venture-capital funds (whose own investors have to be accredited) or angel investors (who also have to be accredited). They are also why most crypto projects even restrict recipients eligible for their airdrops. This, the government claims, is to protect people. But that same government has no issue with complicated same-day parlays being advertised to countless people before the next pro-sports match. More than half of all Americans have reportedly&nbsp;gambled in the past year, but fewer than 20% qualify as accredited investors.
Crypto often serves as a mirror for the world that we live in, forcing us to think deeply about how things work today for the simple reason that we now have an alternative. We often think of the mirror as being technological, but some of the starkest images it presents are of our aging legal and regulatory system. It’s not a very flattering view. 
<div>
 <div style="background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;">
 Omid Malekan is a guest columnist for Cointelegraph, an adjunct professor at Columbia Business School and the author of Re-Architecting Trust: The Curse of History and the Crypto Cure for Money, Markets, and Platforms.
 </div>
</div>
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Gambling is on the rise — So why is investing still restricted?

Cointelegraph

Other articles published on May 30, 2024

Israeli Government Accelerates Development of Digital Shekel with Innovative ‘Digital Shekel Chal...

How to start making money from crypto staking with minimal investment

Bitget Wallet Tops CertiK Crypto Wallet Security Leaderboard

Paraguay’s Proposal to Imprison Illegal Bitcoin Miners for Up to 10 Years

Smart cryptocurrency investors make $10 million profit in a year using MAR mining

MoonBag Crowned As The Top Crypto Presale In 2024 While Chainlink And Polygon Watch From Crowd

Join our free newsletter for daily crypto updates!